Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 12 - Evidence - May 8, 2014
OTTAWA, Thursday, May 8, 2014
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 9:02 a.m. to study non-renewable and renewable energy development including energy storage, distribution, transmission, consumption and other emerging technologies in Canada's three northern territories.
Senator Richard Neufeld (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Senate Standing Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld. I represent the province of British Columbia, and I am chair of this committee. I would like to welcome honourable senators, any members of the public with us in the room and viewers all across the country who are watching on television. As a reminder to those watching, these committee hearings are open to the public and also available via webcast on sen.parl.gc.ca. You may also find more information on the schedule of witnesses on the website under "Senate Committees."
I would now like to ask senators around the table to introduce themselves.
Senator Sibbeston: Nick Sibbeston from the Northwest Territories.
Senator Day: Senator Joseph Day from New Brunswick.
[Translation]
Senator Ringuette: Pierrette Ringuette, from New Brunswick.
Senator Massicotte: Paul Massicotte, from Quebec.
[English]
Senator Wallace: John Wallace from New Brunswick.
Senator Patterson: Dennis Patterson from Nunavut.
Senator Black: Doug Black from Alberta.
Senator Seidman: Judith Seidman from Montreal, Quebec.
[Translation]
Senator Boisvenu: Pierre-Hugues Boisvenu, Quebec.
[English]
The Chair: I would like to introduce our staff: Our clerk is Lynn Gordon and our two Library of Parliament analysts are Sam Banks and Marc LeBlanc.
On March 4, 2014, the Senate authorized our committee to undertake a study on non-renewable and renewable energy development including energy storage, distribution, transmission, consumption and other emerging technologies in Canada's three northern territories. Today marks our fourth meeting on this study.
I am pleased to welcome the following witnesses from the Canadian Gas Association: Ms. Paula Dunlop, Director, Public Affairs and Strategy; and Mr. Paul Cheliak, Director, Market Development.
Thank you very much for being with us today. We appreciate it. We look forward to your presentation and then we will have some questions.
Ms. Dunlop, go ahead.
Paula Dunlop, Director, Public Affairs and Strategy, Canadian Gas Association: Thank you, Mr. Chair. Thanks to the committee for the opportunity to speak to you today. As mentioned, my name is Paula Dunlop. I'm here with my colleague, Paul Cheliak. We have prepared a short statement and then we would be pleased to take questions from you.
CGA is the voice of Canada's natural gas delivery industry. I have shown this map to the committee before and it is in your package. I want to remind you where our members fit within Canada's energy picture.
Our members are the natural gas distribution and transmission companies that deliver energy solutions to more than 6.4 million Canadian customers. Well over half the Canadian population relies on natural gas in their homes, apartments, buildings, hospitals, schools and businesses. CGA also has equipment manufacturers and service providers to the industry as part of our organization.
Today I will speak briefly about the opportunity for natural gas to support the delivery of affordable, clean, safe and reliable energy across the North including all three northern territories. In particular, I will answer three questions: What is energy used for in Canada? How do natural gas and the natural gas delivery industry meet those needs in Canada today? How can natural gas or liquefied natural gas benefit Canada's North and northern territories going forward? And I will describe some pilot projects expected to be underway this year. What can the federal government do to support this opportunity?
What is energy used for in Canada? Energy is used for three core societal needs: heating and cooling, mobility, and electric power. The majority of energy use in Canada, about 50 per cent, is actually for heating, both space heating and processed heat for industry. This is followed by energy for mobility, about 30 per cent; and finally electricity, about 20 per cent.
How do natural gas and the natural gas delivery industry meet energy needs in Canada today? Today, natural gas has a central place in Canada's energy mix, meeting over 30 per cent of the country's energy needs. The majority of those 6.4 million customers I mentioned are homes across Canada. The greater volumes of natural gas are delivered to non-residential customers — businesses, institutions and large industry. Customers use natural gas for heat, industrial uses and for space and water heating in homes, and to generate electricity. A very small amount, less than 1 per cent today, is used as a transportation fuel.
Looking again at that first map on page 1, you can see where the existing 440,000 kilometres of underground pipeline, infrastructure and storage facilities have been built out to bring natural gas across the country to customers, and how the natural gas utility franchise areas are in and near urban centres. Since 2005, the natural gas distribution sector has invested over $25 billion in this extensive Canadian national network. This is between $2 billion and $3 billion a year to ensure the safe, secure and reliable operation and maintenance of this existing system.
This is how the product is used today and where our customers are today. Let me now turn to the value proposition offered by the opportunity to expand the natural gas distribution system to deliver more affordable, cleaner and more efficient energy services to customers, communities and industry, especially Canada's mining industry located off of the existing distribution system and in more remote and northern areas.
In terms of the value proposition of natural gas for Canada's North, natural gas is in abundant supply, affordable, clean, versatile, safe and reliable. For the purposes of our discussion today, I want to highlight a couple of these attributes in more detail as they are really particularly relevant when looking at opportunities for natural gas use in the North and in the territories.
On affordability, for all energy users, any reduction in energy costs while enjoying the same level of comfort or maintaining the same or improved level of service or production output is a significant benefit. It means money in the pockets of consumers for families in their homes or for businesses to become more competitive and to expand and grow.
Statistics Canada reports that total household spending on natural gas has declined from just under $8 billion in 2008 to just under $6 billion in 2013. Meanwhile, StatsCan also reports that electricity spending has increased from $15.5 billion in 2008 to $17.7 billion in 2013. In 2013, this means that the average Canadian household spent between $1,000 and just above $4,000 to heat their home, depending on where they are in the country, with a savings of over $3,000 by choosing natural gas over home heating oil.
The long-term forecast from the National Energy Board predicts natural gas commodity prices in the $4 to $6 per GJ out to 2035 and a price forecast for crude oil, which drives diesel and gasoline prices, to remain above $100 per barrel.
In respect to its environmental attributes, natural gas is an efficient and clean-burning energy choice, with fewer emissions than many other fuels. As well, natural gas is an important partner for renewables and emerging low-emission technologies. Further, and of particular concern in the North, in the case of a leak, natural gas dissipates in the air, avoiding damage to the ground.
In terms of the natural gas opportunity for Canada's North, the communities and industries across Canada's North are currently dependant on more expensive, higher emitting alternatives for their heat and electricity needs, primarily diesel fuel. In many cases, existing infrastructure is approaching the end of its useful life and replacement is already under consideration. In other cases, opportunities for new development are present, requiring new infrastructure. In both circumstances, liquefied natural gas, or LNG, and compressed natural gas, CNG, can meet these needs, offering a more affordable and environmentally beneficial option.
By way of background, LNG is produced when pipeline-quality natural gas is cooled to a liquid state of minus 162 degrees Celsius to reduce the volume by 620 times compared to natural gas at normal pressure. LNG can then be transported in storage tanks on trucks, ships or rail to a regasification facility located near large industrial facilities, like a mine, or communities in the North where the natural gas can be used for heat or generating power.
CNG is natural gas that is compressed at a high pressure to reduce its volume by up to 300 times compared to natural gas at normal pressure. CNG is more ideal for communities closer — up to 400 kilometres — to existing pipeline infrastructure. Really, in the North we're looking at LNG.
The current supply of LNG infrastructure across Canada, production and regasification facilities is expanding. Over the last three years, new facilities have been developed or proposed in several provinces and territories.
On the second map, which in the English version is on page 3 and the French version on page 4, you can see in detail three pilot projects where LNG is being delivered to diesel-dependent or otherwise energy-challenged northern communities. The town of Inuvik in the Northwest Territories is using LNG transported from an LNG storage facility owned by FortisBC, a natural gas distribution company in B.C. The LNG is trucked over 3,600 kilometres each way from Delta, B.C., to the city where it is regassified and used for power generation and heat. The switch to LNG forecasts an annual cost savings of approximately $2 million and GHG savings of 500 tonnes per year.
The town of Watson Lake, Yukon, will be converting part of its energy from diesel to LNG supplied also from that same facility owned by FortisBC. Here, the LNG is trucked over 2,000 kilometres from Delta to Watson Lake and used for power generation. In this case, the switch to LNG forecasts a cost savings of approximately $2.7 million to $4 million a year and GHG savings of 500 tonnes per year.
We see a similar story in Whitehorse, Yukon, where again LNG will be used as an alternative to diesel.
I also note for your information that the Stornoway diamond mine in northern Quebec has committed to use LNG supplied from Gaz Métro in place of diesel by 2016. This will be the first Canadian mine to use LNG over diesel in its operations and speaks to the potential opportunity for LNG to support further economic development in Canada's North.
I don't know if the companies involved in these particular projects have been approached by the committee about providing more details, but we could certainly put you in touch with the folks there if you are interested in contacting them.
In general, we believe that natural gas, a cleaner and more affordable energy solution for customers, can serve a number of national priorities, including driving economic growth and enhancing productivity, supporting Aboriginal and northern economic development employment, fostering industrial development in Canada's North, identifying new markets for natural gas, driving environmental objectives, supporting an innovation agenda, and offering northern communities more cost-effective use of energy dollars and better performance of energy services.
I will conclude my remarks by noting a few points with respect to the role of the federal government and this particular study. First of all, thank you for dedicating the time to look at and report on this issue. We are continuing to discuss this opportunity with Natural Resources Canada and Aboriginal and Northern Affairs Canada, and this study will provide important insight and perspective.
As an industry, we are turning our minds towards articulating a vision for natural gas in Canada. This vision will include our perspectives on this topic and others, as well as our thoughts on the role of the federal government to realize what we believe to be a significant opportunity. We would be pleased to share the document with the committee when it is complete, but I think I can give you a sense in terms of our early thinking on recommendations. I have three points here.
We believe that it is important for the federal government to continue to work in partnership with industry to support innovation and innovative approaches to fostering cleaner, more affordable energy solutions for Canada's North. Through investments and partnerships in energy innovation, we will support efficiency gains and energy cost savings that will directly benefit our economy through improved productivity and investment opportunities.
In terms of tax measures and/or a reallocation of existing program or infrastructure dollars, it could help improve project economics to allow more projects, like the ones I have described, to proceed in Canada's North. Again, our vision document will provide more details in this regard.
Finally, it is important that the industry, Natural Resources Canada and Aboriginal Affairs and Northern Development and provincial and territorial governments continue to work together to build the understanding of the benefits of alternative energy delivery options like LNG in Canada's most northern parts. We would support efforts of the federal government to encourage this kind of dialogue.
Mr. Chair, thank you for the opportunity to present. I will stop there and be happy to take questions from the committee.
The Chair: Thank you very much for that presentation. I will just ask you a few questions to start with, because our deputy chair isn't here.
You stated that the spending on natural gas declined from just under $8 billion to $6 billion. That is for household purposes only. Is that what you are saying? The electricity, you say, has gone up from $15 billion to $17.7 billion in 2013. You are trying to make a comparison there, but I'm not really sure about the comparison. Is the electricity for household use only also or is it for all uses?
Paul Cheliak, Director, Market Development, Canadian Gas Association: Yes, it is for households. That's a residential spending dollar. You would see similar variations in price for both businesses and industry. However, the numbers reported are household spending on energy.
The Chair: The reason for the natural gas to go down in 2008 — if I remember correctly, it was probably about $10 compared to now $4. That would be the reason for the drop, is that what you are saying?
Mr. Cheliak: Correct.
The Chair: So consumption has probably increased?
Mr. Cheliak: On a household basis, consumption declines about a half per cent a year in the residential market due to new efficient appliances and better insulated homes, tighter homes. Use per customer actually declines.
Ms. Dunlop: The fundamental reason for the price decline in the commodity cost is really the supply picture in North America.
The Chair: I was aware Fortis was providing LNG, and you said there were other projects. It is interesting that when I look at the map where I live, the gas comes from Fort St. John and Fort Nelson and goes all the way down to Vancouver, is turned into LNG and then trucked all the way back. This is not a distance from here to the local grocery store; it is 1,300 kilometres from Fort St. John to Vancouver, one way.
Fort Nelson has huge gas plants and is even farther north. Have any companies been looking at creating LNG in Fort Nelson, which is half the distance from Inuvik that Delta is? Have you heard of that at all, or is it because they're just starting out?
Mr. Cheliak: Yes, there are actually preliminary discussions, soon to be final, for three proposals on the West Coast of northern B.C.
The Chair: I am aware of the LNG projects in Kitimat and Prince Rupert. I don't want you to go there because it is on the West Coast. When you look at the highways, it is almost the same distance as coming from Delta. I'm talking about Fort Nelson and Fort St. John.
Mr. Cheliak: Yes, I'm also referring to actual domestic liquefaction plants, not the export ones. There are preliminary plans for one in Dawson Creek, I believe Fort St. John or Fort Nelson, and there's talk of Prince Rupert, and that would be used to supply northern needs, and in B.C. as well. There is planning around bringing a closer supply source opposed to what is currently available in the Delta.
The Chair: Who is that?
Mr. Cheliak: I would have to get back to you on the company name. The plans for that are not yet finalized.
The Chair: If you would get that name back to us, I would appreciate it very much. Please send it through to Ms. Gordon and she will make sure all of us get it.
Senator Massicotte: Thank you for being with us this morning. It is obviously very useful. We are learning a lot.
The way you ended your presentation, you talked about a need of departure with the federal government, and I guess when people say that, it is like a tax credit or infrastructure. It is like a code name; what you are really saying is you need federal money to make it work, otherwise it is not feasible. Is that the case?
Ms. Dunlop: There are three roles for the federal government. We have a new partnership with the SDTC organization on innovation, and that's looking at end-use technology that is available but not yet in a commercial sense in the market. In that sense, we think that kind of continuing partnership on innovation is helpful.
On your question related to program spending, one of the advantages of these three pilot projects is that a lot of data and information will come out of them in terms of barriers and the economics of them. When we have that information come through, we will be able to better see how we can replicate these kinds of projects in other parts of the country. I think we will be able to refine what I said there.
Senator Massicotte: How much money does that represent to the Canadian taxpayers?
Ms. Dunlop: We haven't done an assessment of what kind of tax or program reallocation would be needed.
Senator Massicotte: It is not our money; it is the Canadian taxpayers' money: If the federal government said to you, "We will give you all our brains and expertise, but you won't get any money, " does that mean for sure you can't provide natural gas to the North, or do you think there's a mechanism where it could be profitable to your membership irrespective of that?
Ms. Dunlop: I don't have that kind of information. Two things we would want to see: the pilot projects and the end results of those. I would recommend that the committee hear from the companies that are involved because they will have a better sense of the costs, expenditures and benefits in terms of spending.
Senator Massicotte: When I look at the map and see all the trucks coming up North, these are long distances. This is very long. Road conditions are sometimes seasonal and very difficult. One could argue there's nothing wrong with that, per se; you are creating employment and so on. But we have had witnesses talk to us about the fact there's a safety issue. There is a longer distance you travel, especially with liquefied natural gas, and there's an environmental issue.
Then in your presentation you talked about how much GHGs we're saving transporting natural gas up North compared to, say, I assume it is diesel fuel. It is beneficial, from an environmental point of view. When you did that calculation, does that include the consequences of trucking all those miles? You say, "Here is a net savings," but I presume that's the total GHG savings, including the trucking?
Mr. Cheliak: The GHG savings that are shown are actually at the source, which is where it is combusted. It is also important to realize that the diesel is trucked as well. You might have a small increase because of the greater distance to drive the LNG versus where they're currently taking the diesel from; however, the majority of the emissions in a project of this nature actually comes from the combustion of the product itself. The additional kilometres you do have to drive are a minimal impact, but it is something to take into consideration.
Senator Massicotte: So one shouldn't worry too much about the environmental impact of driving so many miles, because you say it is relatively minor compared to the impact of using the fuel.
Mr. Cheliak: Correct.
Senator Ringuette: Correct me if I'm wrong, but I was under the impression that in the area we are discussing and studying there was production of natural gas; is that right? Or it is potential production of natural gas?
Ms. Dunlop: In the case of the Inuvik area, that community was originally using natural gas produced locally. The well is expected to dry up earlier than expected, so they needed to look at an alternative source.
Senator Ringuette: You say that one of the wells is drying up. I was under the understanding that there was quite a lot of gas discovery in that area. Am I correct in assuming that?
Mr. Cheliak: Yes, there are significant resources available in the North.
Senator Ringuette: Natural gas resources?
Mr. Cheliak: Yes, trillions of cubic feet that were discovered in the 1970s, 1960s and even before. There is the issue of infrastructure: You need pipes to move it around. Conceivably, could you monetize one of those wells and put a liquefaction plant next to it and deliver it from a more northern location to mines and communities? You would have to assess the economics of doing that. But certainly there's a large potential resource in the ground in the North.
Senator Ringuette: From my perspective, we should be looking at developing the necessary infrastructure so that the natural gas in that area can be explored, first of all, distributed to the local communities and then whatever.
Chair, from one end, we get information that the energy is costly and that there's too much use of diesel, and we also have information that there's a lot of potential in regard to natural gas in the area. I think we should consider that if the only issue is infrastructure to do the exploration and to be able to supply adequately, at a reasonable price, the communities and future industries in the area — it only makes sense to me. Don't you think?
Ms. Dunlop: Certainly, there are advantages to sourcing your energy as close to market as possible. One of the witnesses that the committee might want to consider inviting to talk about the integrated nature of the natural gas market on the supply side is CAPP, the Canadian Association of Petroleum Producers, because they would be able to talk about the economics of development and the production side of natural gas. Really, that's what that is about and why the resource in the North hasn't been developed to date and at what point that becomes economical to do so. That might be a good witness for the committee to have because they would be able to talk to that.
Senator Patterson: I welcome the Canadian Gas Association's plan to create a vision for natural gas in Canada. I think this work would be very useful to our committee, bearing in mind our study time frame, concluding this calendar year. So this fall would be a great time to hear the results of your work, I would suggest.
We're interested in looking at energy in conjunction with natural resource development. You talked about the Stornoway diamond mine. If I'm right, that's a road connection. The challenge, at least in my region of Nunavut, is that most mines are not road connected, so it would have to be LNG by ship. I'm wondering, since the main capital cost of LNG is in the storage as you've got to keep it cold, although we have a cold climate most of the year —
The Chair: Not minus 162.
Senator Patterson: No, not that cold.
The Chair: You guys are tough but not that tough.
Senator Patterson: You said compressed natural gas is viable where you're close to the source. It's half as dense as LNG. I'm aware that compressed natural gas is used in the Maritimes quite a bit. Does compressed natural gas need the same cold storage as LNG? I'm wondering if that's a viable energy source. Many of our mines are near tidewater. Is compressed natural gas feasible because it doesn't require the infrastructure, or more feasible?
Mr. Cheliak: I think that when you're a large-scale end user, LNG is really your best option because you would need double the amount of storage tanks. It's not stored cold; compressed is, in fact, just under pressure. There is no temperature difference there, unlike for LNG, which is at atmospheric pressure, stored in a tank.
As for the cost differential between going with LNG and having to store it in the special tanks versus just having CNG in its compressed tanks, I'm not quite sure about that.
Senator Patterson: As to natural gas conversion of a diesel generator, can diesel generators easily be converted, and how viable an alternative is that? In Nunavut, we're 100 per cent diesel-dependent for electrical generation in communities and existing and planned mines. How viable is this conversion?
Mr. Cheliak: Of the three pilot projects that Ms. Dunlop discussed, Watson Lake in Yukon is putting conversion kits on the existing diesel generators. They feel that's a much more economical proposition given the life of the equipment there. It's not at the end of life yet, so conversion kits make the most sense. The alternative approach in Whitehorse is that they've ordered new, dedicated natural gas engines, if you will.
You can do both options. It really depends on the age of your piece of infrastructure and whether you are putting a conversion kit on a half-age life facility or whether it's time to replace it, so that you might as well go with a full natural gas option.
Senator Massicotte: What is the cost of a conversion kit?
Mr. Cheliak: I don't have the numbers. Certainly, the project proponents, ATCO Gas —
Senator Massicotte: Approximately.
Mr. Cheliak: I couldn't say; I will get that to you.
Senator Massicotte: How about a local liquefaction plant? What's the cost of that?
Mr. Cheliak: The smallest plants are about $8 million to $10 million. I'll just give you some units; that's about 10,000 gallons a day. The larger units can be anywhere from $100 million to multiple hundreds of millions of dollars.
Senator Massicotte: So more than petty cash.
Mr. Cheliak: Right.
The Chair: To answer some of those questions, we're looking at getting some of the experts around the LNG part of it. We can actually talk to Westport Engineering again, which converts diesel engines to using natural gas worldwide. They're out of Vancouver and have been operating for quite a while. We've heard from them before, and we can hear from them again.
Ms. Dunlop: FortisBC and ATCO Gas could talk specifically to the costs of those particular projects and the costs of diesel versus natural gas.
The only other point I'd make on costs is that the federal government is heavily subsidizing the diesel and the capital equipment in the northern territories, so we think that there are cost savings there for the federal government in terms of the cost of the commodity.
The Chair: In Whitehorse, I think that 95 per cent of their electricity is hydro generated. We've had that testimony. Is the LNG that would be used in Whitehorse for peak use? Are the plants that they're building for peak generation?
Mr. Cheliak: It's primarily for back-up. Understandably, it's 5 per cent of the total, but when maintenance or other things need to be done with the hydro facility, in part, that will work towards supplementing that needed power.
Senator Black: Your presentation has been extraordinarily helpful, so thank you very much.
I just want to understand the preconditions that will be required for LNG support for the North. As I understand from your testimony: (a) We're going to need roads or rail; (b) we're going to need regasification facilities and storage; and (c) we're going to need some level of federal support, whatever that is, whether it's, as Senator Massicotte has suggested, tax support or something else. Is there anything else that will be required on the list?
Senator Massicotte: Customers.
Senator Black: Yes, of course. We'll assume customers. So I have roads or rail, regasification and storage, and federal support.
Mr. Cheliak: Certainly from a community perspective, where there's a smaller scale you're referring to, that's where we feel support from capital contributions or reallocations could be beneficial.
When we're discussing things like mines that are billion dollar investments, it's more on the tax side, I believe. Certainly we've been in discussions with the Mining Association of Canada, and the tax approach seems to be one that is favourable for that industry.
Senator Black: Are any projects being developed or contemplated whereby the LNG would be trucked to the North and regasified and electricity generated and then electricity carried by wire to communities or projects?
Mr. Cheliak: That is the current model, yes.
Senator Black: Is that happening as we speak?
Mr. Cheliak: Yes. In Watson Lake and Whitehorse it will be for electricity, which is then used for both lights and heating. In Inuvik they actually have a gas pipeline distribution system, so people have stoves or furnaces or things like that. There are two different approaches: either piping it to homes or through wires where you have baseboard electric, et cetera.
Senator Seidman: I'd like to ask a few questions about the transport by Gaz Métro to the Stornoway diamond mine in northern Quebec. You say that it's going to happen in 2016. That's the plan.
I know that Natural Resources Canada said there were discussions with themselves and your organization in terms of the potential for LNG or compressed gas to support northern mining operations. It looks as if some progress is being made in these discussions if this project is a result of that, partly perhaps. Could you explain to us what the status is, how far along you've come, what infrastructure currently exists and what you would need to carry through on the project?
Mr. Cheliak: In terms of discussions, the transportation of LNG to remote sites is a fairly new thing in Canada, less than a half decade. Export of LNG has happened out of Alaska and other places since the 1970s, but this new approach is fairly innovative. Our discussions with government officials have been socializing the idea and the opportunity, helping understand what they need to know and also working through some of the technical challenges that exist with any new industry. That's where our discussions have rested to date.
In terms of what is needed to make more of this happen, it's really around more liquefaction capacity, so more liquefied natural gas stations or facilities across the country. When you have those, ideally in strategy locations, you can then look at what the end users need. So if you're in Nunavut, you might need a barge to get it up there. If you're in Churchill, a rail system would work, and if there is a road then trucking is an option. I think you need to identify where the opportunities are and which ones make the most sense, rank them and see what it would take to move those projects forward.
Senator Seidman: If all this goes according to plan and by 2016 Gaz Métro is delivering LNG to the mine, would there also be a plan to incorporate it into the community? I believe you talked about this a bit in the question and response to Senator Black. Once you truck it or get it up there in some form, how do you integrate that into the community so it could be used by the community?
Ms. Dunlop: Certainly that's one of the opportunities. I think your best case scenario is that you have a large industrial user, the LNG is being sent there and for the neighbouring communities we will look at how to make that economic. I would argue that the federal government is likely involved in many of those communities in terms of supporting its energy delivery already. When it comes time to look at those "gen sets" that support neighbouring communities, we believe there's an opportunity there.
Senator Seidman: Thank you.
Senator Sibbeston: There are approximately 66 communities in the three northern territories and, as was said, they almost all use diesel. There have been attempts in recent years to use alternate sources. In Yellowknife, wood pellets are being used by quite a number of companies and institutions, and wind occasionally. Alternate sources of power are being used.
I know that if the Mackenzie gas pipeline had been built, natural gas would have been a source of gas for the communities, but that's not likely to happen. In a sense, it's a race between alternate energy and liquid natural gas to feed the communities, provide them with their energy source.
Do you think there's a possibility that liquid natural gas could be a real alternative, could be successful in providing power to all of these 66 communities in the North?
Mr. Cheliak: Certainly there are infrastructure questions that need to be looked at first. Obviously, fuel is brought to those communities now in some manner, so putting LNG on a truck, rail or barge could be done similar to diesel. Fuel is fuel.
In terms of the renewable or alternate fuels, natural gas is actually an enabler and a complement to those sources across North America where wind and other renewable forms are installed. They typically have what we call a back-up system for times when wind is not blowing or sun is not shining. You can turn on the natural gas plant to give you the power you need to complement that.
We see a role for natural gas to partner with renewables, if it's a 50-50 or 90-10 split one way or another. There are certainly opportunities to do that and it is being done across North America now.
Senator MacDonald: I want to speak both about LNG and compressed natural gas for a few minutes and how it applies to the North.
One of the things you didn't mention — and it should be on the record — is that LNG has about twice the capacity as CNG, but CNG is highly volatile as well. It's one of the reasons you don't want to transport it over too big a space or distance.
You talk about taking the LNG up North. I look at the three territories and it's interesting to see the difference between Nunavut, the Northwest Territories and Yukon in terms of using diesel. It's completely dependent on diesel, and you realize how much more isolated and how much more of a frontier it is when it comes to this type of infrastructure. You mentioned there was a $10 million cost to build an LNG conversion plant.
Even if you put a plant up there, you have to transport natural gas when it is broken down to natural gas from the LNG. So it's hard for me to see how you could use LNG up there in such a way that you couldn't have to transport it the same way that you have to transport compressed natural gas once you break it down.
The technology around compressed natural gas and shipping has come a long way. There have been a number of patents approved in terms of compressed natural gas ships. Has that been looked at in terms of shipping compressed natural gas in ships to the North? I'm wondering what the cost is for all the diesel burned in the North? Let's say in Nunavut it's 100 per cent diesel. I'm wondering what the total cost of that diesel is, what the total cost of compressed natural gas would be and what the economics are of getting it up there.
Mr. Cheliak: Those are all very good questions. Part of the work we're looking at doing and that the committee looks at doing is some of those high-level baselines.
In terms of shipping large quantities of CNG to northern regions, I'm not aware of a study that looks at that. However, I believe some of the northern mines in Nunavut have looked at liquefied natural gas as an option. They have done some consulting studies to determine the economics of that.
On the cost economic of LNG versus competing fuels, we at CGA prepared, with a group called Jenmar Concepts, a model that an end user could use to plug in what they currently pay, where they are and what it would cost them to get LNG to their doorstep. That model has been used by a number of mines and mining associations with our members. We've done some high-level analysis with tools to determine what the cost advantage would be or wouldn't be for LNG.
Senator MacDonald: Do you have any numbers yet?
Mr. Cheliak: I'll have to get back to you with specific cases. We had three case studies run and they are propriety to those companies, but perhaps they could reach out and provide that information to the committee for background.
Senator MacDonald: I'd like to see it. Thank you.
The Chair: I don't have anyone else on the list, so I want to thank you very much for your presentation and answers. For any information that you're going to send, if you send it through our clerk, each and every senator will get the same information. Thank you very much.
(The committee adjourned.)