Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 20 - Evidence - April 26, 2012
OTTAWA, Thursday, April 26, 2012
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 9:01 a.m. to study the current state and future of Canada's energy sector (including alternative energy).
Senator W. David Angus (Chair) in the chair.
[English]
The Chair: Good morning, everyone. I call to order this regular meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources as we continue, but in a winding down mode, our in-depth study of Canada's energy sector that has been ongoing for three years, as we work our way towards our final report that is due in the latter part of June.
We are very lucky this morning to be able to have a group of gentlemen here from under the umbrella of an organization called Energy Technology and Innovation Canada, also related to the Canadian gas industry generally. They were scheduled at an earlier time to come before our committee and, for a combination of reasons could not make it, and therefore, by exception, if you will, and because of the eminence of these three gentlemen, their depth of knowledge and, I might say, the persuasive nature of their representative, Mr. Brendan Hawley, the steering committee agreed to hear these witnesses today.
We are on the CPAC network, on the worldwide web, and we welcome all our viewers this morning who have joined in our initiative to talk about energy, to develop a greater understanding about Canada's wealth in this area and the need for the provinces to come together in a more efficient and, perhaps, sustainable approach to the exploitation of our energy sources and having a cleaner environment in the future for us and our future generations.
Colleagues, today I believe you all have been making use of your iPads either in your offices or here. This committee, of course, being not only about energy but also about natural resources and the environment, has been chosen to lead a pilot project whereby we are reducing reliance on paper and, supposedly, all members of this committee are uploading the documentation to their iPads. We have all been doing that since six o'clock this morning. We have now learned how to turn on our iPads so we can click on "Committee." I can assure you that both Liberals and Conservatives alike are experiencing the same problems.
Quite seriously, it is so simple that Canadians could use less paper. I mean, now people on their BlackBerrys and iPhones have things so you do not download documents if it is not absolutely necessary.
There are so many things we could do in this country to make our energy production more efficient. There are so many things we could do in this country to make it cleaner and more sustainable, and our witnesses today are emphasizing innovation, research and technology. That is why I was particularly delighted that Mr. Egan, President and Chief Executive Officer of the Canadian Gas Association, and Mr. Ydreos and Mr. Goldberger, the Chair and Executive Director, respectively, of Energy Technology and Innovation Canada, could be with us.
Honourable senators have all the biographies of these witnesses, so I will not go into greater detail.
I should tell you who we are. I know you know we are the Standing Senate Committee on Energy, the Environment and Natural Resources. I am David Angus, a senator from Quebec, and I am the chair. Our deputy chair, Grant Mitchell from Alberta, is travelling and is not with us this morning. However, he is here in spirit and his representatives are in the room, so I always feel he is not far away. To my immediate right, from the Library of Parliament, are our very able resource folks who are instrumental in researching data for us and also putting together our reports, Marc LeBlanc and Sam Banks. Then we have Richard Neufeld, senator from British Columbia; Judith Seidman, senator from Montreal, Quebec; Senator John Wallace from the great province of New Brunswick, the centre of shale gas development, oil refining and all kinds of great things — even shipbuilding. To my left is our wonderful clerk Lynn Gordon. To her left, going down the table, is Senator Robert Peterson from Saskatchewan. We have a new member of the committee, a great Canadian from the province of Newfoundland and Labrador, George Baker. To his left from the Yukon Territory is Senator Dan Lang.
Mr. Egan, I understand that you will start with a presentation.
Timothy M. Egan, President and Chief Executive Officer, Canadian Gas Association: Thank you Mr. Chair, and all your colleagues, for this opportunity. With respect to your points on technology, I find — Liberal or Conservative — that the key to managing technology is to get someone under the age of 16 to help you master it, so generally I have one of my children help me. I am pleased to make them available.
The Chair: We may need them.
Mr. Egan: You noted how we are looking for a more effective and sustainable approach to the use of our natural resources, and that is core to our mandate of the Canadian Gas Association.
You may recall that I had the opportunity to appear before you last year to give an overview on the gas industry in general and to discuss some of the exciting things that were happening coast to coast. You made reference to a couple of them, in particular some of the things happening in New Brunswick, which is rapidly becoming one of the new centres for natural gas in Canada. Some of my colleagues are actually in a session in New Brunswick today for a dialogue on the role of natural gas in the province. I was just in British Columbia on Tuesday for meetings regarding the role of natural gas in B.C., and tomorrow I head to Nova Scotia for a session also regarding the opportunities in that province. It speaks to the exciting opportunity that natural gas represents coast to coast to coast in this country right now.
ETIC is a project of my association that tries to capitalize on that new opportunity. ETIC is Energy Technology and Innovation Canada. With me today is the Chairman of ETIC, Mr. Ydreos, who is a vice-president for government relations and Aboriginal affairs with one of our largest companies, Union Gas. Mr. Ydreos is the genius behind the idea of ETIC, and it speaks to his decades of experience in the industry. I am pleased he could join us here today. He will talk a bit about some of international aspects of this venture and of the opportunities it represents for Canada.
To his left is Mr. Goldberger, who has recently joined us as executive director of the project. He brings a wealth of experience from the finance industry and from his own work in the energy sector over the course of a couple of decades. We are pleased to have him with us to move this project forward.
I will give a couple of background remarks on the industry. You all have a slide deck before you or on your iPads. I am working from the paper version right now, I have to admit.
I want to talk first about the customer. In our industry, our focus is on the customer. Within the value chain around natural gas, the Canadian Gas Association is the delivery side of the industry, so we are the direct interface with the customer, and we have approximately 6.3 million customers across the country. That represents 6.3 million metres and each metre may be the metre in your home, your business, or industrial facility. By our estimation, that is 20 million or 25 million Canadians who are using natural gas every single day. It also means we are communicating with 20 million to 25 million Canadians every month about natural gas. That comes in the form of them getting a bill every month for the use of that energy service, and that speaks to a really incredible personal relationship and direct outreach to an extraordinary number of Canadians that our industry has.
Natural gas today represents about 30 per cent of Canada's end-use energy needs. That is more than electricity, which many people do not know. We have described it as the "silent giant" in the energy mix. Most people never think about it; they just use it day in, day out. It obviously varies province to province, but its use is rapidly expanding across the country.
The slide shows how natural gas is used in Canada right now. I will not walk you through that pie chart, but you have it before you.
I will speak to a couple of the future opportunities that we recognize that prompted us to create ETIC as a separate project. There are expanded uses in homes and businesses that are currently using it, so new applications within the home and in industry are rapidly coming to the fore. This is largely driven by the fact that the supply picture has changed so dramatically over the course of the last couple of years. We used to talk about 30 years of supply; we now talk about 100 years of supply. If you talk to the production industry, they will tell you that even that might be a modest assessment. Regardless, it is a profound change from what we would have said a few years ago.
With that supply picture has emerged a change in the affordability of natural gas. It has always been an affordable commodity; it has only become more so. In a time of economic difficulty, when energy costs are generally rising, this is a positive message.
The Chair: I have this terrible habit of interrupting from time to time since I do not normally participate in the questioning.
In terms of the price of gas, we keep hearing now that it has gone below $3 and $2.50, and now below $2. You are saying "affordability." How does the market price of natural gas relate to what you are telling us, if it does at all?
Mr. Egan: There are three components to the bill you receive as a natural gas consumer from your distribution company. There is a commodity cost — the cost of the fuel itself — a distribution charge, and a transmission charge. It reflects the parts of delivering that service to you in the home. The transmission charge is for the larger pipes delivering it across the country; the distribution charge is the cost of putting it in your home through the local distribution system; and the commodity cost is the market price of natural gas.
The Chair: At the wellhead, or whatever.
Mr. Egan: Right. By law, distribution companies pass that price through to you, so unlike with many other energy services you are actually paying the real market price of that commodity.
I can turn to Mr. Ydreos on how this is done, but that price is adjusted periodically under regulatory authority to ensure that customers do pay the real price of the commodity. You see what is happening in the market in your bill, which I think is unique in energy service.
The Chair: That is why I made the point. I wanted you to bring that out. Thank you.
Mr. Egan: One of the key things we like to emphasize about natural gas is that we talk about both the commodity and how it is delivered to you. It is delivered through utilities across the country. Those utilities have really two mandates: One is to ensure safe and reliable service delivery, and the second is to ensure customers are constantly getting the best service possible. That means an emphasis on efficiency at all times. That is why natural gas companies are very often leaders in things like demand-side management or looking at opportunities to integrate natural gas with other energy service opportunities, be they renewable energy opportunities, district energy systems or a host of things like that. It is looking at the creative opportunities that exist to ensure that Canadians are getting the energy services they need.
When we think about energy services, there are really three for every consumer: Heating and cooling is one, plug load or electricity is the second one and the third is transportation. Natural gas is first and foremost about heating and cooling; increasingly it is about electricity; and the real emerging opportunities are regarding transportation.
It is important to have that as a setup when you understand the energy system.
The Chair: You mentioned utilities and one traditionally thinks of a supplier of electricity as a provincially- or government-owned body. We understand in Canada it is a mix; is that correct? In Quebec, you have Gaz Métro, which is owned by shareholders.
Mr. Egan: It varies province to province. On the balance, the gas distribution industry is more of a private-sector industry than the electricity industry is in Canada. In my association, we have utilities on the ground in 10 provinces represented. The exceptions, with all due respect to your colleague from Newfoundland, are Newfoundland and Prince Edward Island. All other provinces have distribution utilities that have franchises within that province.
In Canada today in the gas industry, all of those are private-sector entities, except in the province of Saskatchewan — we are a member of SaskEnergy — and in Manitoba — we are members of Manitoba Hydro, the integrated gas and electric company. Otherwise they are private sector entities in our industry. The electricity industry tends to be much more of a Crown corporation-based industry in the country.
There are two other things to talk about when you think about the customer and new opportunities going forward. I mentioned one, which is transportation. It really is changing dramatically. The view of policy decision makers and the view of the public about the applications for natural gas in the transportation industry were talked about decades ago. There were some initial forays. They did not go very far. The technology was not there. The volatility in the price of the fuel was a factor. Those things have changed, and now the growth in the transportation sector represents significant opportunity.
The other thing is power generation and the opportunities that exist there to expand the use of natural gas in power generation.
First and foremost, several jurisdictions look at phasing out coal. Even beyond that, opportunities in remote communities, in new industrial development opportunities in the northern parts of provinces that are looking at significant industrial development, be it Plan Nord in your province, chair, the Ring of Fire in Ontario or northern development in the Prairies or Western Canada. The opportunities to use natural gas are significant to help get those off the ground.
The Chair: Let me do one other intervention here. We started this study three years ago already; so much has happened in three years. At that point in time we were being told there is a great movement, fossil fuels are running out, it is a depleting resource. It is a good thing because it produces CO2, it is environmentally destructive, and they are not sustainable and all of this.
We understand natural gas is a fossil fuel. How do we reconcile that fact with the movement away in the public — in some areas at least — with the need or demand for more sustainable and alternate fuels to the fossil fuels?
Mr. Egan: First, on the idea of us running out of that, I think the last few years have shown that it is simply not the case. In terms of natural gas, we have actually known for a very long time the extent of the supply, but thought it was economically inaccessible. Technology has shown that it has managed to change that picture, which is why we have moved to talking from 30 years on over 100 years supply. Gas from shales across North America has dramatically changed the supply picture and is changing it worldwide. Now, the International Energy Agency talks about the golden age of gas because of the supply picture having changed worldwide.
No one is even talking about something called gas hydrates, which are a whole other supply of natural gas found essentially frozen in water off continental shelves. That supply picture runs into the thousands of years. It is actually mind-boggling. The technology is not there yet for economic recovery, although several countries are doing extensive work on that right now. The Japanese and Norwegians are amongst the leaders on that. The supply picture on this particular fossil fuel is very good. The supply picture on oil, coal and other fossil fuels is equally good and as technology advances the opportunities there are huge, too. I think it puts to rest the idea that we do not have the resources available.
That said, people are concerned about the environmental impacts of the use of those resources. One advantage of natural gas is its emissions profile is so much better than that of any other fossil fuel. Be it NOx, SOx, mercury or particulate matter in the burning of natural gas, the profile is much cleaner. On CO2 emissions, it is also significantly reduced. It depends on how you burn it. Different technologies are available, but overall it is a much better picture.
As I was saying before about natural gas, one of its great advantages is its versatility and the fact you combine it with other technologies in order to deliver, over time, a smaller environmental footprint.
In terms of the actual use of natural gas, it means that on a per capita basis the emission profile is declining over time as we are using this resource more efficiently. Are we still using fossil fuel? Yes. Are there environmental implications to that? Yes, but is the picture getting better and is our economic productivity as a consequence of that better use improving? Yes, it is.
The Chair: Mr. Egan, as an advocate for the gas business, you just took the lob ball I softly threw towards you and knocked it out of the park.
Mr. Egan: I appreciate that because I did not bring a glove, so the soft ball was appreciated.
I have talked about who we are across the country. I will not go into any more detail about our member companies or the use of fuel. On this next slide I have talked about the product and many of its attributes. This is the story that we tell in all of our advocacy work across the country. We talk about the fact that this resource is Canadian, abundant, clean, versatile, affordable and reliable. The last attribute we highlight is its safety. The first and foremost priority of the industry is safety.
We are delivering a product into people's homes and want to ensure that the public understands how to use that product safely and sensibly; that is the first priority of our industry.
We touched on this in the Q and A exchange we have had, but I will talk about some of the environmental challenges and how we move going forward to the better use of this fuel and the opportunities it represents. Canada is a small country. We have incredible natural resources for our energy needs and we are very interested in driving the better use of those resources and driving innovation in the use of them, but there are a variety of players out there. They are not always aligned in their interests and for the most part they tend to be fairly small players in terms of the global marketplace. Part of what we try to do is say, "Is there a way to bring those elements together to align some of their interests to look at how a desire for more innovation, a desire for better use of technology can be aligned? What can we do to bring better coordination and levering of resources?" That is what prompted the creation of ETIC as a venture within CGA. For the time being it is a project of the association, not a separate legal entity, but it is one that we are excited about, very committed to. We are particularly committed to working with government and other stakeholders on it.
With that, I will turn it over to my colleague, Mr. Ydreos, to give you a little more on the specific background for the creation of the venture.
Mel Ydreos, Chair, Energy Technology and Innovation Canada: Thank you for the opportunity. Mr. Egan was all too kind in his introductory remarks. I have played an important role in the establishment of this organization, but my knowledge has come through the opportunity to engage in some international work that has been very helpful to me in shaping my views about how we can advance issues like these.
I have been a long time participant in an organization called the International Gas Union. The International Gas Union is the global organization that represents the entire value chain of natural gas. I have been the Canadian representative to that organization for well over 12 years now. That organization runs on a triennium — a three-year cycle — where a country gets the honour to host the presidency of the union and also hold a world gas conference which is held every three years.
During the Argentinian presidency between 2006 and 2009, I was honoured by being asked to be a vice chairman of a special task force that the International Gas Union formed to review the global situation with respect to innovation and R & D. With that, we travelled around the world exploring issues and opportunities around the natural gas industry in assessing the state of investment in research and innovation. We tried to learn from the best in the business and tried to formulate a number of recommendations on how the industry should move forward in the area of research and innovation.
That is where my thinking and vision came from in the establishment of ETIC. I came back and spoke to my Canadian colleagues and said, we need to set up an organization that will collaborate and bring all the players across our nation together so that we can make a greater impact in the area of innovation and R & D — as opposed to being divided provincially, individually — in the investments and efforts that we are making in this area.
At that time we also identified a significant increase in effort and resources that are actually required to move forward with some of these innovations and developments, which we need in order to ensure that natural gas stays and has a very important role in the future energy mix.
That is where the idea came from. We debated that for some time and finally decided to launch this initiative.
The vision around the initiative and the mandate is to bring all the players together, collaborate and facilitate the necessary technology innovations to ensure that natural gas plays a key role in our energy futures.
It was at a time when most of the discussion was about the development of the smart grids. What was interesting about the discussions at the time was that it was all centred on electricity and that, ultimately, all consumption would be electrical and that we would move sort of upstream in how we generate electricity, but on the usage side, it would all be electricity.
We had a much different view of that, and we are supporting the development of smart energy networks, as opposed to smart grids, which combine all the available energy sources in a way that increases the overall efficiency of our systems and the way we utilize energy in our businesses and our homes and the way we generate electricity.
Our vision was a much more open vision, without selecting winners or losers with respect to what energies we might ultimately end up with.
In fact, about four weeks from now, at the World Gas Conference, we will be publishing a global vision for natural gas in a report that I participated in creating. One of the things that we talk about in that report is that natural gas is the "no regrets" fuel. It is "no regrets" because of the tremendous flexibility it offers for the future in that the existing network, for example, can be reconfigured to deliver other energies if some day, way in the future, there is a significant decline in the consumption of natural gas. For example, if we move to a hydrogen economy, way out there, the network can be the network that actually delivers that fuel as well.
The mandate of ETIC is to broker investment and innovation in the downstream and end-use markets as they relate to natural gas. To do that, we believe that, as a nation and as member companies, we need to have a process where collaboration can be established and leveraged by partnering with other entities within the energy sector in order to leverage the investments and make a much more impactful approach to innovation in R & D. That could be with the federal government, provincial governments, research agencies and international players who are interested in the same sort of technologies we are pursuing.
Critical mass is important, and I think that is one of the key issues that drove the establishment of this initiative, that we can all go about spreading our very limited resources in a way that actually does not make significant impact. The only way you will move the innovation agenda forward is if you focus, have critical mass and strategically invest in the right technologies.
One of the issues that we have is all of our member companies are regulated utilities, and to that extent, we need to convince our regulators that rate-funded investments in innovation and R & D are appropriate for us to pass along to rate payers. It is a bit of a challenge.
The challenge is the question as to what role do downstream utilities have to play in that space, and, in defining that, we are very careful to say that we are not about to embark on developing new products or manufacturing. What we do and why we are so important is that we are a critical link in that deployment of new technology because we can connect downstream customers to these innovative products that are being developed so that we can merge the two in ways that, hopefully, propel and excel the way the products get commercialized.
We are not in the space where we will be taking over manufacturing or creating new products. We will let that happen where it properly happens. We will simply be the vehicle that can connect the downstream customers to those new innovative products so that the early adopters can be facilitated so we can break down some of the embedded barriers that exist in the deployment of some of those new products. Those barriers could be regulations, standards, or things that restrict the way these products can get to market. To a certain extent, we view ourselves as playing a very critical role in market transformation initiatives and supporting that process.
The other key issue with respect to our mandate is we did not want to establish another research or R & D organization. We have established a very efficient, effective virtual organization that is small and lean but has the mandate of bringing the players together in a collaborative way in order to make these things happen.
That is the vision and the mandate of the organization.
I will move to the next slide. As a virtual organization, what are the services and products that this organization will deliver? Well, it is largely three areas: awareness and information exchange activities — making people aware of what is evolving, where products are coming from, being developed and the possibilities for deployment of some of these products; strategic enabling services — the facilitation of project management, particularly ones that require the collaboration of many players; and then an industry advocate service, which is going out there and ensuring we are well aware of the function of this organization and what it will do.
With that in mind and with watching the organization, we wanted to keep it very focused. To that extent we identified four key areas that we will focus on initially, and I will pass it over to Mr. Goldberger who will explain what those areas are.
Dan Goldberger, Executive Director, Energy Technology and Innovation Canada: Thank you, Mr. Chairman and senators, for having us today.
To my right are the visionaries of ETIC and the gas industry writ large, and my task is to implement the vision and execute on it.
The real key for ETIC is bringing together, as explained earlier, this national collaboration of natural gas utilities and putting forward projects that all of them in their own jurisdiction believe are in the best interests of their rate payers and their customers, and so we have these four areas. Essentially, I will touch on the four areas today.
The first one is ICES, Integrated Community Energy Systems, and that would allow us to look within a local community, try to find the synergies within the use of natural gas in that community — it could be a community as big as the city of Ottawa or a community that is rather remote — and take advantage of whatever natural gas infrastructure there may be at that location. The projects could be extremely diverse, and they could focus on issues such as thermal metering, combined heat and power, which can be a large, industrial sort of technology, or it could be for a residential application on a smaller scale of 4 to 6 kilowatts, thermal energy storage, the use of hybrid gas and marrying it with renewable energy technologies.
To date, we have seen about two dozen types of initiatives, ranging from the small end to the multimillion dollar range. Some of them include the technology of storage, such as power to gas storage; water heating technologies, looking at a variety of different technologies that I will explain later; smart gas appliances; smart controls; and ways to power remote communities.
As you know, the problem with remote communities across Canada, of which there are several hundred, is they rely on diesel that is typically flown in or barged in. We believe there are tremendous opportunities to perhaps move them away from a reliance on diesel to more reliance on natural gas, which would be more benign for the environment and more efficient.
The next area I would like to touch on is transportation, which Mr. Egan alluded to earlier. There is tremendous upside opportunity for Canada, particularly in the sector of heavy duty diesel trucks and return-to-base fleets. This would include everything from garbage-hauling trucks to delivery vans, such as FedEx and so on, that could benefit from switching over to natural gas. It is very practical and cost efficient; and, as mentioned earlier, the emissions profile is tremendously beneficial. We believe that we must focus on this area. There has been a lot of advocacy in this area, but there needs to be a lot more awareness built on it. Actually, the heavy duty diesel truck, given the nature of Canada and travelling highways like the 401 in Ontario, emits about 30 per cent of our overall greenhouse gas emissions from the vehicle sector. It is a really important sector for us to try to move forward, build awareness and build on projects that can see the use of natural gas as a success story; and we plan to do that.
In other applications on the transportation side, I was at a workshop yesterday on liquefied natural gas for marine applications, and I will be at another one tomorrow regarding BC ferries and LNG. Yesterday's story was even more significant in the sense of talking about the Great Lakes and the surrounding provinces and states. It struck me as a great binational initiative on clean energy applications if we can somehow build the advocacy for LNG applications to replace heavy duty bunker fuel and the like. Greenhouse gas emissions could be tremendously beneficial as a reduction from that.
Another area we are hoping to focus on, and we have already seen a number of potential projects on, is renewable natural gas. A lot of people may be somewhat surprised by that moniker. Essentially, we are looking at ways to clean up the natural gas and replace it with natural sources, such as biogas and the like. You have probably heard of anaerobic digesters. We are looking at new technologies that would lend to gasification and cleaner burning fuels. Some of this is less commercial than the anaerobic digesters that I mentioned earlier. Essentially, it involves using organic waste that captures the methane, which we alluded to earlier, that is 24.4 times the greenhouse gas effect of CO2. This is another really important area where we are partnering with CANMET and Natural Resources Canada. We hope to do a lot of work in this area.
The fourth sector that we have identified is industry, which is critically important to Canada's future, as we all know. About 40 per cent of the natural gas consumption in Canada comes from the industrial sector. There is almost an endless supply of industries dependent on natural gas as a feedstock for a variety of chemical processes, including plastics, process heat applications, refineries, steel, cement and fertilizer. All of these types of industries are heavily reliant on natural gas as an input fuel. We are working with them to better improve the emissions profile, the combustion efficiency and perhaps even where there are ancillary products as a result of these new processes. We are moving forward rather aggressively on the industrial sector to make it more cost efficient and to improve its environmental profile. Those are some of the four areas that we are working on.
Mr. Egan: If I may interrupt for a second, I am conscious of the clock and I know you are watching the clock. We have a couple of specifics we could talk about but senators have the package so I wonder if you want to go to questions now.
The Chair: Well, that is what I was signaling. It is your choice because we have the documentation. Maybe you could give one example to lead, but I know that senators are anxious to question, and it is nearly quarter to ten. We have a good 20 minutes.
Mr. Egan: Maybe we could have one more minute to talk about an international project we have, after which we would be happy to take questions.
The Chair: That is perfect.
Senator Baker: I wonder if Mr. Goldberger had a few concluding remarks to wrap up his summary. I was left hanging.
Mr. Goldberger: We are working hard in a collaborative fashion nationally to bring forward these projects. As was stated earlier by my colleagues, we are doing this not only collaboratively with the natural gas utilities but also in tandem with governments and academia — universities, local industrial partners and the like. It is an excellent opportunity to demonstrate the innovativeness and the application of these new technologies, as opposed to the R & D side because we are more on the demonstration and near commercialization side of these new technologies.
Mr. Ydreos: I will move to one example: our first international collaboration project. Our vision was that we could reach beyond Canada and begin to establish international collaboration efforts. Although that sounded very good, we were not sure if it was possible. We were delighted a number of months ago to announce our first international collaboration project, which involves GDF SUEZ, France; the Advanced Energy Research & Technology Centre at Stony Brook University on Long Island, New York; ETIC as the catalyst to the formation of this collaboration; NRCan; and the Saskatchewan Research Council. We were able to bring those organizations together. Currently, we are investing in combined heat power technologies that could support the development of the smart energy networks that I talked about. Interestingly, in the collaborative effort the same technology is being tested but in three different applications. We share the learning and information. From that perspective, the collaboration is leveraging the opportunity and sharing the burden of the cost of this innovation and research among all the members involved. We are very excited that we have established our first international collaboration project; and it is described on the slide.
The Chair: That was on page 12, I believe.
Mr. Ydreos: That is correct.
The Chair: Is that a point of departure?
Mr. Egan: Absolutely, Mr. Chair. Mr. Goldberger gave some comments on where we want to go with this. The only thing I would add is that this is a virtual fund of member companies, but we are trying to leverage the engagement of others, be they from the investment community, from academia or governments. The first project we have demonstrates how we can work with other players who are interested in building on that as much as possible. It is a private-sector led initiative that reaches out at a time when money is constrained in governments. When the private sector comes forward and offers this kind of initiative, it is a great opportunity to seize and pursue for the benefit of all Canadians in building our energy sector.
Senator Seidman: I have a supplemental to this. It is extremely commendable and very exciting, but we all know that the challenges in innovation come after the innovation. They lie in commercialization and in bringing the product to market. Could you tell us a bit about your plans for that or how you see that unrolling and the cooperation and openness or, in fact, the coordination and integration of all the partners in achieving that end state.
Mr. Ydreos: You are quite correct. That is a very challenging issue. Issues of intellectual property, for example, become extremely important as we try to bring products forward and commercialize them.
We are trying to collaborate in a way that makes the deployment of these products much more efficient than the current network of decentralization, where everybody does whatever they want to do. We think that, by being focused, we can do that.
I think the water heater project that we did not talk about is a very good example because that is a national project. We did a project trying to drive a higher standard of efficiency into water heating. In the old system, it would have been a number of utilities deploying two, three, or four of these units in their own franchise areas and sort of trying to learn and deal with those issues.
We are actually deploying a project that cuts across the nation. We are in four different provinces, and, in doing that, instead of doing one and two and three units, we are now doing 100 units across the nation. We can learn then what the possible efficiencies and deployment strategies are in breaking down the barriers, et cetera. That is why I say that you need critical mass. Critical mass is important because it has the advantage of focusing on what you are trying to do.
Senator Seidman: Thank you.
Senator Lang: Mr. Chair, I would like to direct an overall question to whoever wishes to answer it. We are doing a study to try to get an understanding of the energy supply across the country — what is available to the various provinces, territories, and the Government of Canada — and to try to delineate what the federal government's role is in respect to working with the provinces, knowing the constitutional responsibilities of the provinces versus that of the federal government.
My first question would be: If you were the federal government and had the responsibility of bringing forward a framework for national energy across the country, what would you do?
Second, because I know time is short, I would like some comments in respect to the changes in the current budget towards the regulatory processes that the Government of Canada will be recommending to Parliament. That is an important factor. The other aspect, if you can comment, is the question of the future of the natural gas business in view of the fact that there is so much of it, supply is so great. There is so much of it around the world now, not just in Canada. We have to understand what the implications are to Canada, from the point of view of revenue, because I wonder how many more years the United States will be buying natural gas. Perhaps you could comment on those two short subjects.
The Chair: Senator Lang, I do not think those questions flow directly from the testimony, but would the witnesses like to have a go?
This is how we get our report written.
Mr. Egan: I will take a stab at the first one. There was a lob ball earlier, and I feel as if 30 balls just came through the air.
Senator, what is the line from Tom Sawyer? "If'n I was God," what would I do?
From the perspective of the natural gas industry, I think three things would be very useful. Some are being worked on now, but I would make them priorities. First, the federal government has a role to educate Canadians about the resource base we have available, and I do not think that that role is fulfilled to the extent it could be. Several other leading nations have extensive services providing information about the energy resource base in their countries. The biggest service in the world is the Energy Information Agency of the United States. We do not have something comparable. NRCan is a wealth of resources, and there are a great number of terrific public servants there. However, I think our capacity to talk about the resources, to document, and to explain to Canadians the resource base that is available needs to be enhanced. That is something government can do because, when industry does that, it is seen as self-interested. We can speak to those things, but it is seen as self-interested.
Two, you asked specifically about regulatory reform. The federal government has a role with respect to energy, principally in terms of environmental regulations. A series of pieces of legislation — the Canadian Environmental Assessment Act, the Species at Risk Act, the Fisheries Act, the Migratory Birds Convention Act, and the Navigable Waters Protection Act — are key pieces of legislation at the federal level. Any effort to ensure that those are better coordinated, both in and amongst themselves and with provincial legislation, is key. We look forward to going through the new legislation that is coming forward from the government now in that regard. That is fundamental to driving better use of our energy resources, and that is something the federal government can do.
Third, governments have a role not in picking winners but in ensuring the conditions are in place for innovation to occur in sectors. I think an innovation agenda is key for the federal government, looking forward at how our resource base can be better used and what specific things can be emphasized. In respect to innovation, it is not a question of making money available, per se. It is a question of ensuring that the conditions are in place for industry to move forward. With respect to our initiative, in particular, what we are interested in is the opportunity to talk to government. When there are innovation priorities, is there a means for us to sit down with government and say, "All right, here is what we are bringing to the table. What can we do to work together with you in a better way?" Again, it is not a question of seeking a subsidy or assistance for a project. It is a question of how your innovation priorities are aligned with where industry is going right now and what we can do to better execute those. That is about your first question.
I do not know if Mr. Ydreos wants to take your second question.
Mr. Ydreos: What was the second question?
I want to add to that. As I travel internationally, I am always humbled at the tremendous respect that the world has for us as Canadians and the tremendous desire for many, many nations to do business with us on the energy side of the business.
They welcome that. They would like that. They are a bit disturbed, if you will, by the current regulatory processes that we have. They have become unwieldy and difficult, so the initiative around regulatory reform is a terrific initiative because there are simply too many levels of approvals that projects need to get through. Bringing some efficiency, with time-bound, specific outcomes, to those regulatory processes, while respecting the multi-stakeholder interests within that process, is a terrific initiative and one that is welcomed by the industry for sure.
The issue of the U.S. increasing their own supply and potentially becoming self-dependent and how we then deal with the issue of natural gas within Canada is a very serious and appropriate question.
This is why we believe that driving a higher level of utilization of this tremendous product within our country, particularly in power generation, the transport sector, and downstream applications, actually becomes very, very important. Along with that, the potential of LNG exports to Asia could also bring significant value to our nation from that perspective. Those are the two avenues that I believe we need to pursue in view of the development of the resource base that is significantly shifting within the North American context.
The Chair: Thank you, Senator Lang. You elicited very fine responses from the witnesses.
Senator Neufeld: Thank you, gentlemen, for being here. Coming from British Columbia, it is all music to my ears, and I appreciate your presentation.
I want to just go through a few things. You talk about organic waste in technology and focus areas. I think it was five or six years ago, in our climate action plan in British Columbia, that we told municipalities that produced "X" amount of thousand tonnes a year that they had to capture their gas and use it or the province would come in and do it, so that technology is already there. It does not mean that it cannot be improved. I would like to know how you interrelate across Canada on that issue.
The other one would be the heavy duty diesel. I do not know how you are integrated with people like Westport, who have been promoting this for probably a decade and are worldwide now, with Robert trucking in Quebec, and Vedder Transport in British Columbia. I do not know how you interrelate with those people. The same goes for on-demand water heaters; I have had an on-demand hot-water heater in my home for about eight years.
How does all this work together? It is great to talk about more technology, but how do you actually synthesize them across the country when things are already happening in those ways? That is one question.
The Chair: You and Senator Lang must have had breakfast together.
Senator Neufeld: No, we did not, but we are watching the clock.
I have another question. I am happy to hear that, when you travel the world, people want to deal with Canada in energy, but we would like to get that same kind of sense across this country. We do want it around the world, but we also want it across the country because we have quite a division across the country in that there is a perception that using fossil fuels is terrible and we are damning the world if we continue to use them. How do you do that, or will you do that, across the country? Can you actually get people talking about it?
The value chain you spoke about is important to me because I do not think people know the value chain of natural gas. It is likely the people in Ontario do not know how much natural gas they actually use in their industrial sector, in their petrochemical industry, and all of those kinds of things. Would you break that down for us, if you could; namely, how much fossil fuel is used in Central Canada, that being Ontario and Quebec, for those kinds of purposes?
In that way, we can start getting people to understand that this is important; it is not just something that you burn to heat your home. It is in cars. If you kick a car today, you will probably break off a piece of plastic — those kinds of things.
I think that is what we need to start thinking about, as well as how we do that. I know it is a lot, but can someone talk a little about that?
Mr. Egan: I will take your first question, senator, regarding how we bring all these things together. You talked about renewable natural gas, RNG, and about transportation and hot-water heaters. With renewable natural gas, we are launching a road map process. We reached out to NRCan. We are working with and have signed a MOU with CANMET.
We have launched a natural road map on the use of renewable natural gas; how it is being used, jurisdiction by jurisdiction; and what codes and standards need to be developed to bring it online faster and more effectively in an economic way. That road map will be chaired by Sophie Brochu, President of Gaz Métro, who I believe appeared before the committee last year.
That is what we are doing on RNG in order to capitalize in the sorts of provincial efforts you mentioned coming out of B.C. because there is not a national view on RNG and we think it is valuable to develop one.
On transportation, you mentioned Westport being a key driver of transportation technology and key supplier of natural gas vehicle technology around the world. The market in Canada is a much smaller one. Last year a road map was in fact launched by NRCan on transportation, and we are now in an implementation stage of that road map. We work with our colleagues in the Canadian Natural Gas Vehicle Alliance to move that implementation stage forward as quickly as possible and to identify opportunities across the country to move the transportation sector forward on natural gas.
Again, with respect to specific things that can be done nationwide, what are the codes and standards in place that need to be amended in order to facilitate bringing this on; what are the things that can be done in order to facilitate the move to natural gas infrastructure; and what infrastructure already exists that we can capitalize on, be it LNG facilities or CNG facilities, to tie fairly disparate pieces into a collective vision?
Again, there is a process under way there.
The third thing you mentioned was hot-water heaters. You have an on-demand hot-water heater. The impetus for this was actual a federal regulation — a regulation to raise the efficiency of water heaters across the country. We said to the government when that regulation was being developed that the market is not ready yet for that regulation and we need to get it ready. We are prepared to do it with a pilot. That is what stimulated the creation of our pilot that Mr. Ydreos mentioned with 100 tests across the country.
Going back to Senator Seidman's question about this, it entails specific applications of technology at the demonstration stage so that commercialization can occur effectively. Very often, you put in place a regulatory framework and the market is not ready. In this instance, we are saying let us help you get the market ready. We have the direct outreach to an extraordinary number of customers in order to do that.
In those three areas, there is a plan in place. We bring to the equation the outreach to the customer to help in the execution of that plan.
I will leave to my colleagues your second question on how to bring us together nationally.
Mr. Ydreos: I think it is a very important and legitimate question. One of the initiatives that we have launched is the Canadian Natural Gas Initiative. The primary members of that initiative are CAPP on the upstream side, CEPA mid- stream and CGA as a downstream player. For the first time, the three associations are collaborating to ensure the messaging and the dialogues that are occurring raise the understanding of the importance of the fuel throughout Canada.
One of those initiatives is about to roll out in something called provincial dialogues. With that, we are going province by province, bringing in key decision makers within those provinces to have a dialogue around natural gas: How much supply there is, how the product moves around the nation, the potential uses, and the emissions reductions through natural gas. We are trying to get the level of understanding of the importance of the product to a much higher level.
Senator Neufeld: I have many other questions but other senators have some, too.
Senator Lang: To follow up on Senator Neufeld's question, one concern we should all have is that the debate within the country is becoming very polarized. I see the corporate interests on this side, those who feel strongly about the environmental side on that side, and the twain never seem to meet.
Have you got labour involved in these discussions, and will they be speaking out as well? There are a lot of jobs and many people's lives involved here.
Mr. Egan: The invitation is province by province on the dialogues. I am not sure whether labour leaders are invited. The role of organized labour is significant in the industry because we are employing thousands of Canadians, many of whom are unionized in the member companies across the country. Organized labour has been a big supporter of natural gas because they see the opportunity going forward for more resource jobs and for more employment opportunity.
In terms of the engagement of the environmental community, natural gas is an interesting one for many in the environmental community who are inclined to describe it as a bridge fuel, as a means to move to a cleaner future. We welcome engagement with them and are working with them on a variety of projects. One is QUEST, Quality Urban Energy Systems of Tomorrow. QUEST appeared before the committee. We are working with a variety of environmental activist organizations to see how to continue to improve the emission profile of the energy industry and of the country as a whole.
Our approach is that we need to engage with everyone. This is a product that so many people are using. It is infrastructure that is in the ground that is not going away that we want to better utilize all the time — what are the opportunities to do that and to capitalize on what that represents?
We are engaging all comers on this one and we welcome that opportunity.
Senator Peterson: Thank you, gentlemen, for your presentation. You have certainly been successful in finding natural gas, which is evident by the price we have today. Now the challenge is how to use it. You said transportation is only 1 per cent presently. I read recently that it would take 15 years for a large trucker to recapture the additional cost of converting his truck. Since transportation is one of the largest CO2 emitters, have you made any moves towards assisting them with some type of an accelerated depreciation, because they are emitting less CO2?
The other thing we were told earlier by a large transportation company is the refueling problems, which now moves it down to a municipal jurisdiction. How do we overcome that to get the trucking industry more involved in natural gas?
Also, how far is industry prepared to forward-sell gas now in terms of allowing you to do long-range planning?
Mr. Ydreos: To answer your final question, the typical contracts are five-year contracts, currently, although there appears to be some movement by some producers in their willingness to move to 10-year contracts, particularly in view of the current price situation and how long we are on supply. That is something that the power sector industry is very interested in and finds important, obviously.
Mr. Goldberger: The issue with getting the transportation sector up and running is that we have to focus on the most meaningful types of projects we can do. In terms of your earlier question about incentives, the Canadian Natural Gas Vehicle Alliance has advocated for enhanced financial incentives and for a truck corridor, which was identified in the roadmap exercise that Mr. Egan alluded to earlier, that would go from Quebec City to Windsor. Looking for those strategic points where you could put refuelling stations while working also with the OEM sector is another important initiative where you want to look not just at the retrofits but also at the original equipment maker and work with them to put out natural gas vehicle engines and so forth. That is on the way.
In terms of the marine sector, again, I come back to the BC Ferries opportunity in B.C. for LNG and, possibly, on the Great Lakes — tremendous initiative. It will take time. It will not happen overnight, but the exercise in terms of discussion and bringing forward that kind of collaboration is extremely important, and we are trying to address all those things simultaneously.
Mr. Ydreos: One of the interesting things about the transport industry is it is very much a hub-to-hub business. That then allows you to deploy your refuelling stations in a much more strategic way along the route. To give an example, in the U.S., there are six and a half million 18-wheelers that move around the country. The estimate is that about 1,200 refuelling stations would be sufficient to meet the needs of refuelling for that entire fleet of 6.5 million 18-wheelers. Again, it is because it is such a hub-to-hub business. You deploy your refuelling stations along those corridors; you do not have to worry about non-corridor refuelling.
The Chair: We have our initiative here with Robert in Quebec and Westport, and we have as a committee been to both venues to see, but we have talked about the small scale that it is presently on.
However, in the United States they are making big strides. Am I right that they have a lot of these refuelling stations in place, the technology in the trucks and the trucking fleets operating on LNG to a big degree?
Mr. Ydreos: It is very much in transition, but I would say they are fairly aggressive with their implementation. They are going beyond just the transport heavy fleet sector and going into NGV as well, smaller natural gas vehicles, fleet vehicles also, and that infrastructure is being developed.
The Chair: Gentlemen, I think you can sense the movement around the table. We were so delighted we could work out your appearance here this morning and the documents you provided. I know Mr. Egan is always at the other end of the phone if we have some follow-up through Mr. LeBlanc and the others on our research team.
I want to thank you on behalf of all senators for coming today, and I want to congratulate you on this initiative because, clearly, if it is all left to the individual companies, I think, as you explained, Mr. Egan, it will not happen. You need to have some kind of a collective approach, not just nationally but also internationally, to get a critical mass so you can have the innovations and the products developed that will make it happen.
Thank you very much indeed.
Colleagues, we are moving fast down the road now, and I think it is very important that we have a session of the whole committee next Tuesday where we just talk about generally brainstorming the report. We have been working hard — the steering committee, Mr. LeBlanc and other people — so if the clerk allows it to happen, I will let you know by email shortly what the plan is.
Having said all that, I will adjourn the meeting.
(The committee adjourned.)