Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 18 - Evidence - December 6, 2016
OTTAWA, Tuesday, December 6, 2016
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:06 p.m. to study the effects of transitioning to a low carbon economy.
Senator Richard Neufeld (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld. I represent the province of British Columbia in the Senate 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 the Senate's website. You may also find more information on the schedule of witnesses on the website under Senate Committees.
I would now ask senators around the table to introduce themselves. I will begin by introducing my colleague to my right, the deputy chair, Senator Paul Massicotte, from Quebec.
Senator Massicotte: Good day.
Senator Griffin: Diane Griffin, Prince Edward Island.
Senator Fraser: Joan Fraser, Quebec.
Senator Seidman: Judith Seidman, from Montreal, Quebec.
Senator Greene: Stephen Greene, Nova Scotia.
The Chair: I'd also like to introduce our staff, beginning with the clerk, Maxime Fortin, on my left, and our two Library of Parliament analysts, Sam Banks and Marc LeBlanc.
Today marks the twenty-sixth meeting of our study on the effects of transitioning to a low-carbon economy, as required to meet the Government of Canada's announced targets for greenhouse gas emissions reductions. In the first segment of our meeting, I am pleased to welcome, from the Council of Canadian Academies, Eric M. Meslin, President and Chief Executive Officer; and Eddy Isaacs, Scientific Advisory Committee Member.
The floor is yours, gentlemen. I understand you have a short presentation, and then we'll go to questions and answers.
Eric M. Meslin, President and Chief Executive Officer, Council of Canadian Academies: Thank you very much, Senator Neufeld and members of the committee.
The Council of Canadian Academies is delighted to be here with you this evening to speak about these issues of importance to your committee. The CCA itself, as you may know, is a not-for-profit organization that undertakes independent, evidence-based expert panel assessments and workshops to inform the public policy development activities of Canada and Canadians. Our projects are multi-disciplinary, multi-sectoral panels and they have been under way since 2005 when we were created by the Government of Canada.
I think one of the things we're most proud of is the independence and objectivity of the work that we do, because we bring together what we believe to be the finest minds in Canada, largely supported by our member academies: The Royal Society of Canada, the Canadian Academy of Engineering and the Canadian Academy of Health Sciences. Their fellows and their senior decision-makers sit on our board of governors, which is chaired by Margaret Bloodworth, and on our Scientific Advisory Committee. They provide a key source of membership on our panels.
I'm delighted to be accompanied by Eddy Isaacs, who is not only a member of our Scientific Advisory Committee but is also president-elect of the Canadian Academy of Engineering. He played a major role in a number of our reports, which I will briefly describe for you today, and then I'll let Eddy fill in some of the additional details.
We've produced two reports, copies of which are available to the committee, if they wish, and on our website, available in both official languages.
The first report, Technological Prospects for Reducing the Environmental Footprint of Canadian Oil Sands, was released on May 28, 2015. It was provided to us as a question to be addressed by Natural Resources Canada, with the support of Environment Canada. We were asked to examine whether new and existing technologies have the ability to significantly reduce the environmental footprint of oil sands development.
I won't go through the entire report with you. Let me just share two of the key findings.
First, opportunities to reduce greenhouse gas emissions lie primarily with in situ operations, a major source for emissions, which could rise by up to 300 per cent by 2030 under the 2014 production forecasts.
Second, there really is no silver bullet technology that can significantly reduce the volume of tailings and increase their consolidation for reclamation. However, a range of technologies used together may provide options for timely reclamation.
The second report, called Technology and Policy Options for a Low-Emission Energy System in Canada, was actually given to us by Magna International, who asked the CCA to assemble an expert panel to conduct an independent, evidence-based assessment to examine the technology and policy options for transitioning to a low-emission energy system in Canada. That report was released on October 27, 2015. Again, there are many findings from that report, three of which I will share.
The first is that major emissions reductions could be achieved with the adoption of commercially available technologies; second, low-emission electricity is key; and third, the right combination of stringent and flexible policies is needed. That combination has been discussed in our report.
That concludes my remarks. I would again like to thank the committee for expressing an interest in the CCA coming before you. I would now be pleased to have my colleague, Eddy Isaacs, provide his remarks.
Eddy Isaacs, Scientific Advisory Committee Member, Council of Canadian Academies: Thank you very much, Dr. Meslin.
Thank you, Chairman Neufeld and committee members, for the opportunity to address you. We hope we can add value to the work of this committee.
Before I start, I want to pay tribute to Senator Elaine McCoy. She's not here with us today. For many years, she championed innovation and action on clean energy, and we're very grateful for the work she has done. We have been involved in much of that.
We've submitted a brief to the committee on the effects of transitioning to a low-carbon economy, so I'll keep my comments brief and focus on three items: putting into context the transformation of the global energy system and the rapid changes that are taking place; Canada's ability to compete in a low-carbon economy and the importance of innovation; and lastly, the use of decision tools as an aid to make complex and rational policy decisions.
The first item is the transformation of the global energy system. When we think about innovation in the 21st century, our mind revolves around the World Wide Web, iPhone, iPad, Skype, Facebook, Twitter, YouTube — all of those things. But, in fact, we sometimes overlook the disruption that is taking place in the energy system with breakthrough technologies.
On the renewable side — wind and solar, for example — the costs have come down considerably in the last number of years. You have a figure that shows how fast solar technology has come down in cost.
In many countries, they're counting on renewables to achieve ambitious greenhouse gas emissions reduction targets, considering the need to limit global temperature rise to less than 2 degrees Celsius. For example, Denmark talks about a target of 100 per cent renewables by 2035; in Germany, the target is that all cars sold are to be electrical by 2030; and greenhouse gas emissions reductions of 80 to 95 per cent by 2050, also in Germany.
In fact, 2015 marked a turning point for renewables. More renewable power capacity has been built globally than coal or gas electricity. That's a pretty dramatic change.
On the fossil fuels side, we've also witnessed breakthroughs in the production of unconventional oil and gas. New technologies such as hydraulic fracturing, or fracking, long horizontal wells, and 3-D seismic and steam-assisted gravity drainage in Canada have extended by several decades the reserves of oil and gas that we have in the world.
A number of years ago, we spoke about peak oil. Today we speak about peak demand. In a matter of 5 to 10 years, we have gone from having short supply to too much supply and not enough demand. The consequence is that we have plenty of cheap oil and gas, probably for a long time to come.
In addition, developing countries have widespread coal resources that are also plentiful and relatively cheap, so it's not surprising that we continue to use increasing amounts of fossil fuels and have not seen the curve starting to bend as yet. You can see this in one of the curves that I've provided in the presentation.
Effectively what we're witnessing is two parallel universes. The question remains: How do we bridge the gap between the renewables area and the fossil fuel area? We do have a complex energy system that needs a long lead time to change, and any transition away from fossil fuels has been made more uncertain due to the ready availability and cheap cost of these resources.
Now I want to turn to Canada's ability to compete in a low-carbon economy.
Managing greenhouse gas emissions for Canada will always be a challenge. Ours is a resource economy that is dependent on oil and gas exports. At the same time, a very significant part of our greenhouse gas emissions is due to resource extraction, especially the oil sands sector.
Innovation, especially in the short term, can bring about a 20 to 30 per cent reduction in the production and conversion of bitumen to transportation fuel. Things like energy efficiency to reduce costs and energy intensity at the same time are really part of the equation. Cogeneration, including combining steam and power generation, is also a very important technology. Next-generation production technology, such as through the use of solvents and electromagnetic heating, and adding value to our resources through things like partial upgrading to maximize benefit and create jobs, is also an important component of the near future.
Because we have a green electricity grid in Canada, we do have a major asset as the world moves to electrification. Canada has one of the lowest carbon-intensity grids in the world; and with the phase-out of coal in Canada and the boost to renewable sources of energy, our electricity system is, and will continue to be, the envy of the world. However, because we have such a clean electricity system, our cost of compliance will be much higher than our major trading partners.
In addition to becoming a lot more innovative, we also need to focus on changes in behaviour. In the end, what we have is a consumption problem that we can only regulate to a certain extent. Behavioural change and innovation both are uncertain processes, but they are the only bets that we really have.
Turning to carbon pricing, it is an important action to demonstrate that Canada is prepared to act and take a leadership role on climate change. It is a courageous step, especially because of our large resource-based economy. However, Canada cannot act alone and remain competitive. We have a complex, largely unconventional oil and gas resource, and we are a high-cost producer. Financial markets look for the best returns, and our increased costs could be a barrier for investments.
I'd like now to turn to the use of decision tools as an aid to make complex and rational policy decisions on climate change action. Eric certainly mentioned some of these reports we have under our belt.
Canada, like many other countries, has set ambitious GHG reduction targets. We tend to first set the targets and then stumble our way to try to figure out how to achieve them without damaging the economy. A better approach is to use modelling tools that provide rigorous analysis, exploring the pathways that can achieve GHG reduction at a minimum cost.
One example is the Trottier Energy Futures Project, which was co-sponsored by the Canadian Academy of Engineering and the David Suzuki Foundation and was completed earlier this year. This study demonstrated how difficult a task it is to achieve deep decarbonization of our energy system in the context of an orderly development of the Canadian economy.
Additional work is continuing to examine in greater depth the mitigation paths for individual provinces and territories. As well, under the Conference Board of Canada and the Canadian Academy of Engineering, a study is being launched to determine the economic impacts of deep decarbonization.
Finally, I want to mention the work of the Council of Canadian Academies, the organization we are representing today. The Council of Canadian Academies builds its reputation on evidence-based assessment, and that is critical. We have two examples of completed reports that my colleague Eric Meslin has mentioned, the Technological Prospects for Reducing the Environmental Footprint of Canadian Oil Sands and Technology and Policy Options for a Low-Emission Energy System in Canada.
Our plea is that we start to take these decisions, planning and assessment tools seriously as we position the country for the future economically, environmentally and socially. Thank you.
Senator Paul J. Massicotte (Deputy Chair) in the chair.
The Deputy Chair: The chairman stepped out for a second. He will be back shortly.
Thank you very much for the presentation. If I can comment, we're privileged to have people like yourselves, with your experience, knowledge and the time you put into these projects. You are highly credible. Your input is very important, especially given the size of the challenge we have. Thank you very much to you and your colleagues.
Could you clarify a little bit? In your presentation, you say green energy is now basically capturing more than half of the growth of energy needs and so on. It sounds good and important, but all you're talking about is half of the growth. You're not even touching the base, the 100 per cent.
You made the comment that the challenge ahead of us is immensely difficult, and I think that's something we're very much aware of.
What advice would you give? In your own charts, you're saying coal is jumping up a lot because a lot of poor countries use coal and it's very cheap. How do you see all this coming? You have knowledge and privileged information. We know how difficult it is. What's the prognosis for the next 15 to 20 years? How do we get there? If we don't get there, the cost will be a lot higher than not getting there.
Mr. Isaacs: This is the most important question. The answer is very complex. I think that in terms of renewables, that's a real milestone when people are starting to build a lot of renewable energy.
From a Canadian perspective, we really do need to decarbonize our electricity system. Electrification is coming about, and I think that's one way for us to get there. Does it get us all the way? Probably not, but it will certainly help having a clean electricity system now.
Four provinces will have to phase out coal in the next number of years, by 2030 or thereabouts. That's an important milestone as well because it will allow room for other emissions, say from the oil sands and so on.
Looking at it from a global perspective, you do have extreme challenges for countries like Canada with the major economy based on oil and gas production and exports. That's a challenge that we face. But many other countries are importers of oil and gas and therefore have a driver that will allow them to move to more renewable energy because then they do not have to import. From an economic perspective, that's certainly important for them to do.
We are caught in this paradigm of having a lot of fossil fuels available, and developing countries will be using quite a lot more in the future. We do have renewable energy available to us now. Renewable energy still needs to be backed by hydro, by nuclear, by something else, but that's becoming more and more available a lot cheaper. So I think there's going to be a swing to a lot more renewable.
The Deputy Chair: In your study, did you look at hydro? We've had many witnesses come to tell us that it is not economical and it's not practical to think that we can basically transport hydro from Quebec to other provinces that need it more because of the extensive costs. Yet, our Prime Minister made a comment recently that the newly proposed infrastructure bank could maybe finance some of that. Where does that sit in your head, in your plan? How feasible is that? Can we export energy from B.C. to Alberta to help?
Mr. Isaacs: Well, studies have been done looking at hydro, not only from B.C. but also from the Northwest Territories. In all of these, the capital costs have to be overcome. The capital costs that you need to put in to build the hydro facilities is certainly very high. But you also have cheap natural gas, so how do you square that?
In developing hydro, especially from the Northwest Territories, or from other provinces, government investments will be crucial. It is the public-private investment.
The Deputy Chair: You made a comment that capital cost is a problem, but that's not going to disappear, and that's a big nut. If it's not economical and not pragmatic and other alternatives are cheaper, no matter whose money it is, it probably shouldn't get done. Am I correct in saying that?
Mr. Isaacs: Well, this country has been built on big projects. The railway got done, and the St. Lawrence Seaway. There is a group of engineers in Sarnia looking at big projects that Canada should undertake, but it's not going to be economically feasible to do them with current prices. Capital costs are, as I mentioned, pretty high. It's a question of whether we want to do this or not as a country.
The Deputy Chair: You made reference in your presentation to what I call the intensive high-emission producers or companies in Canada. In other words, we have a number of sectors that basically are high emissions but extremely important to our economy. If we impose too much cost on those, whereas our neighbour may not impose much cost or any cost, how do we survive?
Mr. Isaacs: It's a very good question, and we need to be very careful that we do not impose costs, especially when commodity prices are as low as they are. If they were a lot higher, then you could bear some of these costs, but when the commodity prices are as low as they are, it's going to be very difficult to compete against resources developed with new technology such as fracking.
By "competing," I mean where is the investment going to come from? If I have better places to invest, I'm going to invest where it is cheaper to do so. That is going to be a major barrier. It's also our supply chain. There are companies asking do we stay or do we move across the border if the costs become unbearable and we don't have to face these barriers elsewhere?
Senator Seidman: Thank you very much for being here. There is no question that you represent the very finest minds in this country when you look at your component organizations.
I'm curious, actually, about the Council of Canadian Academies. If I read the statement about the council, it says it is an "independent, not-for-profit organization that supports independent, science-based authoritative expert assessments to inform public policy development in Canada." I see a lot of "independent" here. How do you get funded?
Mr. Meslin: I'm pleased to report that through a funding agreement with Innovation, Science and Economic Development Canada, formerly Industry Canada, we receive a funding tranche.
I'm pleased that you picked up on the notion of independence. Redundancy is not a terrible thing if you really want to make an important point. In this case, there are really two points to be made.
The first point is that the nature of the work that we do carries with it an understanding that we don't provide policy recommendations for our work. We provide an assessment of the state of the science on a particular topic. If you were to ask us what should we do, we'd say, "Read the report," rather than, "These are the policy recommendations we'd make." I think that distance is not just symbolically important, it's quite politically important.
The second point is with respect to the way our funding works. We were established in 2005 with a funding agreement through Industry Canada. It was renewed in 2015 for a further five years, and essentially that allows us to carry out three to four projects per year that come through a system through the federal government.
In the case of the Magna report, we are permitted, though it's not something we do regularly, to accept requests from other entities or organizations, provincial or non-government actors, in which case, as we say, we're not for profit but we're also not for loss. The money is used to carry out the work itself.
The independence is scientific objectivity and at arm's length from government to rely on us to provide the state of the science on the topic.
Senator Seidman: But if private sector corporations like Magna ask you to do a particular study because they're interested in something, how do you make that decision?
Mr. Meslin: It's another very good question. We're quite mindful of the perception of what it would mean for us to be asked by someone other than the federal government.
We have a really phenomenal board of governors, four of whom are nominated by the federal government to sit on our board. There's a very rigorous vetting process to pick up exactly that issue. I only arrived as president in February of this year and this report pre-dated me, but my understanding is that it went through a very serious conversation about the nature of that kind of work.
The fact is that all of the work that we do will always be made available to the public in both official languages. It's not private as in, "We'll give you information for you to use." Those are terms and conditions of any arrangement we make, whether it's with the federal government, provincial government or private. Of the over 40 reports we've done over ten years, there have been two that have been done with non-federal or non-provincial resources. It's an exception rather than the rule by any means.
Senator Seidman: So it's not like has been the criticism of clinical results that if you have negative results so you don't publish.
Mr. Meslin: No. I have a long history in that field and I am familiar with those issues. I can say with great confidence that no, it's not like that.
Senator Seidman: You might say, "Read the report" and so you won't answer my next question, but I might try.
In your 2015 report that I'm looking at, in the executive summary, you have finding number three, "a transition to low emission energy system is achievable with the right combination of stringent and flexible policies," and then you go on to say that "voluntary measures alone are insufficient, policies that focus exclusively on further technological progress offer no guarantees of emission reductions," and you move on to talk about "in addition to compulsory policy," because that's what you're recommending, "enabling policies are very important."
If you could help me understand where you're going with this, I would appreciate it.
Mr. Meslin: Sure. I would only note that your summary, while excellent, included the words "we are recommending," and we clearly aren't recommending one strategy or another. Senator, therein lies the best way to explain what we're doing.
The idea is that there isn't one solution but a combination of these policy initiatives, some voluntary, some maybe required. I think we're very careful not to step over the line of which should be done first, which should not be done and which should be encouraged.
Mr. Isaacs: I think what we tried to do is point out that we need to be very flexible in the way we apply policies. The example about having it done during the stock turnover is a good example of that kind of flexibility. But it's not prescriptive as to which policy or regulation you would apply.
Senator Seidman: Would you be willing to say which you think are most important as opposed to prescribing what we might do first?
Mr. Meslin: Well, the council didn't, but you may have a view. How is that for diplomacy?
Mr. Isaacs: My view is that you really have to be very careful about balancing carbon taxes, regulations and so on with economic development. The view that we're proposing here is that you need to assess and do the complete assessment of what needs to be done to make informed decisions. There are unintended consequences, and we need to be sure we know what they are and be able to make a rational decision on whether we want to go that route or not.
Senator Fraser: Well, more of the same. I, too, was struck by the notion that we need both stringent and flexible policies, but I'm really trying to wrap my mind around what you're talking about here.
Can you give some examples of policies that are stringent and policies that are flexible? I'm not asking you to recommend either, because I gather you really don't want to do that, but give some examples so that we have a better idea of what we're talking about. Have we any examples of policies anywhere — Canada or anywhere else — that have proven to have unexpected and unfavourable consequences, the unintended consequences element of things? What is stringent, what is flexible and what is unintended? Can you give any examples?
Mr. Isaacs: The feed-in tariff in Ontario would be one example of policies that have had unintended consequences of raising electricity rates. You can see that in other parts of the world. It's not to say that they shouldn't have done it; it's just they should have known this was going to happen. If they had known this would happen, that's great, and they still decided that it was important to go ahead and do it.
Senator Fraser: Signs are that they didn't.
Mr. Isaacs: We're arguing that you need to be sure where you're going and what are the pathways that get you there.
I'm not a policy person. I was part of this report, on the panel. My area is technology. But just as this report says, there is no guarantee that innovation, technology and behavioural changes are things that we can predict are going to take care of the world as we see it.
In essence, you have a number of things that you can do, but it comes down to regulations and policies that give you directions of where the country needs to go. It's not necessarily that you are sure that these policies will be followed. Getting people to agree to these policies is becoming more and more difficult.
Senator Fraser: This is probably betraying my abysmal ignorance here, but on this lovely chart, what do the red range and the blue range indicate?
Mr. Isaacs: It's their assumptions they've made about the growth of the economy and what reductions one could possibly achieve when this chart was prepared. It's a modelling study they've done trying to predict the GHG emissions up to 2030.
Senator Fraser: So the bottom, blue line would indicate that at low growth, we get fewer emissions and at high growth, that's what we're looking at?
Mr. Isaacs: Yes, they're different scenarios.
Senator Greene: I'm from Nova Scotia, which, as you know, is not an economic force in Canada, to put it mildly. We've got a lot of difficulties. The Province of Nova Scotia has had difficulty in creating a balanced budget, and it's got very little room to do anything. There's a teachers' strike right now in the province, to give you an example.
The province's energy strategy is trying to wean the province and everybody off carbon, and we've got wind experiments and wind farms. We've got plans for more hydro — to bring it from Newfoundland. We've got tidal power on the horizon, and a lot of money is being spent on that. There's a lot of optimism and hope.
With all of that, and given the relatively poor position the province is in financially and that the ability to contribute provincial money to projects is small, what is your stance on the province being able to achieve its own particular goals with regard to reducing carbon? Also, given the size of the economy in Nova Scotia, does it really matter if we achieve our goals?
Mr. Isaacs: I'm not that familiar with the way things are working in Nova Scotia, but you mentioned the key technologies that you have available to you. The hydro from Newfoundland is going to be a big part of that, but also the tidal power idea has been around for quite a long time. It's in demonstration phase, as far as I know, in the Bay of Fundy. It remains to be seen how much that will contribute to the overall electricity system. It will contribute some. It's just a question of how big that will be.
I'm not really answering your questions because I'm not sure how you can — you need to create economic value so that you can afford to do the things you need to do to reduce the carbon intensity of the electricity system. That's possible to do, but it's the timing of when you do it that's going to be critical. From my perspective, a lot of it has to do with timing.
Senator Greene: What you do you mean by that exactly?
Mr. Isaacs: You try to make sure that it's not hurting your economy while you're transitioning. When you're able to do that may not be in the next five years, but it may be in the next ten years.
Senator Greene: If we can't do anything for 10 to 15 years, let's say — and that's certainly possible — what does that mean for the ability of Canada to achieve the goals it has committed to internationally?
Mr. Isaacs: It's always going to be very difficult for Canada to achieve the targets that it set. Even a 30 per cent reduction by 2030 is going to be a very difficult target to achieve, and I'm not sure that without much more rigorous carbon pricing, for example, you're going to be able to achieve that. It's just not going to be feasible in that time range. That doesn't mean that you will not be able to achieve that in the 2040 or the 2050 time range, so I think we have to plan now not just for 2030 but also for 2050.
How you stagger that and how you allow provinces the flexibility to achieve their goals of reductions needs to be worked out. It's not going to be that every province is going to be able to reduce by the same amount equally. In the end, there has to be some flexibility.
Senator Griffin: Following Nova Scotia, I'm from Prince Edward Island, and I would certainly have to say we're even less of a powerhouse in many ways, whether an economic powerhouse or energy-producing powerhouse, with no oil and gas production and no hydro power. We have wind turbines, oil-fired electricity generation and underwater cables across the Northumberland Strait from New Brunswick.
I like the idea that there can be a combination of policy initiatives, because I think that's the only way we can go, especially with renewable resources. We have lots of wind and solar, so those could be good for us.
I'm heartened by the comment in your presentation that Canada could implement climate policies with much greater weight and effect than those implemented to date, without comprising its economic well-being. It's not often that I've personally heard that. It's usually, "It's going to cost us a lot of money. It's going to hurt pretty badly."
Then one of your examples immediately following that comment is that fugitive emissions account for 8 per cent of Canada's total emissions. That's an appalling number of leakage from the system. I'm not sure how we got into that. We talk about these systems — pipelines and whatnot — being environmentally friendly whenever we hear of new pipelines being proposed, but to hear that there is 8 per cent fugitive emissions from them, I'm shocked.
Mr. Isaacs: May I respond to the fugitive emission question? We're all shocked by the large number that we have in fugitive emissions. A lot of it is from the transportation of natural gas, and venting and flaring that occurs during the production of certain kinds of resources.
The good news is that the oil sands is not very much of a culprit in this because bitumen is effectively a dead oil. But we do have heavy oil resources where venting and flaring takes place and so on.
Alberta and Saskatchewan have made a case for reducing these fugitive emissions by a very large amount. In Alberta's case, by 2025, the Climate Leadership Plan talks about a 45 per cent reduction by 2025. There are ways to get us there.
A lot of these fugitive emissions are because it's uneconomic to capture them. We need to find ways to be able to do that. How do we capture them and get maximum value out of them? It's something that's being worked on, and I think that the technology is there to be able to reduce them quite significantly in the next number of years.
Senator Griffin: If I can just follow up: It strikes me that because it has not been economical to capture them that we're looking strictly at the economic situation. We're not really looking at full cost accounting when that happens; we're not looking at the negative environmental impact; we're not looking at what it's going to do to our economy if we don't get to a low-carbon economy.
Mr. Isaacs: That's right.
Senator Griffin: Maybe all that will help play into a more effective way of people realizing that we've got to get a hold of these fugitive emissions. Eight per cent is impressive.
Mr. Isaacs: Yes. That's equivalent to about 85 per cent of the entire oil sands sector in terms of emissions. It's a big number.
Senator MacDonald: I want to speak to you about demand and coal. I think all people realize we want cleaner air and cleaner water, different ways to get there and a different pace to get there. I want your view on the efficacy of setting arbitrary targets in regard to CO2 reductions that we know we are not going to meet anyway. We're putting these targets out there, and we pretend we're going to meet them and people pretend that they believe us, but we know in our hearts we're not going to meet them because we haven't met them in the past.
We know that in relative terms Canada is a small global contributor. Should we be setting arbitrary targets when we know that China is building 230 coal-fired plants a year, and India is a huge emitter of CO2? What are we really doing here when we do this? What is the sense in fooling ourselves?
I'm not saying it's not a problem and we shouldn't address it, but instead of pouring money into killing the Canadian economy, wouldn't we be better off working with these countries to help them reduce their emissions?
Mr. Isaacs: I think your comment is well taken. The question is one of balance between what we need and can afford to do at home and doing things abroad that can help economies that can essentially bypass in some of the remote villages. They don't need to go to fossil fuels. When they think about electricity, they can go directly to solar and so on. In many countries, they bypass landlines and are going directly to wireless.
Senator MacDonald: I see us in a mad rush to take coal-fired plants and turn them into stranded assets 15, 20 or 25 years before their lifespan when we're burning diesel and stuff that's really just dirty in relative terms, but there is a great obsession with shutting down those coal plants. In Germany, their old coal plants are being rebooted because they're inexpensive, they can meet demand and they don't put people in energy poverty.
I know they're not dirty, but the more you use the stuff, the better the technology gets. Coal-burning technology is much better today than it was 20, 40 or 50 years ago.
No matter what the fuel source is, you have to put it in place. You have to use it in order to improve the technology, to make it more efficient and cleaner. I'm just wondering if you would respond to that, because I just find there's a lot of stuff going on that doesn't mesh.
Mr. Isaacs: I tend to agree that we have a very complex situation. Alberta's Climate Leadership Plan was based on phasing out coal not only because of reducing greenhouse gas emissions and bumping up renewable energy to about 30 per cent, it really is based on how to start to balance health issues that are associated with coal, and I think more of the older coal plants rather than the newer coal plants, which are able to essentially capture a lot of the particulate matters and metals. Where do you want to go as a province or country and what room does that allow you to do in other sectors of the economy?
Mr. Meslin: Senator, you've asked an excellent question, and there is no pat answer in the pages of the work we've done, perhaps with one little bright light, and it may be these issues are often described as "wicked problems" because they don't admit of any one particular solution, and the solutions are often framed around public expectations.
I found your opening remarks to be very pragmatic and refreshing, in a way: An arbitrary, deceptive activity is going on. What you have highlighted, and was touched on in one of our projects, was that there is a fundamental role for public engagement in some of this because you're actually talking about trade-offs.
When you're in the business of making trade-offs about assessment and acceptability of risk, there won't be an algorithm, which is partly why the question around balancing flexible and stringent. The answer is yes, there should be a balance of flexible and stringent. We can't tell you the right balance; that's a policy decision.
Certainly recognizing that this is a moving target, there are public expectations as well as public attitudes, and I'm referring to publics, not one monolithic group. I think we touched on that in our low-emissions report and recognize that it's a challenge that's as difficult to frame and capture as the technology itself.
Senator Richard Neufeld (Chair) in the chair.
The Chair: When you look at reducing our GHGs, or what is planned to be reduced, 291 megatonnes by 2030, actually after 2030, it's a lot tougher. That's the easy part. I'm not saying it's easy. It's almost impossible. After 2030, I think that is impossible, to be honest, without harming our economy and the way people live, because we've been told it would take up to $200 or $300 a tonne in emission charges to get the public to change what they're doing now.
You can imagine what that does at the pumps. I know what $30 does at the pumps. About 7 or 8 cents a litre in the province I live in. So just extrapolate that out.
If you think about the 291 megatonnes, if you go the charts — you have that chart, and we do also. If you took the oil and gas industry totally out of the picture, you still can't meet 291 megatonnes. Even if you take all the coal generation out, you hardly touch it, because we actually have very little coal in comparison to the amount of generation we have. Transportation is only about half.
These are serious, Herculean tasks that have been laid in front of us to try to achieve. In your mind, when I give you those numbers, without totally destroying the economy, can we meet those numbers?
Mr. Isaacs: Truthfully?
The Chair: Yes, I want it truthfully.
Mr. Isaacs: No. I think the Trottier report showed how difficult it is to get to 80 per cent reduction. They never did, in any of the scenarios they looked at, in any of the pathways, because it's extremely difficult. Not only is it difficult to get there, but you also need the infrastructure to do that. If you're building nuclear, hydro, all kinds of biofuel plants, using biojet fuels and so on, all of these things have to be built at the same time and it's a question of being able to pace them properly to be able to do that. It is extremely difficult. It takes several years to build any facility that's going to make a big difference. It is a very difficult task.
The Chair: In your words, technology takes a long time to catch up. It's not simply that on Friday you decide to do it and Monday you get it done.
Mr. Isaacs: That's right.
The Chair: It is very difficult. Thank you for that.
Senator Griffin asked about fugitive gas. Would you explain that a bit more, please? It's not the actual pipeline taking the gas where fugitive gas comes from. It's actually through all the connections, through pigging stations, plants, at the well site and flaring. Could you expand on that a little? I don't want the wrong idea to go out that pipelines leak that much. They don't. We need to correct that.
Mr. Isaacs: That's true. There are valves and fittings that do leak in different plants and so on, but I think that's small. The major fugitive emissions are due to production.
For example, if you go through the countryside around Lloydminster, between Alberta and Saskatchewan, you see a lot of tanks out there that are used to capture production from what we call "cold production," which is producing sand and oil concurrently but also the solution gas, and then the gas is released from the tanks to get at the oil.
The regulations are changing very fast to not allow that to happen. When you vent methane, it's 25 times more potent than carbon dioxide. You're going to have to at least flare more, and over the years you will have to capture some of that methane.
The Chair: Thank you. I'm glad you enlightened us on that. B.C. is doing the same thing as Alberta and Saskatchewan with fugitive gas. It's a great thing to do.
One thing I'm always reminded of is the Bakken in the U.S., where they were producing all the shale oil. I was told you could see the flares from space. It was President Obama who let that happen but wouldn't let us build a pipeline down to the Gulf Coast, if you can imagine. They were flaring almost all the gas. They had no system in place to gather it, process it or do anything with it, so they were just flaring it. In fact, at one time in Alaska they flared as much gas on the North Slope as what British Columbia produced in a year on a constant basis. I thought those things were gone, but apparently not the Bakken. You can still flare all you want in Obama's world, and I think that will continue as we move forward. I think we have to keep that in mind.
Even if we were to meet all these targets, to me, from what I've learned and listened to and read, I don't think we're going to change the temperature. Canada can totally eliminate all its emissions and the temperature will not change, but our economy will be in total tatters.
Do you folks look at adaptation to climate change? We hear that 2,400 more coal plants are going to be built. Countries like India are not thinking so much about greenhouse gases as actually getting people out of poverty. What's more important: being able to put food on the table for your people to live or thinking about something else? It doesn't take long to figure that out. How about adaptation to what's actually going to happen? Do you do any studies on adaptation?
Mr. Isaacs: I have not.
The Chair: Is there a chance you might, if someone asks you?
Mr. Isaacs: I think we need to do that. We certainly need to look at what is happening, from a decision perspective, with adaptation. An assessment report on adaptation, I think, Eric, is probably not a bad idea.
Mr. Meslin: We're always happy to receive requests for activity. I think you ask a very good question, as some of this is beyond the scope of questions that were asked. It's reasonable to say, "So what's next?" There's certainly a reasonable expectation that your questions are important; and if they're important to Canada, if we're able to help, we would be pleased to.
The Chair: That's very interesting. It's something we should keep in mind. I'm not saying we shouldn't try to be as clean as we possibly can. I don't have any problem with that. But we have to be certain that we don't upset the apple cart because we all still have to put food on the table and live. It would be great if you thought about doing that.
One other point: You talked about Denmark and Germany. I think we should remind our viewers that Denmark and Germany still create about 52 per cent of their electricity from coal, and no time soon are they going to reduce that. They can put in all the wind power they want, but they need firm, dispatch-able power, just like everybody needs, and wind is not firm and dispatch-able.
Mr. Isaacs: True.
Senator Massicotte: I was going to raise the same issue. We appreciate your pain. Like I said earlier, you are highly credible. You are being frank in saying you don't think we will achieve the targets we've set in Canada, and probably the same thing worldwide.
It's important that you say that. I know you want to discuss alternatives, but it's important for decision-makers to hear your comment about how difficult it will be to get there and to manage that expectation and then probably, as the chairman says, deal with the next issue. So what do we do?
Obviously, the consequence to our climate will be significant, but how do we manage that? Let's get on with it. Let's talk about the real stuff: what we think will happen and how we should deal with it. I highly encourage you to be more forthright with your opinion so we know exactly what you're thinking.
Senator Patterson: My apologies for being late. I was listening and was enthralled by Senator MacDonald in the Senate.
I have a quick question. In the report on enabling rational decision making, you gave the example of fugitive emissions being a least-cost emission reduction strategy. Are there other examples that the study enumerated?
Mr. Isaacs: Energy efficiency would be one example of being able to do things that will actually save you money in the long run. We can do a lot more with energy efficiency than we have in the past. Quite frankly, conservation is going to be extremely important. We need to change the behaviours we have in this country in order to be able to do much more on conservation.
Senator Patterson: I was going to ask you about that. I believe that other countries, European countries, are much more conservation-minded. I've travelled in Greenland, just across the strait from Nunavut, where I live. To enter or leave your hotel room and get the lights on, you need to insert your key. So when you take your key out, the lights are out. It's a small example.
How is it that Europe seems to have got to lower consumption of water and energy and we're still lagging seriously in North America? How do we fix that?
Mr. Isaacs: I think it's the way we educate our population. You have to start at kindergarten to make sure that people recognize that energy is not for free and water is not for free. It's got consequences if we over-consume, so how can we conserve a lot of that? Maybe there is a way to start making that very clear.
Mr. Meslin: I don't know if this is on point, but among the other things I do, I co-teach a graduate seminar at Carleton University here in Ottawa with a colleague on Monday nights, and the topic is science, technology and innovation policy. Yesterday, by complete coincidence, the case study we were discussing with these young people was energy. In fact, they used one of our CCA reports as one of their readings and tried to rip it up, as good graduate students would do. It was quite a sobering experience to watch them do that.
The conversation that ensued flowed exactly from your question, senator, about what's important now and what's important in the future. They are the ones who are, in a sense, inheriting the decisions that are being made now. The ideas of learning at an early age, they've heard that. They're interested in solving some problems. When I hear your colleagues on the committee speak about absolving problems, I think the young people of this country are quite interested in sharing that goal.
The Chair: Thank you. Another reason they don't use as much, 40 some cents per kilowatt hour compared to an average of 10 in Canada. Costs do that. Five bucks a litre for gasoline. Guess what? Anyhow, price drives conservation, but you have to be careful.
Thank you very much, gentlemen. We appreciate it. It was very interesting and we look forward to further conversations with you.
Senator Paul Massicotte (Deputy Chair) in the chair.
The Deputy Chair: For this second segment, I am pleased to welcome, from In Situ Oil Sands Alliance, Richard Sendall, Chairman; and Patricia Nelson, Vice Chair. Thank you for joining us. Please proceed with your opening comments, after which I'm sure we'll have a lot of questions for you.
Richard Sendall, Chairman, In Situ Oil Sands Alliance: I'd like to thank you, Mr. Deputy Chair, for extending the invitation for us to appear before this committee. It's much appreciated.
As indicated, my name is Richard Sendall. I'm the Chair of the In Situ Oil Sands Alliance and also senior vice- president of strategy and government relations for MEG Energy. Joining me is Patricia Nelson, Vice Chair of the In Situ Oil Sands Alliance.
In assessing the mandate of this committee, we are pleased to present the In Situ Oil Sands Alliance perspective. IOSA members are demonstrating that low-carbon production is possible right now, and with government setting the right conditions for investment, we will continue to do so.
I notice that we're working off of hard copies, so I'll indicate what slide I'm progressing to.
Slide 2: The In Situ Oil Sands Alliance is an alliance of Canadian oil sands developers dedicated to the responsible development of our country's oil sands resources using in situ technologies. Our members produce the resource in situ, or in place, using environmentally responsible, low-impact, horizontal well drilling.
IOSA members manage the development of over 30 billion barrels of oil resources. We fund our operations and innovation through financial markets rather than from internally generated cash flow from our operations. We are reliant on those financial markets for our funding. We therefore represent a barometer on which to judge investor confidence in this sector.
Slide 3: Our members operate in an environmentally sustainable manner. We are committed to the Canadian communities in which we operate, and we are proven leaders in innovation. Our low-impact drilling technology accesses deep underground resources, leaving 85 per cent to 90 per cent of the land undisturbed. The water we use is sourced from deep underground, non-drinkable sources, over 90 per cent of which is recycled in our operations. We are focused on reducing greenhouse gas emissions at every stage of our operation.
IOSA members are Canadian companies focused on local job creation. We believe that long-standing relationships we have built with our local and Aboriginal communities are a key component to developing sustainable prosperity. Our industry is built on research, development and commercialization of technology. IOSA members are technology companies focused on finding innovative solutions to improve efficiencies, reduce greenhouse gas emissions from our operations and enhance oil recovery.
Small- to medium-sized companies like IOSA members are critical to fostering further innovation towards a lower carbon future. For us to continue innovating and bringing technology to bear, we need certainty that investments in technology today will be deployed and that the resulting production will reach global markets.
Slide 4: Canada has a world-leading resource. We have the third largest oil reserve globally, 97 per cent of which lie in the oil sands. In fact, because the oil sands are open to private sector investment, we represent 50 per cent of the world's free enterprise oil.
Canada also has world-leading environmental regulations. Of the top oil reserve holders, Canada is the only country that abides by world-class stringent environmental regulations and oversight and is the sole major producing jurisdiction with comprehensive greenhouse gas regulations, which include placing a 100-megaton limit on oil sands emissions.
As worldwide demand continues to grow, Canada's environmental and socially responsible production will be an important aspect of making us a supplier of choice for energy. Of the major reserve holders on this graph on slide 4, who would you rather do business with? The world needs more Canadian energy.
Slide 5: Most energy demand forecasters predict that, for the foreseeable future, fossil fuels will continue to provide the lion's share of energy needed to sustain standards of living around the world. Canada has a choice to participate in this energy market. As our Prime Minister said in his pipeline announcements just last week, "there isn't a country in the world that would find billions of barrels of oil and leave it in the ground while there is a market for it." The transition to a clean energy economy will take investment, and it won't happen overnight. We need to be able to create jobs in a strong, growing economy to pay for it. Canada's oil sands endowment is a significant source of national wealth for Canada. The market will continue to exist for Canadian oil, and it is vital that we continue our efforts to produce this product efficiently and in a way that is carbon comparative and comparable to other sources of energy.
We must also create the infrastructure for its timely development. This infrastructure will provide improved economics for both the production and for future innovation developments as Canadian products gain access to tidewater and therefore higher world oil pricing. In turn, this will increase government revenues and prosperity to all Canadians, while providing a pathway to a lower carbon future.
Slide 6: We are a technology-driven industry. Steam-assisted gravity drainage, or SAGD, is a steam-based technology that unlocks the heavy oil reserves that are too deep to mine. Eighty per cent of Canada's oil sands resource will be accessed through in situ techniques. SAGD is a primary recovery technology used in in situ production. It is a low-pressure process that extracts oil while leaving the sand in place. With SAGD, the landscape remains intact and it doesn't involve tailings ponds. The process uses non-drinkable water, 90 per cent of which is recycled.
Slide 7: Innovation continues to increase the efficiency of resource extraction while reducing the energy required for production. We now use infill wells and non-condensable gases to reduce the amount of steam required, while increasing the amount of resource that can be extracted. IOSA members are also integrating other technologies to reduce greenhouse gas emissions, like the application of solvents, injecting propane and butane instead of steam, and electromagnetic heating of the resource. The Nsolv process requires no steam at all. Each of the technologies on this slide represents a progression of technologies deployed to reduce energy emissions per barrel of production.
Slide 8: The innovation to lower carbon outcomes doesn't stop at the resource extraction stage. It continues with heat integration in our plants and facilities. Significantly, producers are integrating cogeneration technology to further increase efficiencies and reduce greenhouse gas emissions. Cogeneration produces two energy products — electricity and the steam required for resource extraction — from one energy source, clean-burning natural gas.
Facilities that use cogeneration are large industrial campuses providing the electrical grid with the cleanest energy generated from a fossil fuel anywhere on the planet. Electricity from oil sands cogeneration produces almost 75 per cent fewer emissions than coal-fired generation. Excess electricity that is not consumed on site is offered into the power grid, typically at a price of zero, providing a reliable source of base load power 24/7. This electricity is well positioned to support coal-power replacement and supports renewables by ensuring that the intermittency of renewables is backstopped with highly efficient gas-driven power. Cogeneration also averages down the electricity price for all consumers. Canada is a leading jurisdiction in the world on the use of cogeneration to curb greenhouse gas emissions.
Slide 9: IOSA members are also committed to innovation in the processing of oil on its way to the refinery. In particular, MEG Energy has developed HI-Q, a partial upgrading process that eliminates the need for the diluent used to transport the bitumen through a pipeline. This opens up pipeline capacity previously occupied by that diluent, allowing more heavy oil to be sent to market through the same pipeline infrastructure. HI-Q technology also reduces greenhouse gas emissions by 20 per cent over the traditional upgrading processes and uses no processed water.
Slide 10: Combining the in situ production with cogeneration already results in one of the greenest barrels globally. Despite the rhetoric, this is the reality. Giving consideration for the benefits of cogen, emissions per barrel of production are below the average range of common imports to the U.S. market, our largest market, and also to Eastern Canadian provinces.
With our continued commitment to clean energy production, we aim to reduce our emissions and become carbon competitive to the average conventional barrel and therefore become the supplier of choice.
In conclusion, we are committed to the low-carbon future, to investment in technology and innovation. Further innovation will be driven by smaller- and medium-sized companies, like those members of IOSA.
As further policies and regulations are developed, the Government of Canada must work to improve Canada's business climate in order to attract investment to take us on this path. The cumulative costs of policies and regulations must be diligently considered, monitored and compared against competing jurisdictions. Regulatory processes should be efficient and effective and avoid duplication with provincial processes.
The pursuit of new markets for Canadian energy products is absolutely critical to our competitiveness and positions us to be a global energy leader. By developing infrastructure that provides access to tidewater, Canadians will receive a higher price, and as such, the benefits of development are maximized for all Canadians.
This cash flow can be directly used to support investment in new technologies and further the success of our industry as we continue our leadership as the most sustainable production in the world. Through the support of innovation in this sector, the government is able to accelerate the pace at which technology is brought to commercialization. This materially improves our ability to move Canada towards a lower carbon future. Thank you for the opportunity to discuss in situ technology and the future of Canadian oil sands.
Senator Richard Neufeld (Chair) in the chair.
The Chair: Thank you very much, Mr. Sendall. That was much appreciated. Ms. Nelson, do you have anything to add?
Patricia Nelson, Vice Chair, In Situ Oil Sands Alliance: No, I'll just participate in the dialogue.
The Chair: That's great. Senator Fraser, you have to leave soon. Do you have a question you want to ask before you go?
Senator Fraser: I'm so defeated by the technology involved here. I've been trying to fathom your charts. Let me ask about page 10. What are the units we're measuring here?
Mr. Sendall: That's grams of CO2 emissions per megajoule of energy produced. It's equivalent to emission per barrel.
Senator Fraser: In situ unconventional, basically that means oil sands?
Mr. Sendall: Yes.
Senator Fraser: So 105 is —
Mr. Sendall: That's where the industry was a few years ago where we had a steam-to-oil ratio. The amount of steam put into the formation was three relative to a barrel of oil produced.
Senator Fraser: And 96 is where we are now, with your process?
Mr. Sendall: Yes, our company is now 96, with a steam-to-oil ratio dropped by over 20 per cent down to 2.4, and with consideration of co-generation.
Senator Fraser: You use natural gas to produce the steam, basically.
Mr. Sendall: Right.
Senator Fraser: I did get that you're getting the water from undrinkable sources. How much natural gas do we need to use in order to produce, by your process as distinct from other processes? Do you understand what I'm driving at here? Are we making up on the roundabouts what we're losing on the swings, or how does it all add up?
Mr. Sendall: The energy produced from the liquid product is at least a magnitude of 100 times greater than the energy input through natural gas, if that in any way answers your question.
Senator Fraser: What about emissions from that natural gas? Are they captured or are they, to use a lovely word we heard earlier, fugitive?
Mr. Sendall: The emissions from the natural gas, once it's consumed in the gas turbine to produce electricity, and the waste heat off that process goes to produce the oil. All of that natural gas is burnt efficiently and converted to water vapour and CO2 emissions.
Senator Fraser: What happens to the CO2?
Mr. Sendall: It's vented to the atmosphere. When we speak of fugitive emissions of methane, it's a methane form, and, yes, it's a CO2 emission.
Senator Massicotte: I'm at the same page. What is the U.S. average today? If you look at what the United States is consuming, where would that be compared to all those comparatives? Is it the Saudi Arabia medium?
Mr. Sendall: Yes. This compares product that is imported into the United States and competes with our product in the refinery base. Yes, they import a lot of their product from Venezuela and also, you're right, Saudi Arabia.
Senator Massicotte: So it would be close to 100, if you look at the average. You said the 3.0 is what we used to do. The 2.4 is what we would hope to do, or we are doing today?
Mr. Sendall: This is achievable today and is being achieved on a scale of hundreds of thousands of barrels of production a day.
Senator Massicotte: If you look at the number of projects in the oil sands, how many would be of the 105 category? How many of those projects are in the 96 category?
Mr. Sendall: For the in situ barrel produced, which is approximately 1.2 million barrels a day, approximately 25 per cent is being produced at the 2.4 or better, and then the rest is in the 3 range or lower. Three is a high end.
Senator Massicotte: When you look at the source of the chart, it's from 2008 or 2009. Is the future now? This is six years dated, all of this information, I presume?
Mr. Sendall: Yes. In fact, when the data came out, the average in situ production was in that 105 range, and now we are trending lower such that the average is more like the 102 represented on competing barrels, and like I say, about 25 per cent of the production is in that 96 range.
Senator Massicotte: While the source refers to 2009, this is current today; do I understand that correctly?
Mr. Sendall: Yes. This shows the trend to date.
Senator Massicotte: When can we expect the future, the one that goes down to 92?
Mr. Sendall: These technologies listed here, where we continue to take the steam-assisted gravity drainage technology with the innovations of using propane and butane solvents to reduce the steam requirements, along with the HI-Q partial upgrading, post-production stage on the way to market, that future is truly around the corner, I'd say.
Senator Massicotte: So a couple of years?
Mr. Sendall: It does take time to deploy, on a commercial basis, some of these technologies; so I would say within the next decade.
Senator Massicotte: An earlier witness made a comment that the GHGs emanating from the in situ process is going to go up 350 per cent. It was a big number. I thought in situ was more efficient relative to the creation of methane and GHGs than open pit mining. Could you clarify that?
Mr. Sendall: Yes. On the extraction stage for the product, including that open pit mines typically upgrade their product at the mine face, we are comparable in GHG emissions from either in situ or a mining product.
Senator Massicotte: Comparable with methane?
Mr. Sendall: Because this is a heavy oil that is almost tar-like in its formation underground, there is virtually no methane in that product; and any methane there is comes out in our process and is recycled and burned for the creation of energy.
Senator Massicotte: Relative to CO2, open pit or in situ, largely the same impact: If you in situ, much more efficient or much less harmful relative to methane gas being produced. Is my understanding accurate?
Mr. Sendall: Yes. There is very little gas production and emissions off of our processes. Dr. Isaacs did indicate that fugitive and methane emissions from in situ operations is minimal, and there are regulations that ensure that we do conserve any methane that comes with the oil in our processes.
Senator Griffin: The previous witnesses today basically agreed with Senator MacDonald that we cannot meet Canada's carbon reduction targets. What do you think?
Mr. Sendall: I think it's a huge challenge. Eddy Isaacs did indicate in his remarks that he felt a lot of emissions set by countries around the world are set reasonably arbitrarily without proper modelling and consideration of a technology path that will get us there. It's my belief that the targets Canada has set are going to be difficult to achieve at reasonable cost that protects our economy.
Ms. Nelson: I would like to get into that dialogue a little bit. One of the things we missed is that this is a global issue that we're dealing with. We have been known throughout the world as being one of the leaders in technological enhancement in the resource development base for decades. This industry is built on innovation and technology enhancement, and all the way along it has been improving on efficiencies, effectiveness and environmental reduction and protection. Those are the three Es: the environmental protection, the efficiency and the effectiveness of the development that has taken place.
One of the things that is critically important is we have the ability to go into the developing nations as they start to do their development and take good practices to those countries to show how to do it without damaging their environment. They need to have successes as they develop within their own countries. We have the technology and expertise with our young people to do that.
One of the things that we have done in this industry and particularly in the in situ side is not because there was a program that said you had to do this. We transitioned away from the coal-fired electrical generation into clean burning natural gas co-generation, and we did that for some very valid economic reasons.
It provided 24/7 electrical generation for our steam production. You cannot let these formations cool down if you're in turn around with a coal plant, so it gave us a consistency of 24/7, 365 days a year to move to co-generation. In doing that, what we were able to do on the environment side is reduce that emission for those plants on just the straight generation of electricity by 66.6 per cent right off the top.
Today, in Alberta, we are the only jurisdiction in all of North America and maybe worldwide — I'm not sure of that but for sure in North America — that has got installed, not going to, but actually physically installed over 4,500 megawatts of co-generation power today. That's almost 45 per cent of the power generation in the province of Alberta today. In addition, we have the third largest wind farm in Canada in Alberta as well of over 1,200 megawatts of power.
The initiatives have been coming forward before there was a call or a legislative process in place, and they came forward because they made sense. If you do it right the first time, you don't have to go back. You're able to take that knowledge now and spread that across the world and offer a plan to do things right.
Will we continue to increase our efficiencies and effectiveness with new technologies? As Richard has said, we have a number of initiatives that will continually put a more efficient way of producing that resource that returns a lot to the community.
With the co-generation and a facility, they generate approximately 85 megawatts of power a day production from their co-generation facility. They use between 15 and 20 megawatts of power. The other 70 megawatts are wielded in as green power from natural gas into the Alberta power grid as zero cost. The benefit to the people of Alberta is not only being the resource owner and efficiency and a better return on price and royalty into the Crown barrels, but in addition to that they have the ability to get an averaging down of their power costs. That's a huge benefit for a province like Alberta that is reliant upon small businesses and innovation and attracting business.
There are pluses all the way around, and that's one of the things that our industry hasn't really gone out and talked about enough — some of the benefits that are accruing to the community right across the country.
When I first saw this chart, number 10, I was amazed that this was conventional play from around the world who, on this other chart, are our competitors, and we're now the only group on this chart that supplies fuel into the United States that actually has a greenhouse policy in place. None of our competitors do. They were all gonna. They belong to the "are gonna club." None have actually done it. Again, Canada is leading the way. Canada is making strides that no other country has done.
Have we got it bang on? Probably not, but who would? This is all frontier land that we're in. But we're doing things in a lot of ways that make sense and we've been doing them all along. That's what I hope we continue to do in our industry, which is take the initiative and forge ahead and not look back. To me, Canada's regulations are here and the rest of them are here. We need to bring people up. We need to bring them up on board with the standards we have put in place in Canada. I think we can be the lead on that if we do it right.
Can we meet the arbitrary targets? Probably not, but we can keep going because it makes sense, and I think that's what we need to do.
Senator Griffin: My second question is regarding carbon pricing in Canada. What price per tonne do you think it would take to make any significant impact in terms of the amount of carbon that is being produced and used?
Mr. Sendall: First, in Alberta, we have lived with a price on carbon for a decade now, and my first inclination is that industry is incented to reduce its carbon emissions simply because it makes sense. By reducing a large component of our cost, which is the procurement of energy, natural gas, and by being more efficient as we move forward, we will not only reduce our emissions but also reduce our operating costs. We have the natural incentive to reduce emissions.
In fact, we have a price on carbon in Alberta. It does add additional impetus to move down that chain of higher efficiencies and develop new processes to more efficiently extract the resource, and just that price signal spurred us on and helped us on our initiative, which was to be more efficient and more cost-effective in conducting our business.
At this point in time, we're starting to push the limits of being detrimental to job creation and growth of our industry.
Senator Patterson: Thank you for the presentation. I'm interested in finding out a little bit more about your alliance. One thing I'm curious about is we have received presentations from the Canadian Oil Sands Innovation Alliance, which you know about, I'm sure, and we were impressed that they collaborate and share technology innovations freely among members. Do you also open source your technology breakthroughs amongst your members? If you don't mind me asking, as I'm just a little curious, have you considered being part of COSIA, since you have similar environmental goals? Why have you got your own alliance?
Mr. Sendall: The In Situ Oil Sands Alliance is one of like-minded companies with basically the same DNA. We are small- to medium-sized companies that have a voice and desire to have a voice on policy setting, both provincially and federally, and so we have come together. Yes, the technology that each of us develop is available as it goes commercial.
As far as our cooperation and coordination with COSIA, COSIA has a number of membership models, and some of them are joint-interest projects that you can participate on in individual projects as opposed to the entire program. Many of our members of In Situ Oil Sands Alliance do participate in the COSIA programs through supporting individual initiatives within COSIA.
Senator Patterson: So there is some interface there.
Mr. Sendall: Yes.
Senator Patterson: There was a recommendation at the end of your presentation that I'd like to ask you about: Government support for innovation improves commercialization timelines and industry adoption.
We've heard about slow timelines with innovation in the oil and gas sector. We're making a report to government. Could you elaborate a little on this, please? Are there programs the government has that you would recommend to us or commend to us? Give us a little more guidance here, please.
Mr. Sendall: There we're contemplating the participation and involvement of Innovation, Science and Economic Development within the federal government to consider assisting and considering the oil sands sector as a significant economic influence in the Canadian economy and look at programs that can assist us on this innovation path to a lower carbon future. The scientific credit system federally and provincially is to be encouraged and expanded to assist us along that path.
Senator Patterson: That's a tax credit.
Mr. Sendall: Yes, the scientific tax credit, yes, to help accelerate some of these programs.
Specifically when we talk about carbon pricing, both from a competitive nature and sustaining our viability and continuing on the innovation path, it's important that some of those compliance costs that we put into the system, and we recommend the lion's share of those costs, be allocated back into the innovation and technology stream to ensure that we are successful in lowering our emissions at source as opposed to having those funds funnelled off into general revenues, for instance.
Senator Patterson: Are there any other vehicles the federal government supports that you would recommend? I know we've heard from Sustainable Development Technology Canada. Are there any other vehicles that you would recommend or would be useful to your industry?
Mr. Sendall: Two others come to mind. Alberta Innovates is another organization that goes into competitive challenge for a pool of funding that's created provincially, and the other area of policy to consider is one of our current state-owned enterprise investment rules for foreign investment in our sector. What was put in only a few years ago truncated a significant investment flow into our industry when they indicated that state-owned enterprise rules specific to investments in the oil sands would be restricted unless it was judged to be required. That, like I say, truncated a significant source of investment stream to our industry, and it was specifically targeted to the oil sands. We recommend that we examine that policy and open Canada up for investment again.
Senator Patterson: You'd like broader access to capital markets than is presently available by Canadian policies?
Mr. Sendall: Yes.
Ms. Nelson: In our industry, we fund our projects through the market. We are the smaller- and mid-sized companies. We don't fund off of our balance sheets. We have to go to the marketplace to raise funds.
Every time we put another cost on top of all the other costs, those become disincentives for people to invest in the industry. We need to have an economic framework that recognizes the competitive nature of what we have in this industry with the rest of the global market, if we're going to be a global player. That's a key question that has to be asked: Do we want to be a key player in the energy market globally or not? If we do, there are a number of things we have to have, which is a fiscal framework, which is conducive to attracting investment, but also access to tidewater. We need to be able to produce this product out and then go to the marketplace. We're not large enough to be able to consume it all in the North American continent.
Those are key policy decisions that somewhere in the mix of this have to come to the forefront, including on how we treat carbon. I'll go back to the chart. We're the only one of the suppliers to the United States of America, which is 99 per cent of our marketplace, that has policies on greenhouse gas emissions, and yet we're curbed on even our transportation down into that area.
For a province like Alberta, we're a dry-land province. We don't have an option but to be able to transport product into the marketplace or the market arena, but it's difficult if you can't move anything through a pipeline. You've got to be able to do that somewhere, and you've got to have the capital come in to support all that development.
It's critical that the economic framework and financial framework is solid.
Senator MacDonald: I have a couple of questions. Looking at the steam-assisted gravity drainage and looking at the stats here, we are the third-largest reservoir of petroleum in the world, but 97 per cent of it is in the oil sands. The capability of providing wealth for the country here is just phenomenal if we can get it to market and get it out in a way that's suitable.
A few months ago, we had a good presentation here by the nuclear association. They talked about small, modular nuclear plants and the evolution and development of these. It would seem to me that they would be tailor-made for what you're trying to do with steam in situ with the oil sands. Could you respond to that? Has there been any progress made in that regard?
Mr. Sendall: I think very recently there have been some projects that have looked into nuclear power for their energy needs, and those were on a larger scale rather than the micro-nuclear plants. It wasn't economically viable. The social perception of that was not necessarily accepted and wasn't sanctioned by the government 10 years ago.
I really don't know enough about micro-nuclear and its possibilities. I think it's still in development stage. To my mind, I really don't know.
Senator MacDonald: So it hasn't been re-examined in the past decade, then; is that what you're saying?
Mr. Sendall: That's my understanding. With the fact that most of the oil sands are in areas that are claimed to be traditional territories of First Nations, I think we would be challenged to have that dialogue with those communities for employment of nuclear.
Ms. Nelson: That's an important part of this. We have been extremely fortunate to have tremendous relationships with our First Nations communities. They have been partners on a lot of things. In fact, in the oil sands, the top three service companies up there are owned, managed and operated by the Aboriginal community. They have done a tremendous job, top drawer, all the way around. That is a valued relationship that I don't think we'd want to change.
Senator MacDonald: You talk about partial upgrading technology, allowing heavy oil to be sent to market from Alberta without the need to import it. Would this be considered Syncrude? Are we talking Syncrude here?
Mr. Sendall: It's an upgraded product that improves the quality of oil. It doesn't take it to a synthetic crude oil that is typically called Syncrude. It enhances the oil quality enough to be able to pipeline it, so lowering the viscosity such that it can flow through a pipeline, without going all the way to what's referred to as a bottomless crude, where all of the heavy ends and asphaltenes are taken out of it.
Senator MacDonald: So it wouldn't lose its economic advantage?
Mr. Sendall: In fact, we believe it actually enhances the economics, because many refineries in our primary market — the U.S. Gulf Coast and over in the Michigan area — have now reconfigured their plants to handle the heavy oil, so they don't necessarily want a fully upgraded sweet light.
The Chair: On page 7, the solvent-only electromagnetic heating and solvents, are those processes that are in place now or is that newer technology that I'm not familiar with at present?
Mr. Sendall: The first technology, infill wells with non-condensable gases, is a technology that is currently being deployed on a commercial scale, and that is what is driving a lot of our steam-oil ratio counts to the low 2s, so 2.4 and less.
The solvent-assisted has been proposed for commercial projects in Alberta. We don't have a commercial deployment of it yet. It's deployment-ready at this point in time and has been proposed for commercial development in the province.
The electromagnetic heating is truly in the demonstration and research and development stage, I'll say.
The proponent of the solvent-only technology believes that it is commercial-ready. No one has yet committed to using it on a commercial basis.
All of these are either a reality or in the development stage and very close to commercial deployment.
The Chair: All the water you use is from deep underground, I understand? It's non-potable?
Mr. Sendall: Right.
The Chair: That's in all in situ processes going on in the oil sands right now?
Mr. Sendall: Yes. It's a transition. I'd say 30 years ago, a significant water source was taken from surface waters. But over time, through regulation and simply because it made sense, we have transitioned such that at least 95 per cent — I'd have to check my statistics on that, but at least 95 per cent of it is from deep underground sources that are non- potable and not usable for domestic or agricultural purposes.
The Chair: The mining process uses water out of the rivers there; is that correct? When they talk about water usage — which has been dramatically reduced, by the way, at least from what we've been told — that's for the mining process and it's from the rivers?
Mr. Sendall: Yes, typically. There's heavy regulation, as well as cooperation between the companies that operate mines. There are limits on what they can extract from the river during low-flow conditions, and they've built backup systems to accommodate for those periods of the year when they may be restricted. We believe the environment is being protected through a combination of regulatory and cooperative methods between companies.
The Chair: No further questions from anyone?
Thank you very much. That was very interesting. We appreciate the information. Thank you for coming here and sharing that information with us.
The meeting is adjourned.
(The committee adjourned.)