Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue 17 - Evidence - February 8, 2011 (Afternoon meeting)


MONTREAL, Tuesday, February 8, 2011

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 1:35 p.m. to study the current state and future of Canada's energy sector (including alternative energy).

Senator W. David Angus (Chair) in the chair.

[English]

The Chair: Let me say, first of all, that we have quite a lineup of witnesses this afternoon. As you will note, this meeting was originally supposed to start at 12:45. It is now 1:30, and we are cutting everybody back by five or ten minutes each. Please try to stick to this.

I would ask all senators to keep their questions short and without a big long preamble. I know Mr. Breton understands that because this morning he saw what could happen.

[Translation]

We are pleased to welcome you to the Senate Committee on Energy, the Environment and Natural Resources. You are familiar with our current study.

Daniel Breton, President, Groupe Maîtres chez nous-21e siècle (MCN21): Definitely.

The Chair: The study began a year and a half ago. This fact-finding trip to Montreal is of great interest to our committee.

Mr. Breton, you are the president of the Groupe Maîtres chez nous-21e siècle. What is MCN21?

Go ahead, Mr. Breton.

Mr. Breton: Mr. Chair, I will begin with a very short introduction about who we are. The Groupe Maîtres chez nous-21e siècle is not a group of ecologists, but rather a group of energy specialists. Our group includes the following members: former associate deputy energy minister at the ministère des Ressources naturelles du Québec, Mr. Denis L'Homme, who worked in the field for 40 years; Mr. Jean-Marc Pelletier, former top executive at the Syndicat des scientifiques d'Hydro- Québec; Mr. Xavier Daxhelet, doctor of engineering physics; two economists; and myself, a transportation specialist. These 21st century transportation and energy specialists have between 15 and 45 years of experience.

The Chair: Did you hear Mr. Robert's testimony this morning?

Mr. Breton: Yes, absolutely. I have actually conducted an analysis of the Route bleue. Route bleue refers to the LNG transportation route.

The Chair: Route bleue is a reference to the corridor between New Brunswick and Windsor, correct?

Mr. Breton: That is correct. Route bleue presents some technical problems when it comes to greenhouse gas emissions. I am not saying that we should dismiss the Route bleue concept outright. Nevertheless, this analysis raises questions about the conversion of all heavy trucks to liquefied natural gas.

There are 71,000 heavy trucks on Quebec's roads, and they emit 21.3 per cent of all greenhouse gas emissions in Quebec. If that percentage of greenhouse gas emissions were reduced by 25 per cent, the result would be a 1.9 per cent reduction of the total greenhouse gas emissions in Quebec. This is not an insignificant reduction, but we must take into consideration that, with trucks using liquefied natural gas, there is a risk of valve leakage when temperatures rise. As a result, if natural gas is not being burned, methane will be exhausted through the valve. In the end, we find ourselves with minimal or even non-existent gains in terms of greenhouse gas emissions.

I am not talking about dismissing the Route bleue solution, which calls for trucks fuelled by liquefied natural gas, but there is another possible solution. I am now going to show my Canadian patriotism.

Most conversion systems for liquefied natural gas are American-made. However, in Canada, companies like PACCAR, in Sainte-Thérèse, make diesel-electric hybrid trucks.

Those trucks cost about the same as converting a truck to liquefied natural gas does, but that is without taking into consideration the cost of making garage mechanical systems compatible with liquefied natural gas. We would end up with the same gains in terms of greenhouse gas emissions and, in addition, we would be making trucks in Canada instead of importing them from the United States.

I think that this is a possible solution that would have a positive impact on jobs and revenue for Canada, and the environmental gains would be the same.

The issue of direct subsidies provided for gas and oil companies came up. I have the figures involved. Direct subsidies from the federal government for last year totalled $600 million. The figure was not $1.4 billion. Out of the $1.4 billion mentioned, $800 million were for tax relief and $600 million were for direct subsidies. Those are the actual figures.

These figures are provided in the document we will submit to you later.

The Chair: Are we talking about a federal subsidy?

Mr. Breton: We are only talking about the federal government. We are not talking about provincial governments.

I would like to respond to the comment made by Senator Massicotte, who compared the cost of hydroelectricity, wind energy and solar energy. You stated that the cost of solar energy was four to five times higher than the cost of hydroelectricity. That is no longer the case. Owing to advancements made over the last few years, the cost of solar photovoltaic energy now ranges from $0.15 to $0.20 per kilowatt-hour.

These advances were made in 2010. If we take the Romaine Project as an example, we are talking about a power plant that produces energy at a cost of $0.10 per kilowatt-hour. We are talking about an important factor, a 50 per cent cost difference.

I am not saying that I prefer solar energy to hydroelectricity. I just want to provide you with the latest figures.

Regarding wind energy, it does not cost twice as much as hydroelectricity in Quebec. A German company called Siemens presented a project in 2005 that would have made it possible to produce 4,000 megawatts at $0.07 per kilowatt-hour. So, wind energy would actually be cheaper than hydroelectricity.

All this to say that an energy portfolio outlining all possible solutions will have to be implemented. No conclusion has been drawn regarding the exploitation of shale gas, as we are waiting for more information before we make a decision.

About two weeks ago, the Institut national de santé publique stated in the clearest possible way that the available documentation does not provide enough information for determining the negative health effects.

This is why we were and still are asking for a moratorium until we gather all the necessary information. I think that it is too soon to be for or against the exploitation of shale gas. If we want to apply scientific rigor, we must ensure that we have all the facts.

Mention was also made of subsidies for fossil energy. You have probably heard about the International Energy Agency, which had shown that subsidies for fossil energy are currently 12 times higher than subsidies for renewable energy around the world. The same is true and is quantifiable at the federal level.

I am a specialist in green transportation, and I write for various media. I also travel around the world to discuss new sources of mass and individual transportation, such as electric, hybrid and diesel. I attended the Detroit trade show about three weeks ago. Ford company representatives told us that, when they were about to hire 7,000 new employees in the United States, of which 3,500 were to be engineers in green technology development, Ford was closing its R & D centres in Canada. Among others, this was due to the fact that the Canadian government does not provide sufficient funding or support for research and development in electric, diesel, hybrid and other types of transportation. This is a real problem the engineering community is faced with.

I come from a family whose members have been working for General Motors and Ford for 75 years. They were employed by these companies in Oshawa and in Detroit. I am very familiar with this community. I am saddened by the fact that automotive transportation and mass transportation R&D centres are moving to the United States. The top researchers are leaving for the United States. People who have Master's and PhD degrees in fields like wind energy are going abroad because not enough support is provided for research and development in Canada.

You are probably familiar with last year's study, which shows that, even when the level of taxation imposed on large companies is significantly reduced, very little of that money is invested in R&D. As a result, Canada was dead last among OECD countries when it comes to investments in R&D. However, we have the lowest corporate tax level of all OECD countries, second only to Mexico.

The Canadian government does not provide sufficient funding for the development of green technologies and green transportation. This is an important issue we wanted to point out. The reality is that, if the planet depends on oil, Canada depends on oil revenue. The following expression sums it up:

[English]

The planet is hooked on oil and we are hooked on oil revenue.

[Translation]

This is a problem. I have family living in New Orleans. About 20 years ago, a case was made that this part of the world would be submerged within 40 or 50 years because of rising sea levels. Katrina made us see the consequences of global warming and what we refer to as "the engulfing of parts of the world." A few years after that natural disaster, millions of litres of oil were spilled in the Gulf of Mexico because of the irresponsible actions of oil companies.

There are oil and gas companies that are professional, and others that are not. BP showed that it was lacking professionalism. When the spill occurred in the Gulf of Mexico, people lost jobs in the food service, hospitality and fishing industries, and the federal government imposed a moratorium so that it could investigate and determine the source of the problem. However, because people were dependent on the revenue and jobs generated by oil, which were virtually the only jobs available, they said: "We cannot afford a moratorium because we need our jobs." This illustrates perfectly the meaning of:

[English]

To be hooked on the jobs and the revenue from oil.

[Translation]

These kinds of things happen because certain parts of Canada put all of their eggs into one basket. This is something that threatens to happen if we rely too much on oil and gas revenue. So then, if there is even the slightest problem —

[English]

— you guys are screwed.

[Translation]

This is one of the comments I want to make on the exploitation of gas and oil in Quebec. We are trying to diversify our energy portfolio. I suggest to all the provinces that they do the same thing because, if they rely on a single source of revenue, they will not be able to survive the 21st century.

Former Alberta Premier, Peter Lougheed, has spoken out about the way Alberta has been managing its income and tar sands. He called this management approach irresponsible. He said that Norway succeeded in setting up a heritage fund worth hundreds of billions of dollars.

[English]

Where is the heritage fund in Alberta?

[Translation]

Once there is no oil left, what will happen if they have not saved any money? He asked:

[English]

Are they going to have to move to another province?

[Translation]

This is part of the thought process we must engage in regarding the future of energy and of the environment.

As I needed to make my comments succinct, I kept to these few considerations. However, I think that all this provides a lot of food for thought. In the next few weeks, I will be sending you a document that fleshes out my position, if that is something that interests you.

The Chair: Yes, it is. Thank you.

[English]

Senator Mitchell: I would like to pursue the question of subsidies to the oil industry. I think the case can be made that in the 1970s the federal government took a direct a direct equity position in Syncrude; I think it was 12 per cent. It might never have started had it not been for that. That was a direct investment subsidy, but it is more difficult. I had this discussion with an earlier witness.

Mr. Breton: Yes.

Senator Mitchell: It is more difficult to make the case that it is a direct subsidy. I am interested that you have said it has come to $800 million, I think.

Mr. Breton: No, I said $600 million. I will give you the documents.

Senator Mitchell: In direct subsidies.

Mr. Breton: Yes.

Senator Mitchell: Like real cheques. Okay. That is great, if you would.

Second, one of the cases you can make is that the assistance for carbon capture and storage, the $2 billion, is coming from various governments, at least Alberta and the federal government, as direct subsidies.

Mr. Breton: Yes.

Senator Mitchell: Would you say that is inappropriate?

Mr. Breton: The scientific case for putting that much money in subsidizing carbon capture has yet to be made. I mean, right now there are some real technical problems with that. I think there should be a very serious discussion before going ahead and listening to what the promoters are saying, which is that this is the eighth wonder of the world.

None of the various scientists I have worked with are convinced that it is going to be the solution. First of all, there is no one bulletproof solution; that is for sure. However, $2 billion in carbon capture is a good way of escaping reality, as far as I am concerned, because even if you capture carbon, you still have a problem with water and air pollution. It does not solve all problems, even if it is technically feasible and even if it is economically feasible, which is far from having been demonstrated so far.

Senator Mitchell: Yes. It is that same story. At least businesses seem to be inclined to want to do it. You could make the same case that there were huge technical problems with respect to oil sands development.

Mr. Breton: Absolutely.

Senator Mitchell: That did not stop anybody, and now you can see the results. They figured it out. I think that we have to take some solutions and drive it and figure out how to make it economical, and if we would just get started, we would do that.

Mr. Breton: Yes.

Senator Mitchell: I find that there is resistance to every possible solution. Carbon capture and storage may actually be the one practical solution, because businesses seem to be inclined to want to do it.

Mr. Breton: Maybe.

Senator Mitchell: I do not want to put words in your mouth, but would you not agree that we are not going to do away with fossil fuels for a long time?

Mr. Breton: No, I agree with that.

Senator Mitchell: We are going to have to do something about their usage. If we do not capture it, what else would you do?

Mr. Breton: Well, use less.

Senator Mitchell: I know. How much time do we have?

Mr. Breton: We do not have much time, but let me give you an example. France has a bonus-malus system regarding the use of cars and what kind of cars people use. I do not know whether you have seen that, but in 2010 there was an explosion of sales of trucks and sport utility vehicles, SUVs; in 2010 more trucks and SUVs were sold than cars for the first time since the Second World War.

Senator Mitchell: Yes.

Mr. Breton: That is unbelievable. I am sure you know of Bob Lutz, who used to be the vice-president of General Motors. He said that if we do not have an energy strategy that is coherent in the United States and Canada, the car industry will be screwed because we cannot plan while the price of gas goes up and down, and people ask for small and big cars from month to month. It makes no sense to them.

Even the car manufacturers — General Motors — are asking for an energy strategy, meaning that people will have to pay more for a gas guzzler and pay less for a fuel-efficient car.

[Translation]

Senator Massicotte: Mr. Breton, thank you for joining us. You referred to my comment on the various types of energy. Yesterday, I received information from Hydro-Québec and, once I looked at my notes, I realized that Ontario Hydro had actually given us the same figures.

Mr. Breton: Are you are talking about Hydro-Québec and Ontario Hydro?

Senator Massicotte: Ontario Hydro provided us with the figures. We would appreciate it very much if you could send us your figures.

Mr. Breton: It would be my pleasure.

Senator Massicotte: To get back to our argument, I have to say that I am not a technician, but you are. Regarding Groupe Robert's comments on net gains, could you go over that argument more slowly?

Mr. Breton: Yes. I will send you the calculations that we have done so far. Currently, subsidies are needed because converting a truck to liquefied natural gas costs an additional $70,000 on average. There is a subsidy provided for buying trucks fuelled by liquefied natural gas. I talked about the conversion of 71,000 heavy trucks, which are 45 feet long and in working order.

The result would be a 1.9 per cent actual reduction of greenhouse gas emissions in Quebec. The reduction is supposed to be 25 per cent per truck. However, this is only in ideal conditions. In the real world, trucks account for 21 per cent of greenhouse gas emissions from transportation, which is responsible for 40 per cent of all greenhouse gases. Therefore, we are actually cutting 21 per cent out of the 40 per cent and, then, we are taking 25 per cent out of that amount. The end result is less than 2 per cent, which is 21 per cent of 25 per cent of 40 per cent. This means that the total reduction of emissions in Quebec is 2 per cent. However, we are talking about 2 per cent in ideal conditions. In other words, we are taking it for granted that valves will not leak. As I was saying earlier, at higher temperatures, liquefied natural gas heats up, pressure increases, and valves must open to release methane. Since methane emits eight times as much greenhouse gases as natural gas does, leakage is a factor that will quickly bring down the figure of 1.9 per cent.

If trucks are constantly running, there is practically no valve release. However, as soon as a truck has been at rest for few hours, valves must release liquefied natural gas. Therefore, the gain is minimal.

This is why I am saying that hybrid diesel trucks, or New Flyer hybrid buses, which are made in Manitoba, are technologies that should be favoured over the liquefied natural gas systems.

As I said, we are not dismissing this option outright, but we are maintaining that it is not the silver bullet that Groupe Robert representatives made it out to be.

Senator Massicotte: But 1.9 per cent is still huge. Regarding methane, do you have any research data to corroborate your findings? If my understanding is correct, based on the studies we have read, methane is not like carbon, as it quickly dissipates into the atmosphere. Methane's life span in the atmosphere is much shorter than that of carbon. Do you have any studies to back up your claims?

Mr. Breton: I will send them to you, if you wish.

Senator Massicotte: Are there any other specialists that agree with you?

Mr. Breton: Absolutely. A study was conducted by MIT, the Massachusetts Institute of Technology, and its title is:

[English]

Is natural gas the solution for transportation?

[Translation]

This is a study you have access to, and it is among the studies we have looked at. Another study was conducted by the American Truckers' Association, which did not disagree.

As far as we can see, this will bring about major changes when it comes to the mechanics, garages and safety. A diesel spill in a garage is not a major problem. However, a gas spill is colorless and odourless, and an explosion could occur. In light of these problems, the solution involving LNG must be reconsidered.

[English]

Senator Lang: It is not diesel.

Mr. Breton: No, I am saying diesel is not a problem. I am saying natural gas can become a problem mechanically when you have to do the maintenance on that, compared to diesel.

[Translation]

Senator Massicotte: However, government representatives, a premier and officials are backing this process. Why are they subsidizing indirectly via tax credits? Have they not read your report, or are they just clueless? I do not understand the reasoning behind this.

Mr. Breton: I will give you an example that makes no sense, in my opinion. Three months ago, a $1-million subsidy was granted for converting trucks and cars to propane gas, as part of a pilot project. When I heard about this project, I said: "On a bus route in the Quebec region, Hydro Quebec has had vehicles, trucks and buses running on propane gas for 30 years. Why should the government invest $1 million in a pilot project?" The fact is:

[English]

We have known what it does for thirty years.

[Translation]

I do not want to answer your question directly, but I think that this does answer it. I am sorry, but there are many legitimate solutions out there. The government is basically saying to us: "We have a pilot project in the works; we will invest $1 million in propane gas conversion to see what will come of it." I am sorry, but we already know what the results will be; this has been known for a very long time.

However, liquefied natural gas is a new technology in transportation, and new studies must be conducted on it. I agree with a pilot project on liquefied natural gas, but a pilot project on propane is a bit ridiculous.

[English]

The Chair: We have to keep moving here, senators.

Senator Lang: I want to pursue the question of liquefied natural gas, LNG, and the long term for transportation for our trucking industry.

We have learned a number of things. First of all, it is proven technology in the United States; they do some of that there. We have it on the West Coast.

Mr. Breton: They have started to do that, yes.

Senator Lang: Yes, on the West Coast. We also know that it lowers greenhouse gases, GHGs, by in the neighbourhood of 25 per cent to 27 per cent.

Mr. Breton: That is not true. That is in the best situation ever.

Senator Lang: Well, we know that there is a pipeline that is underutilized for the purpose of delivering gas to provide LNG for what they call the blue corridor. We also now have a trucking company that is prepared to put forward its own money and is prepared to invest.

Mr. Breton: With quite a few subsidies.

Senator Lang: He is still putting his own money forward, and it is a major, major commitment risk on his behalf. Do we have anybody who is prepared at that stage to do the diesel-electric trucking option that you talk about?

Mr. Breton: What if I told you that every truck from the Coca-Cola Company in the United States has hybrid electric trucks all over the United States?

Senator Lang: That did not answer my question. Do we have anyone here in Quebec who is prepared to go and do that or is doing it or is thinking of doing it?

Mr. Breton: Well, right now, I do not see anybody, but I do not see any subsidies for diesel-electric vehicles, while there are some subsidies for liquid natural gas.

Senator Brown: Yes, I am getting a little confused here. We had the Canadian Gas Association here a week or two ago, and they said that to convert a diesel engine would take $15,000.

Mr. Breton: They said $15,000?

Senator Brown: Yes. Ordered brand new from the factory, it would be $8,000, they said. This morning Mr. Robert, from the trucking company, said something like $20,000, and you are saying $70,000. Is this for conversion?

Mr. Breton: That is very interesting because Mr. Robert, from Robert Transport Inc., told the government six months ago $100,000.

Senator Peterson: He said that today.

Senator Lang: He said that today.

Mr. Breton: He said that today?

Senator Peterson: He said that today. Yes, he did.

Senator Brown: Yes, but that is conversion. That is not ordering a new engine.

Mr. Breton: No. Brand new is a lot more. It is not $8,000 or $20,000.

Senator Peterson: Then $70,000 is for the tanks.

Mr. Breton: Yes.

Senator Mitchell: It is technology.

Mr. Breton: The numbers that we have been finding all over the United States and Canada are between $50,000 and $100,000, depending on whom you talk to. There was never any question of $8,000 to $20,000, ever.

Senator Brown: You were talking about not burying CO2. Do you know that in North Dakota they have been sending CO2 to Weyburn, Saskatchewan, for five years and putting it underground?

Mr. Breton: I am sorry; I cannot hear what you are saying.

Senator Brown: They have been storing CO2 underground in Weyburn, Saskatchewan, from a North Dakota power plant for five years.

Mr. Breton: I heard about that, yes.

Senator Brown: We have never heard of a problem.

Mr. Breton: I find that information very interesting. I had some information regarding the fact that some companies in the United States wanted to put CO2 in the ground, and the United States government did not want to be responsible if there was any leak. Therefore there have been no projects. That might be one of the reasons why South Dakota is sending it to Saskatchewan.

Senator Brown: Well, CO2 is not a poisonous gas.

Mr. Breton: In high density it is. It can get you to choke. That is true.

The Chair: Did you have a point of clarification, Senator Banks?

Senator Banks: It is merely a comment. Senator Brown is correct that they have been shipping CO2 north in a pipeline to Weyburn, Saskatchewan, and it is true that it is being pumped into the ground, but that is not for the purpose of sequestration; rather, it is for the purpose of getting more oil out of old oil wells. The sequestration is incidental.

The Chair: Perhaps Senator Peterson, from Saskatchewan, has more clarification on that.

Senator Peterson: When they inject it to enhance oil recovery, 90 per cent of it stays down there; 10 per cent comes up, is captured and is put back down again. They have been doing that for five years. There is also a carbon capture demonstration project south of Weyburn, with SPC Power Corporation and the State of Montana.

The capture is the tough one. The sequestration we already know how to do.

Mr. Breton: Yes.

Senator Peterson: The Petroleum Technology Research Centre in Regina is very close to commercializing CO2 capture, and without too many subsidies. This is coming; it will happen. We have to do it if we are going to stop greenhouse gas emissions.

Mr. Breton: I am not saying that it cannot be part of the solution, but for sure it cannot be the silver bullet.

Senator Peterson: It is not the silver bullet, but it is doing something. There has been a lot of talking going on for years and years but nothing happening. We are doing something; we are actually happening.

Mr. Breton: Yes.

The Chair: Sir, I would like to use the chairman's prerogative and ask one question. I like your name, Maîtres chez nous. In the title of your organization, where is "chez nous"? Is it Quebec? Is it Canada? Is it the world?

Mr. Breton: To tell you the truth, when it first started it was in Quebec, because energy is a provincial jurisdiction. However, I have been discussing that with federal parties, with the Conservatives, the Liberals, the Bloc and the NDP, saying that we need energy security as well in Canada. There is a big problem with NAFTA right now, because there is la clause de proportionnalité. I guess you people are aware of that.

The Chair: The proportionality clause came up yesterday.

Mr. Breton: To me, it becomes a problem when you send more and more oil and gas to the United States because we might end up running out for ourselves in Canada while we are supplying the United States. I have been considering talking about that and energy security for Canada, which I think is very important. I have not seen anything in that direction in the past 20 years.

The Chair: In any event, if I understand well your group, whereas you are based here in Quebec, you are interested in being in control of our own destiny within this country of Canada.

Mr. Breton: Yes.

The Chair: That is your main goal, energy-wise? Or do you mean just Quebec?

Mr. Breton: Well, both.

The Chair: Quebec is pretty good, already.

Mr. Breton: Yes, but I will be honest with you. When the shale gas problem came up, we found out that the government decided to give away something that had been nationalized, which was our electricity, oil and gas — because everything is owned by the people of Quebec. The government decided to give it away for peanuts to the private sectors from Australia, Switzerland, Israel, the United States or wherever.

It is not because we get the gas from inside the soil of Quebec that we are Maîtres chez nous, because if the gas and the company that owns this gas and exploits this gas comes from somewhere else, the profit goes elsewhere, and we are merely the workers working in that, which brings us back to before 1962 when Jean Lesage decided to do that election based on the idea of maîtres chez nous.

Senator Massicotte: Can I comment on that?

The Chair: Yes, quickly. I did not want to raise a big thing, but I think it is important.

[Translation]

Senator Massicotte: People react when you say that it is not a Canadian company that holds the exploration rights. That is true if we look at all the plants individually. When we focus on the figures, the percentage of operating revenues that are converted to foreign dividends —and I think you are familiar with the figures —is much lower than 1 per cent. That means that 99.5 per cent of companies' revenues, whether they are Canadian or not, are spent on materials and labour. So, I fail to see the importance you are placing on the fact that those companies may be Australian, Canadian or American. We are talking about 95.5 per cent here.

Mr. Breton: If we say that the exploration rights we have given up are between $0.10 and $0.50 per hectare —

[English]

— the gentleman from B.C. is going to say you got screwed, and we did.

[Translation]

Because they have made a lot more money through exploration rights than we have, between 1,000 and 40,000 times at the outset, and then, there are also royalties.

Senator Massicotte: The government can change.

Mr. Breton: That is what is being said. We are talking about 10 per cent royalties. We are talking about raising them to 12 per cent, but that is without taking expenditures into consideration. Under the Mining Act in Quebec, mining revenues have been ranging from 1 to 2 per cent. If we are talking about making 1 to 2 per cent in royalties on oil and gas from our subsoil —

[English]

— we are stupid. I am sorry, but we are.

[Translation]

Senator Massicotte: Regardless of that, we have to look at the money difference. Where does this difference go? In terms of the savings, the money difference, if you will, the government can change if it thinks that it has made a bad decision.

Mr. Breton: Yes.

Senator Massicotte: Obviously, you do not agree with this opinion. However, the money is not being lost to Australia. There are still significant benefits for Canada and Quebec. We must not forget that.

Mr. Breton: No, they are not that significant. We could discuss this again. I could send you some documents. All energy specialists have stated that Quebec is losing out financially through the royalty system, the Mining Act, and the exploration rights, more so than any other Canadian province.

Senator Massicotte: Are you talking about the last 40 or 50 years?

Mr. Breton: No. I am talking about the current and future exploitation of gas and oil.

Senator Massicotte: Oh! Are you talking about shale gas?

Mr. Breton: Yes, I am talking about shale gas.

Senator Massicotte: You think that there is not very much of it, right?

Mr. Breton: I am saying that we are better off discussing matters before we start exploiting shale gas and regret our decision later, once the process has begun.

The Chair: This has been very interesting for us. Thank you for your patience and for your presentation.

[English]

Colleagues, we are privileged this afternoon to welcome witnesses from the Canadian GeoExchange Coalition, CGC, recommended perhaps by Senator McCoy. Mr. Tanguay, are you friendly with Senator McCoy? We have Denis Tanguay, President and Chief Executive Officer, and Ted Kantrowitz, Vice-President. Also, from the Association québécoise de la production d'énergie renouvelable, AQPER, we have Jean-François Samray, Chief Executive Officer.

Some of you have been in the room most of the morning. I think you have a sense of what we are up to, and you know who we are. I will not go through the usual introductions, other than to say we are looking forward to your testimony.

Monsieur Tanguay, please proceed.

Denis Tanguay, President and Chief Executive Officer, Canadian GeoExchange Coalition: You should have a PowerPoint presentation.

The Chair: Yes, I have it.

Mr. Tanguay: You mentioned Senator McCoy. Yes, indeed, I thank her for having us invited here. I also know Senator Neufeld from the energy ministers conferences many, many years ago — three or four in a row, I think — so he knows that I am quiet.

The Chair: Were you an energy minister, yourself?

Mr. Tanguay: No, I was not, but I was at Quebec's energy efficiency agency. We had the pleasure of discussing the model national energy building codes and things like that. I think in my first year at Canadian GeoExchange Coalition, we spoke a little bit about ground source heat pumps, as well, with the energy minister from the Yukon.

The Chair: You have mentioned two of our committee members who were most instrumental in having us do this study. You must have influenced them very well.

Mr. Tanguay: I do not know, but I will try to influence you more today.

[Translation]

My comments will be in French. Then, I will answer your questions in English or in French.

I would like to thank you for the invitation to discuss the geoexchange industry and its role in Canada's sustainable energy future.

I must say that, when I read the discussion paper Attention Canada, which you published last June, I was surprised to note that it did not even mention geothermal energy. I hope to be able to convince the committee members today to pay special attention to this technology, especially in terms of any work involved in developing a Canadian sustainable energy strategy. In my opinion and in the opinion of some hundred individuals and companies that work closely with us, geothermal is the perfect sustainable energy source.

Before I go any further, I would like to make a useful clarification. Essentially, there are two types of geothermal energy. First, there is high-temperature geothermal. I apologize if this is somewhat abstract, but I have to make the distinction. For the most part, high-temperature geothermal uses dry steam and hot water sources from deep within the earth, often at a depth of one or two kilometres below earth's surface, in order to produce electricity or hot water for urban heating. To our knowledge, there is currently no energy production associated with this type of energy in Canada.

Second, there is low-temperature geothermal, where the energy of shallow ground or water is harnessed, usually at a depth of 100 metres or 250 metres. This type of geothermal energy is extracted using heat pumps, with the purpose of heating and cooling buildings.

The heat pump uses thermal energy to extract from the ground several additional units of thermal energy. For example, if a kilowatt-hour of electricity is used to extract the equivalent of three kilowatt-hours of thermal energy from the ground, the coefficient of performance is four. That is the equivalent of four kilowatt-hours of thermal energy, three of which are provided free from the ground below.

It is estimated that there are about 80,000 such systems currently installed throughout Canada. What makes the geoexchange process stand out is that it extracts energy at no cost from the ground below the building the energy is being consumed in. Therefore, geothermal energy contributes to the reduction of traditional energy needs and, consequently, contributes to the reduction of pressure in existing energy transport and delivery infrastructures.

Geoexchange is a renewable, conservation and energy-efficiency technology. It is also particularly well adapted to the concept of integrated energy systems in communities because of its capacity to recover, store and move excess thermal energy.

In addition, the coalition is part of the QUEST steering committee and has been participating in the work done by that group since the very beginning. I will not spend any more time on this subject because my QUEST colleagues Shahrzad Rahbar and Kenneth Ogilvie made an excellent presentation to this committee on November 14, 2010, I think.

Geoexchange is just as promising a technology when it comes to reducing GHG. In a study published by the CGC last year, we estimated that, if we were to replace 4 per cent of the single-home residential heating systems in Canada with geoexchange systems, it would be the equivalent of reducing GHG emissions by 800 megatons or removing 250,000 vehicles from our roads.

Currently, geoexchange is used to meet about 0.5 per cent of heating and cooling needs in Canadian buildings. Despite the low penetration rate, the industry has experienced tremendous growth in Canada over the last few years. In 2009, over 15,500 geothermic heat pumps were installed in Canada, whereas only 442 heat pumps were installed in 1998.

At this point, the growth of the Canadian industry exceeds that of France, Switzerland and the United States. This growth is largely due to a geoexchange market transformation initiative developed and deployed by the CGC, starting in 2005. I will tell you a little bit about this initiative in a few moments.

The 80,000 documented systems in Canada can be found throughout the country, even in communities such as Whitehorse and Yellowknife. In terms of units installed in the past four years, the leading provinces are Ontario, Quebec and Saskatchewan. They are followed by Manitoba, British Columbia and New Brunswick. Together, Ontario and Quebec account for about 80 per cent of these installations, while Saskatchewan and Manitoba have slightly less than 5 per cent each.

Most of the heat pumps sold in Canada are imported from the United States. The market share of a handful of Canadian manufacturers is about 10 per cent. However, Canada generates the vast majority of the economic activity involved in geoexchange. At the U.S. border, the cost of a heat pump is about $2,500. However, the average cost of a ground source heat pump system — including labour, drilling, design and installation costs — totals about $28,000.

This means that Canadian industry stakeholders in geoexchange are responsible for just over 91 per cent of the economic activity. Therefore, 91 per cent of a ground source heat pump system's value represents investments made here, in Canada, to buy products and services within the country.

I want to point out that this economic activity — whether it involves drilling, design or installation — cannot be relocated to countries paying lower wages. At the end of the day, the Canadian geoexchange industry creates jobs where the energy is produced and consumed, that is, in every single town across Canada.

Therefore, there is no justification for believing or to trying to make people believe that a few U.S. heat pump manufactures represent the Canadian industry. Foreign contributions to the Canadian industry account for only 9 per cent of the total economic activity.

In 2007, the CGC began deploying an extensive market transformation initiative. This initiative is characterized by an increased focus on training ground source heat pump installers and designers. The initiative also involves a system certification mechanism. Under the program initiative, we have trained over 4,500 individuals and accredited over 1,150 residential system installers and designers.

These individuals work for 450 companies certified by the coalition. Therefore, the geoexchange industry in Canada is represented by thousands of workers and companies. This means that Canada currently possesses the professional and technical capacity required for market expansion.

In addition, we are working with a strong and growing network of colleges across the country to ensure the education and training of the next generation of installers, designers, technicians and engineers who will work in the geoexchange field.

As you can see, Canada has quickly become a world leader in geoexchange. We have created and implemented market transformation mechanisms needed for sustained and sustainable industry growth. This industry — and I must once again be specific — this Canadian geoexchange industry has the capacity to meet many challenges, and thus contribute even more to Canada's sustainable energy future.

The CGC has been gathering and analyzing market data for over five years. We have access to the best technical database in the world in terms of geothermal systems. Today, I want to give the committee members the opportunity to take advantage of this information, so that geoexchange may get the credit it deserves in the report on the committee's current study.

It would be my and my colleagues' pleasure to answer your questions now.

[English]

The Chair: Thank you very much, sir. We will now proceed with Mr. Samray.

[Translation]

Jean-François Samray, Chief Executive Officer, Association québécoise de la production d'énergie renouvelable (AQPER): Mr. Chair, senators, Madam Clerk, I will be brief. I have submitted a two-sided document in colour, and it contains all the information I am about to share with you. In the next few weeks, we will send you a more detailed document. For now, you have one page in colour. If you lose it, there are others. We will also provide Madam Clerk with a copy on a USB key.

The Association québécoise de la production d'énergie renouvelable has been in existence for 20 years. Its mission is to promote the development of Quebec's independent power producing industry by prioritizing renewable energy sources or new energy sources that comply with sustainable development principles.

The fact is that electricity production in Quebec has been nationalized. I think this was brought up earlier, and you witnessed it during your visit to Hydro-Québec yesterday. Regardless of that fact, many companies have contracts with a single client, and that client is Hydro-Québec.

At Hydro-Québec's bidding, these companies produce — whether on small-scale sites or in new fields, such as wind energy — electricity that is bought by Hydro-Québec. In turn, Hydro-Québec preserves the environmental benefits and resells this energy on the market as efficiently as possible.

So, in its strategy, under previous governments, the government put in place a big machine to build gigantic projects, such as the James Bay project, with working conditions that required people to travel far from home to work on them. But this same machine was not able to carry out small projects at competitive costs. So the partnership was set up. And so electricity produced privately represents about 5 per cent of Quebec's overall production.

Our list of members includes some 130 companies. The Association québécoise de la production d'énergie renouvelable, which has been around now for 20 years, is an association of employers that represents companies that produce energy and electricity. So, we are talking about companies like Boralex, Innergex, Brookfield, Algonquin, Cartier and Kruger, and companies that provide services in engineering, law and the environment, in construction or in equipment, such as hydraulic and wind turbines, in the biogas and biomass sectors, transformers, cables, and so on.

Before my presentation, I also read as much of your document as I could. I would like to congratulate you, as well as the analysts, for the work they did, and to underline the appropriateness of the questions that it raised. It can be seen that Quebec's energy consumption is a little different from everywhere else.

First, 97 per cent of Quebec's electricity comes from renewable resources, compared to about two-thirds for Canada. As for final energy consumption, around 41 per cent of all energy used in Quebec is electricity, 38 per cent is oil, 10.7 per cent is natural gas, and 9.1 per cent is biomass. There is also a very small percentage of coal, but it is used in the processing industry.

With the rising cost of a barrel of oil, which is explained very well in your document, we need to realize that the oil that is sold and used in Quebec comes from foreign sources. It comes from the North Sea, Maghreb and Mashriq. And so, year after year, somewhere between 11, 12 or $15 billion leaves the economy in order to purchase this oil. And that is why it is in Quebec's interest to turn toward renewable energies as much as possible.

I think that where we also have an interesting picture is in the production of GHG in Canada in millions of dollars in GDP. You are seeing the small picture, but it is interesting to cross these two sets of data. We see that Quebec and Ontario are the economies that produce the least amount of carbon per unit of wealth, say per million. Quebec does this through its hydroelectricity production, while Ontario does it by importing hydroelectricity from Quebec and by producing nuclear energy.

In fact, we can see that all the provinces that have really turned toward hydroelectricity as a dominant factor, toward renewable energies, will have a low rate of carbon dioxide emissions per millions of GDP.

I think that these are interesting observations, that is, that the challenge of carbon and renewable energies enable the provinces to be there, to enjoy a creation of wealth and to rise to the challenge of an economy that is less dependent on and produces less carbon.

In Quebec, renewable energies have a direct impact on the economy. The development of these energies has led to know-how that is exported to the five continents via the hydroelectric industry. The know-how found in the engineering companies, and especially the equipment that is created here, is exported around the world.

There is also the wind energy industry, which brought $10 billion in investments over a decade and now produces close to 3,000 megawatts of wind energy. That, in turn, created jobs. It also created a network of partner companies that are both competitors and partners to come and set up projects here, in Ontario, and in the other Canadian provinces, projects that are increasingly going international.

I would say that, in actual fact, they were able to be the lowest bidders, to control their construction costs in a province where electricity costs are very low, in a context of manufacture and facilities on work sites that are highly regulated and unionized. So, we must understand that, when we can manage all that with very low revenues, we can export this energy mix installation model and create a very lucrative source of revenue out of it when we can charge a lot for energy.

This kind of expertise allows Quebec and Canada to seek out significant revenues here through engineering and equipment exports. Simple as that!

As for the Canadian potential in renewable energies, I think that there are a significant number of hydraulic energy sites that can still be developed. The same thing for the wind energy sites; there are still dozens, if not hundreds of thousands of megawatts that can be developed. And with that, the ability of the distribution network to capture these additional megawatts will become a key issue.

There is also a large quantity of forest biomass. I found it interesting that you highlighted in your document the fact that Canada is experiencing an energy revolution. We started with biomass, and we needed biomass here 5,000 years ago, 10,000 years ago, when it was cold and when people had to get through winter with no insulation, without anything, it took biomass.

The first settlers also used biomass for heat. Two things changed with coal. But there was also the arrival of the first hydroelectric generating stations, and so the economy changed. And now, we are in the process of re-evaluating the use of biomass with new technologies.

Biomass has been used. But we have optimized the systems. We can go back to biomass. And let us face it, even our Canadian flag, the maple leaf, is itself a symbol of biomass. Furthermore, biomass is present throughout the agricultural sector.

The forestry and agricultural sectors are two sectors that are currently experiencing difficulties, but energy production may offer solutions to them. And, particularly in the agricultural sector, I think that the entire industry in the biogas sector can offer very worthwhile solutions to rural Canada.

As for our recommendations, your document clearly mentions that having a program that supports the production of renewable energy was an incentive that was most appreciated by the industry and that created economic spinoffs. We are in full agreement with your observation.

I think that the logical outcome of that observation leads to a very strong recommendation to the government to reintroduce this support program because the upcoming projects also bring about tax revenues, wage income and revenue from the goods and services that are used. So, it is an incentive that is basically self-funding.

You said that the government developed a national project on the regulation of gas and diesel technologies, or 5 per cent for gas and trying to go to 2 per cent for diesel. But I would like to say to you: we need to be bold and daring to boost our biogas sector as well.

There may be a way to have a similar policy: a Canadian pipeline for biogas. In rural areas or in large municipalities, this biogas is in our garbage; there are biodegradable materials that can be sent to a purified bio-methanization site and that produce methane that could be reinjected into the gas pipeline.

These things are done in other countries. And in North America, this is not very common, but the know-how and the technologies are there. This would allow us to slowly green our natural gas and, at the same time, bring about structuring employment.

As for the price of carbon, I think that your data is correct, with a regulatory framework adapted to the development of renewable energies.

The benefits for the communities are obvious: development of sources of local and regional production, shorter supply chains; creation of jobs in the regions; better air quality. Each year, we read reports from the chief medical officers of the provinces, who remind us of the impact of air pollution on public health.

I would also say that there would be greater economic resilience to energy shock. When the price of oil reaches $140 a barrel, things go well in provinces where there is energy production. But there is an impact. There are a number of regions in Canada, so a number of sources of energy supply, but there is only one monetary policy. This means that, when the price of oil goes up, the economy of provinces that produce oil overheats, skyrockets and the dollar rises, as a result, boosting the dollar and making exporting more difficult for manufacturers, who are also dealing with the fact that they are paying more for fuel for their transport fleet.

So it is important to come up with renewable energy sources. I think that the west is really so entrenched in oil development. But eastern Canada, which imports this oil, could have greater economic resilience and develop its renewable energies further. And it could do all that by contributing to the fight against climate change.

The risks of not acting, because there are some, include losing local expertise, a lack of projects and of a technological showcase. To be able to sell internationally, we need to be able to have projects right here. I think that you explained it well in the nuclear energy industry, that the government is wondering what it is going to do with Canada's atomic energy, the CANDU and other reactors.

We need to understand that it is difficult to sell technologies overseas when it has been a long time since we have done so at home and we do not really know if we are up to it. So it is important that there are projects here. Our engineering and equipment firms are capable of selling their hydraulic expertise internationally, because projects are being done right here. The result will be technological showcases, not depending on foreign sources for the available technologies, being able to get and register patents, being able to have patents on renewable energies and creating high value-added jobs here.

The risk in not acting is a deterioration in air and ecosystems, a weakening of biodiversity, an impact on monetary policy and, as a result, on the government's ability to have an economic development that is manageable from province to province. And there you have it. Thank you.

The Chair: Thank you very much. You have given us a lot of information in a short period of time.

Senator Mitchell: Mr. Tanguay, I would like to start my questions with you. In your written presentation, on page 4, you noted that, if there is a 44 per cent decrease in greenhouse gas emissions in the residential industry, we would save 800 megatons of emissions. But I think that the total emissions in Canada are close to 800 megatons. Is there a mistake there?

Mr. Tanguay: Yes, you are right. I confused mega and kilo. It is 800 kilotons.

Senator Mitchell: Thank you very much. My second question concerns the costs for your technology. I think you said that a system would cost $28,000. How does that compare with traditional systems?

Mr. Tanguay: Compared to a gas system, for example, a gas system is going to cost about $12,000. If you look at electric baseboard heat, we are talking a few thousand dollars. An oil furnace is almost the same as a gas one. So it is two to two and a half times more expensive. But when you factor in performance, the savings are huge.

Senator Mitchell: I have a question for Mr. Samray. Our discussions often focus on the cost of alternative energy systems, and we also understand that the cost of traditional energy systems are too high, and that it is not possible to have a commercial system for the other systems, like the one you spoke about. Can you explain to me how feasible it would be and how long it would take to develop the techniques for systems like wind and solar energy to a level where they can compete with the traditional systems?

Mr. Samray: It is an economic issue, is it not?

Senator Mitchell: Exactly.

Mr. Samray: I think that the hydroelectric industry is a mature one. It is a developing industry that has been around for more than 120 years. The best projects have been developed, and we are seeing that we are dealing with the economics of projects that are further and further away, in valleys or elsewhere, that are more and more complex, and where there are transmission costs. Because if you are talking about electricity, you are talking about power lines. And this factor needs to be considered. I think we had a bath curve. So it has been 120 years, and the first kilowatt-hours were $0.50 per kilowatt-hour in 1880. We need to realize that it was something very expensive, then the cost dropped. Then, power stations were installed close to centres, in Niagara Falls and in Beauharnois, then it was the North Shore and James Bay. So this industry is mature.

I think the costs are also dropping in the wind energy industry. There is a global demand for wind energy projects. Based on Quebec's experience, we need to realize that if we have industrial parks with a size of 100, 150, 200 megawatts per park, there are fixed costs and there are variable costs. So, designing them, the engineering, access roads, integration stations, seeking authorization, and you understand that there is not a big difference whether it is 200 megawatts or 25. So, the more capable we are of recouping it over a large number of megawatts, the more we will be able to arrive at a lower cost for that energy.

The best sites are developed first. Sometimes there are sites with greater potential but that are further from transmission networks. So that requires the development of a transmission network.

Then we come to biomass and biogas. For biomass and biogas, we need to look at everything from a different perspective. It is clear that, by not having the price of carbon included in the cost, fossil energy does not compete on the same scale.

If I am a hydroelectric energy project, if I am a wind energy project, if I am a biomass project, I am going to have environmental authorizations that will ask what my measures of compensation, the impacts, and so on are. If I am a thermal power plant, I am in an industrial park. I am an industrial project. "Pshhht!" That is it, that is all, I have my authorization. Thank you, good night!

What is the external cost of that? It is not included in the price, just like the cleaning of a site. It is all well and good to produce certain types of fossil energy. But when the site is completely tapped, it needs to be cleaned. It is sort of like a mine. If I close and leave the community with the task of picking up, that is a cost that is not included.

So, it is clear that fossil energies are less expensive. But not all the costs are included. I am coming back to my biomass, my biogas, if I internalize within that the transmissions that are left out, I will take the Montreal region as an example, but we can take any large town. There is a truck that goes door to door, that shows up at a transit centre. And there are large trucks that go 100, 125 kilometres, doing round trips, day and night, to go to the landfill. If all these transport-related costs that are billed to the citizen through taxes for waste collection were diverted, if this transportation of large trucks that travel to the landfill was included in a rebate on the cost of electricity, I would say that we would manage to be competitive.

A global approach requires adjustments, something that is not done with renewable energies. And the more innovative the technology is, the more it costs, and the price will go down as the technology matures. It is clear that, when a kilowatt-hour is $0.06, $0.07, $0.08 or $0.10, fine, it is difficult, if we do not see it from a global perspective.

The management of waste material and manure leads to problems in the management of blue-green algae, waterways, and so on. For the transport of waste material, if we use a short, urban route and have the truck go house to house and collect waste, then go to the factory that is in an industrial park and that will produce biomethane, inject the material for the production of urban heating networks, and that can at the same time produce electricity, so cogeneration, then I come up with savings that hold up very well. Does that answer your question?

Senator Mitchell: Yes.

[English]

Senator Banks: Mr. Tanguay, are you aware of the Montreal company that is operating a garbage-to-gas conversion plant in Edmonton now, or building it now? A Montreal company is doing that, putting it back into the gas system. What is it called?

Mr. Tanguay: The company is called Enerkem.

The Chair: Is it based in Edmonton?

Mr. Tanguay: No, but it has a project in Edmonton.

The Chair: Does it?

Senator Banks: Is it a Montreal-based company?

Mr. Tanguay: Yes.

Mr. Samray: Yes, on Sherbrooke Street. Next year, next year.

Senator Banks: I just wanted to know if you knew about that. You obviously do.

I will ask my question to Mr. Tanguay, but Mr. Samray and Mr. Kantrowitz might want to comment on it, too.

Using your example as a microcosm or a metaphor for all of the problems it faces, if you ask, any poll will result in people telling you that they absolutely want something done about the environment, and they want us to stop polluting, and they want us to make the place cleaner. Then the next poll will say, "But not in my backyard, and if it will cost me anything, no forget it. Somebody else has to look into that."

Give us a lesson, please, or help us in marketing and politics, which are the same thing, and explain how you would convince me, if I were buying a new house in Edmonton. Never mind retrofitting because that is more expensive. I can have a ground source heat pump, but I also need to have a furnace because the ground source heat pump will not do it by itself when it is minus 30, right?

Mr. Tanguay: Yes.

Senator Banks: Convince me that I should spend the extra $16,000 to do that, and tell me how I will get the $16,000 back — unless I am a philanthropist and just want to do good and have an altruistic view of why I should spend money on my house and my heating system.

Mr. Tanguay: Being in Edmonton, you have the chance to have low-rate natural gas, which is good for you.

Senator Banks: I am talking only about the installation of the system.

Mr. Tanguay: Yes, that is right. The average price that I gave you takes into account three different technologies — open loop, horizontal closed loop and vertical closed loop. These are the three basic ones. It also includes the different home sizes, as well. The average can vary from one province to another, according to the building stock, et cetera.

If you pay $28,000 compared to $12,000, you have a difference of $16,000, and depending on the energy price in your province, you can save up to $1,000 in heating and cooling costs a year. Basically, it is a 15- to 16-year payback. That is one of the advantages.

Another advantage is that you get a positive cash flow from year one. You can finance the system at low interest rates. We have a program like that with TD Financing Services. You finance the system with a low interest rate; you get a positive cash flow; and you just pay it as you go over 15 or 16 years.

It could be also financed through local improvement charges by municipalities. All sorts of options exist out there to finance those systems. Of course, you can pay them up front, and you will have a positive cash flow, as well.

There is no one response to your question; there are probably 35 million responses. It is really site-specific, customer-specific and specific to every province, I would say, on the economics. However, I have not seen one place where it does not make sense.

Senator Banks: What is the approximate difference between putting that system into a new house, as opposed to retrofitting?

Mr. Tanguay: The advantage of a new house is that if you build the house to R-2000 standards, for example, instead of needing a five-tonne or six-tonne system, you may well require only a three-tonne system, and there you can cut $6,000 or $8,000. Your average price is not $28,000; it could be $22,000, $21,000, $23,000.

You start by building a very nice home, well insulated, R-2000 style, and you can cut on a lot of the expenses on the system. The more efficient the house is, the more economic efficiency you can get from your system, so you will pay a lower price, as well. In a retrofitted situation it is not as easy because you cannot always improve the insulation of the home as you want.

Senator Lang: I would like to go back to page 5 of your presentation. We talk about the Government of Canada's support that was deployed by CGC starting in 2005. Perhaps just give a brief outline of what support you got from the Government of Canada. Also, could you comment on the prospects of commercial geothermal for the purposes of generation of power?

Mr. Tanguay: Those are two very good questions. The Canadian GeoExchange Coalition was created at the initiative of Natural Resources Canada and five electric utilities. The objective of those stakeholders was to engage the industry in a market transformation process, which is described in the slide.

If I recall correctly, there was a contribution agreement between NRCan and the electric utilities, where the federal government was investing $1 in pilot projects and the utilities were investing, too. We were able to leverage federal money to do that. It was before I arrived, but I think overall we did $7.2-million worth of pilot projects.

We got continuous support, but declining support, as well, over the years to develop the training program and the accreditation program that we put in place. However, the ecoENERGY Retrofit program was also a big help for the installers in recent years. I think we would not have known the growth that you have there without the combination of the ecoENERGY Retrofit program and the CGC market transformation initiative that came with it. Training and accrediting people and having a subsidy program for retrofit was the perfect combination for the growth that we experienced. That is the help that we got over the past 10 years. I am oversimplifying, but it was a big help.

The question on commercial application is very good. I was at an awards ceremony last week here in Montreal at which Quebec's energy efficiency agency was giving awards to building owners and building managers for doing energy efficiency projects in their buildings. Out of 25 projects in the building sector where they were giving the awards, 15 had a geo-exchange or a ground source heat pump system. We are talking about 60 per cent of the buildings in the commercial sector having ground source heat pumps.

It is not a question of not knowing what it does and what it is. It is just there, and we do not know it because we do not see it. We often joke in the coalition that we should put a flag on top of a building saying, "This building has GEO," because otherwise nobody knows and nobody notices.

That is the reality of the industry, I think, for the years to come. It will boom on the commercial side, and that is where we will put our efforts in the future, as well, to train engineers, to put some infrastructure on that.

Senator Lang: I would like to go a little bit further and look at the prospects for generating power from the point of view from providing it to a grid. I know that back in the Yukon there is a study going on with that prospect in mind, and perhaps you could just comment on that element of it for Canada.

Mr. Tanguay: I cannot comment too much on that. This is our sister organization, CanGEA, which looks at the high- temperature geo. However, I think you are right. Where I see potential is the West Coast — B.C. and Yukon. I have not seen the capacity, but this is feasible; we see that in the U.S., in Asia a lot and in Iceland. The only potential I know of is on the West Coast, but I do not know how much there is.

Senator Neufeld: Senator Banks asked my question for you, Mr. Tanguay. I think this is great stuff. There is lots of it catching on in British Columbia, where we have heat pumps and those kinds of things.

I do not think you explained that the value when you go to sell that home is increased tremendously. It is a large outlay to start with, but at the end of the day, when you go to sell that home, it brings a fair amount of value back. Would you agree with me there?

Mr. Tanguay: I totally agree with you. The only catch here is that the agent who will sell the home has to be able to sell the technology to the potential customer. We are addressing that challenge now. We have a half-day course for realtors to make sure that they understand the technology and can make the selling point to potential customers.

You are right: The value of the home is higher, and the energy savings are much better. It is really a selling tool for someone who is selling a home.

Senator Neufeld: Mr. Samray, you spoke about reasonably priced electricity being a positive, and it certainly is in Quebec. I know they have some very cheap energy and aluminum smelting, for example. Would you agree with me that that is good to see? Is that what you said?

Mr. Samray: Having cheap electricity?

Senator Neufeld: Yes.

Mr. Samray: It is a good thing when you are the customer trying to make ends meet. Having cheap electricity is nice when you are a consumer or when you are in the industry and you are just like Alcan. A smelter wants to go where electricity is cheap and also where there is a good quality of frequency in the electricity.

However, it can also kill the technology development when someone undercuts the market by seven or eight cents. It is tough. This is why at the association we are kind of having good discussions with the government, saying that the industry needs showrooms. It needs some projects that are working to show the rest of the world that it can be done. It is working; it is operating; it is hydro approved; it is okay with the grid codes; it is approved by the NERC, the North American Electric Reliability Corporation; and so on.

When you have that, you do not really need 5,000 megawatts of new technology. You need certain projects located on the territory that you can bring your customers to see. If you have that kind of project, there is no big trouble. The toughest part for us is to explain to the government that we need those new projects, new technology. However, more and more, we see that those projects will go into regions, in Northern Quebec, for example. It could be also in B.C.

I was in B.C. last year and saw all the timber industry. The trucks were stopped, and there was not much activity. With those industries in the biomass sector, you can see that when the timber is down, the community is down. Definitely there has to be something, and energy could be one of the issues to bring economy into the different regions of Canada.

Senator Neufeld: That is good to know. We heard earlier this morning from Professor Pineau, who actually said that all people in British Columbia, Manitoba and Quebec are highly subsidized in their electricity, and that is not good — we should actually have much higher priced electricity. With the answer you just gave me, would you agree with that, or do you think it is better that we have reasonably priced electricity and can actually attract industry and jobs and those kind of things for people?

Mr. Samray: I would say that you have an entire chapter in your document that talks about energy efficiency. In Quebec, one cent per kilowatt is put into financing energy efficiency measures. If you have a pricing hold, the customers will go much faster on energy efficiency, and there is new technology.

Therefore, it depends. If your electricity price is higher but you have some kind of support from the government to help low-income families make ends meet, then the electricity price should be higher. However, many industries are looking for a cheap price for electricity.

More than that, new technology sectors are looking for the best frequency, and the IBM Bromont plant is a good example. They produce the chip that goes in the very latest technology of IBM computers, and the plant is located there because they have the best frequency on the grid. A meter measures their frequency, and if it moves, there will be a phone call.

Having cheap electricity is something. Having reliable electricity with a good frequency is crucial for attracting new technology industries.

Senator Neufeld: You should be a politician. You have wandered around that question quite well.

Mr. Samray: No, honestly. Does the price have to be higher? If you say yes, then you will have the low-income families saying, "You are killing me." When this electricity is supported by a grant to those families, then you are compensating for that price jump. However, if having a lower price of electricity brings new development and new technology and new jobs into the country, then you are capable of financing everything.

The Chair: You may look like Jean Lapierre, but you are not Jean Lapierre in your politics. You are very skilled, though.

[Translation]

We are ready for the next witness, Mr. Philippe Bourke, the general manager of Regroupement national des conseils régionaux de l'environnement du Québec.

Just like the other witnesses, you have been extraordinarily patient. I have seen you in the room for hours, but you will at least have had the benefit of listening to a number of witnesses. We are very happy to have you with us today and to have you participate in this study, which we care deeply about.

Philippe Bourke, Director General, Regroupement national des conseils régionaux de l'environnement du Québec (RNCREQ): Yes, I have been here for some time, but it is not torture. It is very interesting and very rewarding to listen to your discussions and the interactions with the participants.

I am first going to present you with the mission of the Regroupement national des conseils régionaux de l'environnement du Québec. There are 16 regional environmental boards, or CREs, in Quebec, one in each administrative region, except in the far north, the Nord-du-Québec region. These CREs have existed for a very long time, some for 35 years, so since the early 1970s.

The Chair: Are the boards created under a certain act or statute, or are they private boards?

Mr. Bourke: They are non-profit organizations that are legally constituted, but that are from the community. So, it is people from each of the regions who meet, people from the sector.

The Chair: Of their own accord?

Mr. Bourke: Yes, that is it.

The Chair: Not because they are asked to?

Mr. Bourke: No, they are independent organizations, from the community.

The Chair: Citizens from the regions?

Mr. Bourke: There are citizens, and there are representatives from local governments, such as municipalities, representatives from companies, people from the health and education sectors, from environmental groups. So, they form a multiparty table of all sorts of organizations. But the mission is to protect the environment and promote sustainable development.

The Chair: To recap, initially, a board was formed in each region, and then, those 16 boards got together and formed an organization that you now represent?

Mr. Bourke: Right. So, I am the manager of the group of those 16 CREs.

The Chair: Perfect. Thank you, Mr. Bourke.

Mr. Bourke: The CREs are involved in actions designed to protect and enhance the environment in each administrative area of Quebec. Through their actions, they seek to promote the inclusion of environmental concerns in regional development processes. So they participate in all development processes in the region, with the CREs, the municipalities, the RCMs, by trying to encourage them to include environmental issues and sustainable development in their policies and planning.

The Regroupement national des conseils régionaux de l'environnement du Québec is a very active organization in Quebec's energy field, among others, and has been recognized as an active stakeholder with the Régie de l'énergie since 1998. For more than 10 years now it has been involved in most of the proceedings before the Régie de l'énergie.

We are also involved in various forums and committees that deal with energy issues, either directly or indirectly, because these are things that concern, for example, land-use planning, transportation, so energy issues of all kinds.

The Chair: And is it funded by the government? For example, I am from the Eastern Townships, from Magog. Do we have one of your CREs in the Eastern Townships?

Mr. Bourke: Yes.

The Chair: Are the groups also diverse?

Mr. Bourke: Yes, in fact, the 16 CREs have 2,000 members. So, there are individuals, companies, organizations, who pay a fee to be members. This helps fund the organization. A third of the funding comes from a grant from the Government of Quebec, through Quebec's ministry of the environment, which provides a CRE with close to a third of its financial support. And two-thirds come from contributions from the community, projects, agreements with community stakeholders, to carry out projects.

The Chair: For example, in Magog, we have Memphrémagog Conservation Inc., which is a non-profit organization, to protect the lake environment. Are they members?

Mr. Bourke: They are probably members of the CRE for the Eastern Townships.

The Chair: Is it a good example?

Mr. Bourke: Yes, indeed. So, we are active in a range of issues that concern the protection of the water, the air, and agriculture, as well as forestry. We touch on all environmental issues, and particularly issues relating to energy.

The Chair: Excellent.

Mr. Bourke: Which is the goal of today's discussion.

According to their mission, CREs support projects in the energy sector that help to promote regional development, reduce air pollution, work against climate change, improve human health, increase energy security, create jobs and contribute to favourable positioning for Quebec companies.

For the CREs, there can be no doubt that the energy sector is an important factor in the development of societies, primarily because it generally results in substantial economic spinoffs and allows for the creation of quality jobs.

However, this sector, and more particularly the branches dealing with fossil fuels, are also responsible for the greatest environmental problems facing the entire planet. Consequently, it is not possible nowadays for a responsible decision to be made concerning the development of energy sources without a careful assessment of the implications our choices will have for these fundamental issues and without taking methods of energy consumption into account.

From this point of view, it is the development of local sources of clean energy, combined with an energy conservation policy and rigorous efforts to plan supply and demand, including the issues of transportation and land use, that will give us the energy supply and reliability that we need.

So that is all for the presentation on our organization. I will now focus on the goal of today's meeting, and I would like to say first that the CREs would like to congratulate the Standing Senate Committee on Energy, the Environment and Natural Resources for the initiative you have taken to encourage a dialogue on the crucial issues of the energy future. Like you, we consider this discussion urgent and necessary, and so we congratulate you. It is to your credit. Furthermore, the CREs, with the support of over 200 partner organizations from all sectors in Quebec, have also begun to encourage this kind of dialogue, but Quebec-wide, in the past year, thanks to the initiative of the Rendez-vous de l'énergie. We have attached a file to our brief that gives a short explanation of what this initiative of the Rendez- vous de l'énergie is.

[English]

The Chair: I cannot help this, senators, but it seems like such an important, unique organization.

[Translation]

Do you think there are similar organizations in other provinces, or is it unique to Quebec?

Mr. Bourke: Yes, it is fairly unique. I know that in Ontario, maybe, there is something called Green Communities that would be similar, but they are not networked like ours are or as diverse. As for us, we cover all of Quebec. There might be similar organizations in Europe but we do not know of any organizations like ours in Canada.

That said, I am now coming to the matter of the Attention Canada report, which was sort of the source of your consultation. Overall, we are fairly happy with the quality of the report; it covers most of the issues. We also noted that it does not refer to the geothermal sector, which we find unfortunate because it is a sector that is thriving in Quebec.

The Chair: Your congratulations are encouraging because there were other witnesses before you who did not feel the same way.

Mr. Bourke: Actually, for us, it is so important that people talk about these issues because they are not discussed enough, and especially not thoroughly enough. Every day, people talk about energy issues in the media, but never in an integrated way, never so thoughtfully. These are extremely complex issues that affect the lives of all citizens and companies. We cannot deal with this matter simply by reading about who is for or against this or that industry on the front page of the newspaper every morning. It is difficult to have a dialogue like that. It is normal for it to be criticized as well, since someone may have criticism to give. But that is not my goal today. I want to congratulate you because we need places like this to talk about it. If we do not talk about it, the problems are not going to resolve themselves. So, I repeat sincerely that, for us, it is important that we have exchanges like this on these important matters.

Also, the beauty of your approach is that you are looking at the problem as a whole, at the environmental, social and economic level, and questioning energy consumption especially. When we talk about energy issues in general, we focus almost solely on industries that produce energy, which is the best, the most expensive, the most polluting, but we forget to think about what we are doing with it: are we using these energies efficiently, are we using them in the right place and in the right way?

It is always more difficult to look within, because each of us must engage in an exercise of conscience, look at our own way of living; it is very difficult, but it is essential. If we do not look at this, we may lose a lot of time debating industries, in relation to one another. What we also find refreshing in your report is the tone taken in relation to climate change, which is a fundamental issue for us, for our organization, for Quebec and for a lot of Canadians and, unfortunately, this importance is not currently recognized in Canada's government policies, and we deplore that.

So, for us, it is quite refreshing to see that, in your report, you have positioned this problem properly as being real and as needing to be addressed urgently and strategically.

Also, in my brief, I quoted a paragraph from page 17 of the report. It states:

To meet the climate change challenge, and to prosper in a lower-carbon global economy, we will need to transition our energy systems in a way that can also reduce Canada's greenhouse gas emissions. One of the key tools to achieving this is carbon pricing.

We fully agree with this statement, and we think that a carbon price needs to be set quickly to stimulate innovation and encourage good behaviour and good investments. It is a simple and effective way to encourage a gradual transition in favour of an economy that is less dependent on carbon.

A little earlier, section 2.3 of the report, on page 8, deals with the trend toward increasing oil prices. There are people who spoke well about it before me. Obviously, it is the key element and the drive behind the approach that is currently being carried out in Quebec, on the Rendez-vous de l'énergie.

But for us, it is an important motivational element in favour of the transition because oil is an extremely precious resource that is of major importance for developing societies. Unfortunately, today, we are wasting it, we are not handling it for its true worth, and we are highly dependent on it. In this kind of context, since it is a dwindling resource that is going to cost more and more and since our economy depends on that resource, but at a very low price, we must expect major upheavals and we must prepare for such a revolution.

I will finish off by saying two things that, I think, are missing in the report, two fundamental aspects for me. Going beyond the matter of geothermal energy that was discussed earlier, there are two things: first, the matter of public health is barely discussed in the report, so the impact that our energy system has on the public health of Canadians.

Mr. Samray just spoke about it, and reports are increasingly confirming it for us, whether it is doctors, public health agencies, telling us how much of a concern it is, and besides, Canadians are also saying that health is their priority.

I think that there might be something there to motivate them. If we look for a source of motivation so that Canadians are getting into a system where our energy system would be drastically changed, so the argument about public health would draw in a large proportion of Canadians. They, too, would keep up because we need their support to bring about such a significant change.

We feel that the other thing missing, and I am bringing you back to the energy consumption issue I just spoke about, I think that any aspect that questions urbanism and land use, how we plan our cities these days, we are really using a system that continues to build housing areas that are not very dense. They are very, very spread out, further and further from urban centres, with amenities that are really spread out, and that require people to use their cars more and more and drive further. So we are deepening our dependence on oil every day in the way we urban plan. So it is a worrisome issue. If we want to make a profound change in our relationship with energy, we must absolutely draw inspiration from models that exist here and there, whether in the United States or in Europe, to plan cities that are less dense, with transportation systems that are better adapted to public transit, among other things.

The Chair: Are you referring to the phenomenon of urban sprawl?

Mr. Bourke: Exactly. And it is a scourge. And even if we have been talking about it for years and we say that it is costly, both environmentally and economically, because this phenomenon costs society dearly, we are not managing to control the problem, and as a result we are having more and more difficulties when it comes to energy.

The Chair: Thank you. It was very clear and concise. So, as usual, the list begins with you, Senator Mitchell.

Senator Mitchell: Thank you; I will try in French again.

The Chair: Looking forward to it?

Senator Mitchell: You said that carbon has to have a price. Which policy would you prefer, a tax or a cap and trade system, say?

Mr. Bourke: Let me give you my very personal answer, because we have not gone into that question in depth. But a tax, if you want to call it that, is, as I see it, easiest to put in place, easiest to administer and, I would say, easiest to grasp. At some stage, there has to be a signal, and a tax is the best signal because, at the end of the day, the consumers will make the choice. If they feel that such and such a behaviour is costing them more money because carbon has its price, then fine, they will be able to choose another behaviour in order to reduce the impact of the value that has been attributed to carbon.

So that is a win-win situation, as I see it. Here in Quebec, we have already started the process by imposing a kind of royalty on gasoline and other fuels. It is not done in a major way to force changes in behaviour, but it is certainly enough at the moment to establish a fund to pay for ways to reduce greenhouse gases that we would not be able to pay for without the fund. It is only a first step towards a system, but I have to say that, even though there were some objections at the outset, it is not complicated and it is easy to administer.

Senator Mitchell: On page three of your presentation, you mentioned the Rendez-vous de l'énergie program and you provide a list of the program objectives. First on the list is:

[English]

Make all players in Quebec aware of and inform them about the use of energy in the province.

[Translation]

I feel that everyone knows how very important that is. But most people in our society do not understand what climate change really means.

Which program addresses that specifically, that educational approach? You mentioned that there would be meetings of the Conseil, but will there be seminars and advertising?

Mr. Bourke: Actually, you bring up an excellent point. If there is anything important in the initiative, I feel that it really is public awareness. It is accepting that energy issues are important and complex and that people need to think about them. Without that acceptance, changes will not happen because people do not understand.

We had a survey done on Quebecers' perceptions of energy issues and the results confirmed that there is a need for information.

With that in mind, how did we move forward? In different ways. First, we have two target audiences. We have the decision-makers, the agents of socio-economic change. For them, we organize forums, much like this one today, but bigger. We invite a hundred or so people to debate the issues, people from all sectors and from each of the regions.

For the general public, we work in a different way, of course. For example, we organize "movie meetings" where we show films on energy and discuss the issues afterwards. We are using various tools, including a website, a Facebook page, those kinds of ways in which people can express their opinions.

We have established a "citizens' caravan," which lets us go into the street to meet people, to ask them questions and to play simple little games, in order to make them aware of their energy consumption and the impact it has on society and the environment.

Those are some examples of small strategies, in an attempt to reach as many people as possible and increase their understanding as a first step.

Of course, we have not done a lot of advertising because we have not had the means to do it. But it could well have been a productive approach too. At this stage, we have started with the people who are most involved with the issues, the socio-economic players.

Senator Mitchell: My third and final question. What is your budget for this initiative?

Mr. Bourke: In total, the initiative needs a budget of about $1 million, which would cover about 150 to 200 activities in every region, a reference document of about 50 pages, a website, all the programming, and a national forum, intended to bring everything together, that will take place in Shawinigan in June 2011. Half of the budget comes from a contribution from the Government of Quebec, through the green fund. In a way, the fuel tax is paying half the budget. As I told you earlier, those few bucks will at least stimulate some debate that may lead to some change. The tax is not a major one yet, but it is a start at least.

[English]

Senator Banks: Mr. Bourke, you said that one purpose of the regional councils was to encourage development in the regions. We have heard about possible potential controversial development in some of the regions of Quebec having to do with shale gas. Do any of your member organizations have a view on that, and does your umbrella organization have a view on that question?

[Translation]

Mr. Bourke: In our regions, we are also confronted with a lot of controversial projects. Part of our mission is to prioritize one course of action. There are all kinds of environmental organizations and some prefer courses of action that are different from ours. We prefer working together.

So, when a controversial project comes along, and it is simply not acceptable, we try to convince people that it is not a good project. If the project can work better in a region, we try to work with all the partners to improve it and make it worthwhile for everyone, not only economically but also socially and environmentally.

So that is part of our strategy. It does not always work, it is hard, it is a grind. But sometimes it works; at other times, perhaps our position is different from some environmental groups.

In Chaudière-Appalaches recently, the Conseil regional de l'environnement came down in favour of a wind project. Other environmental organizations were opposed to the project. Our decision was based on what the project could do for the region. So it is always difficult, but, up to now, the strategy has worked for us.

[English]

Senator Banks: Shale gas is a top-of-the-mind issue in some parts of Quebec these days, and your organization is in fact empanelled by the government to advise it, I gather, on matters having to do with ecology and energy. Given that, have any of your member organizations specifically addressed the question of shale gas development, yes or no? Has your organization, as a whole, addressed the question? Do you have a position, a view point, an opinion?

The Chair: Or did you testify at those hearings?

[Translation]

Mr. Bourke: Yes, there were BAPE hearings on shale gas. The three Conseils regionaux de l'environnement involved, Montérégie, Centre du Québec and Chaudière-Appalaches, all made submissions, as did the Regroupement des conseils. It was all done in a very collegial way, by which I mean that the three regional councils and the Regroupement worked together to find a common stance.

I should add that, just because we receive a financial contribution from the Government of Quebec, it does not mean that we shy away from positions that are different from theirs. We have been receiving funding from the Government of Quebec for 15 years and we have always been independent in the positions we have taken. That is something of which we are very proud.

That said, our position was to say that we need more information, and that there must be a strategic environmental assessment so that the issues are clear before we decide whether or not it is a good idea to develop shale gas in Quebec. That is the position that the three regional councils and the Regroupement took and it is similar to the position taken by most environmental organizations in Quebec.

[English]

Senator Banks: Are you a supporter of the petition that we understand was presented to the legislature?

[Translation]

Mr. Bourke: Participating in coalitions, petitions and demonstrations is not in the strategies of our organization. It is not that we are against them, but we do not usually participate in these types of strategies; we prefer to stick to our measures, which are cooperation and doing the work, alongside strategies like that.

This petition is really good for us, since it allows us to be in a position of strength to be able to promote policy changes.

[English]

Senator Banks: Do you have any idea of a timeline when you will know enough about it to make a decision one way or the other?

[Translation]

Mr. Bourke: I was recently at a round table where that question came up; science representatives were there, people who obviously need strategic information in order to be able to find out the environmental impacts. There were also economists needing information in order to assess the benefits this industry might bring to the government, but also to the regional economy. So this type of information also has to be compiled.

There was also an expert, a lawyer, who estimated the time required to put in place a regulatory framework that would allow the industry to move forward. Everyone agreed that roughly two years were needed to do all that research, economic and legal work.

The Chair: I would like to emphasize the points that Senator Banks raised that the 16 regional councils do not only want to protect the environment, but they also want to encourage economic development. Have I understood correctly?

Mr. Bourke: Absolutely. Our mission is to protect the environment; we are its guardian, but in the spirit of promoting sustainable development and supporting the regional economy. So we will be supporting projects that are going to benefit the regional economy, while respecting the quality of the environment.

We believe in that, and the "Rendez-vous de l'énergie" initiative is heading precisely in that direction. We believe it is possible to have a type of economy in Quebec that will meet the economic, health and social needs, all while protecting the environment. And that is what we are promoting. Today, we have heard ideas for technology projects that are moving in that direction, and that is what we are promoting.

[English]

Senator Neufeld: I am reading your paper. In your paper, what is to be done? You list a number of things here: focus on the development of public transport; reduce the consumption of vehicles; reduce the energy consumption in buildings; reinvent the hearts of towns and villages; substitute new renewable energy for oil, for example electrification of transportation.

I would think that Quebec does that now. I know that in the province I come from, British Columbia, we are focused on all of those things now and actually do those things. We are increasing public transport. We do whatever we can regarding the consumption of fuel for vehicles, and we have agreed with tailpipe emissions from California that are the most stringent in North America. We look at our consumption in buildings, and those kinds of things.

At the end of the day, I do not disagree at all that we need to do those things, but who pays for that? It is the public, right? It is the taxpayer, because government does not have a well that it can go to and get money, other than through the people.

There is a certain pace that you can go at. Are you suggesting that there is nothing happening in these areas in Quebec or that there is something happening but you would want it to happen faster? How do you accommodate that?

I am very confused by what I see at the top of your page, which says, "Counter the increase in gasoline prices by cutting taxes and royalties on gasoline." Everything that we have heard here and that I ever heard before I came here says that if you increase the price of something, it actually creates conservation and reduction. You are saying we should cut royalties and taxes on gasoline — at least that is what I read here. However, I know that how we provide transit in British Columbia is through those taxes. To cut those would, it seems to me, just encourage people to use more. I do not quite know how to read all of that stuff in this piece of paper or what you are trying to say.

I guess my question is this: Is Quebec doing these things that you are talking about, the four that are listed at the bottom of the page? I assume they are. I cannot imagine they would not be, but maybe you could correct me if I am wrong. Is it just the pace of it happening that you would rather see increased? How do you cut taxes and royalties off gasoline and still provide all these other services? Who gets to pay, and how do they pay? At the end of the day, they can only handle so much tax.

[Translation]

Mr. Bourke: There are actually two parts to your question. Yes, all those things are actually being done in Quebec and other places. The pace is in fact a problem, but, above all, there is the issue of choice.

While we are saying to rely on public transportation, we continue to invest billions of dollars in car infrastructures, new highways, new bridges, new interchanges, and that is where the problem lies. We are going to have to make a choice one day.

We do not have the resources, and you are right to point out that we have a funding problem. We do not have the means to support everything automobile-related and say that we are going to develop public transportation at the same time. We do not have the means to say that we are going to develop public transportation, while allowing residential areas to be built in the suburbs, where it is impossible to provide public transportation because the houses are too far away from each other. The roads are not at all meant for public transportation.

We cannot have new building approaches without reforming the Building Code, which has been taking forever to materialize. We have been saying that the Building Code needs to be changed for a number of years now. But why has nothing been done yet? So, yes, increasing the pace and making choices are the issues at stake.

Also, we cannot support renewable energy and subsidize non-renewable energy at the same time. So, what we are really looking for is a choice, a long-term strategy in which we would invest the limited funding that is available to us. Yes, it is expensive, but if we make the right choice, it will likely cost us less in the long run.

In terms of the second issue you brought up, meaning funding through gasoline taxes, I am not sure where you saw the mention of cutting taxes and royalties on gasoline. But perhaps what you mean, and that is what I understand, is that, if we wish to reduce oil consumption, we will have to look elsewhere for the revenue that comes to the government from oil taxes. Of course that is an issue.

But I think that what we need to do is to make people understand that the revenue the Quebec government and the other governments get from taxes on gasoline is nothing compared to the costs incurred by society, especially in Quebec where there is no oil and where each year, billions of dollars go out of our economy to buy oil abroad.

In fact, we do not make cars in Quebec either, so we have to import them too. As a result, our trade balance is at a great disadvantage. Yes, I think there is a funding issue, but it should not be mixed up with the need for transition from one economy to another.

[English]

Senator Neufeld: Maybe I read the wrong pamphlet.

The Chair: Yes. There were two documents, but you were looking at the one about what happens if Quebec has no oil.

Senator Neufeld: Yes. Is that yours?

Mr. Bourke: Is that Imagine Quebec Without Oil?

The Chair: They are both his.

Mr. Bourke: Yes.

Senator Neufeld: Under the heading "What is to be done?" on the second last page, it says, "Counter the increase in gasoline prices by cutting taxes and royalties on gasoline." That is what I read in your paper. I am glad that I did not misrepresent anything, because I certainly would not mean to do that.

[Translation]

Mr. Bourke: You are absolutely right. So, from those three questions, it is important to understand that our consultative approach in Quebec is not to tell Quebeckers what to think, but to give them the facts and then ask them: "Which of those three options would you choose?"

Obviously, the first choice, the quick and efficient one, would be to understand that paying lower taxes could be beneficial for everyone in the short term.

The Chair: Those are speculations.

Mr. Bourke: They are speculations we brought forward to encourage debate.

The Chair: There you go.

Mr. Bourke: But we are obviously not expressing a wish. This is to show that a scenario like that would not be beneficial in the long run, and neither would the second one. However, the third one would be. But you are absolutely right. I apologize, but I did not remember it was mentioned in there.

[English]

Senator Neufeld: Let us look at the list of other things under "What is required" further down the page. The first one is, "Focus on the development of public transport." Are you promoting that? Are you saying that, or is that something you are not promoting?

I am actually quite confused. When you look at the first one about cutting taxes, all of a sudden you walked away from that one, but there are others further down. Are you walking away from those, too, or are those things that you agree with? It is hard to tell.

[Translation]

Mr. Bourke: We need to understand that this is a consultation process. The idea is to bring forward the problem of increasing oil prices. In general, when there are daily reports in the newspapers that oil prices have gone up, people come out and say: "Lower the taxes, it is costing us too much. Help us."

Our job is to show that lowering taxes to slightly reduce the cost of gas is not a winning solution in the long term. In reality, we are faced with a steady increase that will never stop. And to solve the problem, we have to find a way other than decreasing taxes. But, since this is a consultation process, our role is obviously not to put words in the participants' mouths. We try to lay out the possible scenarios to be as transparent and open to dialogue as possible.

[English]

The Chair: Are you less confused, senator?

Senator Neufeld: Thank you. I am okay.

The Chair: That is very much a question of context, I think.

Senator Lang: I appreciate your candid observations and the fact that we have to look for solutions, and in any of those solutions there will be a compromise of some kind. I share Senator Mitchell's observations of earlier today that we have had a number of witnesses come who are just opposed to whatever is being done and do not provide an alternative that can be done with how we conduct our daily lives.

I want to make a couple of points. You said there may be too much public money going into the transportation systems. I represent a part of the country where if you get in a vehicle today and start to drive, you might get there in a week. That is how far away I live.

The Chair: Senator Lang comes from the Yukon.

Senator Lang: The point I am making is that one of the reasons we are the country we are is because of our transportation systems. We have to maintain our transportation systems to be able to transport our goods and transport ourselves across this country, so that we can come to meetings such as this and also share goods across the country. I would be very careful with that general observation that we can just go ahead and cut the money in transportation systems and buy a bus.

The other point I want to make is about building codes. Building codes have been updated. I think we should be putting that on the table, as well. In my part of the country, R-2000 is not uncommon from the point of view of what the building code requires in new homes now. We are moving in that direction. I think it probably applies to most provinces across the country, and that is provincial jurisdiction.

I would like turn to the question of LNG and the conversion of transportation in the trucking industry, which was raised earlier today. I think you were here when a number of reasons were cited for moving in that direction. Does your organization have any observations about such a conversion? Do you support that type of redirection, from the point of view of our economy?

[Translation]

Mr. Bourke: Before I answer your question on liquefied natural gas, I would like to comment on your first point about transportation. You know, when I say that I represent 16 regional environmental councils, some of them are a long way from Montreal; they are in the Gaspé, the lower North Shore, Abitibi-Témiscamingue. These rural regions are remote and public transportation is simply not an option in the medium term.

Yet, when they hear about the steady rise in oil prices, they are telling us that they are even more worried. They tell us: "Yes, we will always need a road transportation system. But then how will we manage to change the way we develop, live and get around? How is our economy supposed to change if oil prices go up?"

It is true that the solutions for Montreal are not the same as for Quebec City or Toronto. We need to find other ways and you are absolutely right. So that is why I did not want to generalize when I said that we should no longer support road transportation; I think we have to reinvent it. It is one story in cities and another story, elsewhere.

In terms of liquefied natural gas, I had the opportunity to meet with Mr. Robert. Two weeks ago, I also talked to the people from Gaz Métropolitain, who are working on the Route bleue project, so that they could give me a clear explanation of the environmental benefit to this approach and so that I would have a good evidence-based understanding. I also wanted to understand why we were talking about liquefied gas instead of something else. I just wanted to understand the technological logic behind all that, and I feel I have a better understanding now.

According to the studies I have seen, there was no doubt in my mind that there would be a significant greenhouse gas reduction if we used liquefied natural gas instead of diesel, regardless of where it came from. However, we should check where the fuels in question come from.

What I did not get an answer on yet, is the level of air pollution emissions, even if we could assume that it would be better. I know a little bit about chemistry, so we could assume that there would be less airborne particulates contributing to other air pollution problems, including smog and all that.

I think it would be useful to have this information to be able to give a final diagnosis and say whether it is beneficial or not. I think there are two parts to consider in terms of air pollution: climate change and also public health. We should look at those two aspects. They told me they would soon provide me with results, but, while waiting, I am doing my own research. It is important to have that information.

Overall, we are quite in favour. It is a means among others. The benefits will certainly not be spectacular, as Mr. Breton said earlier, but all the little bits of progress that we will be making in transportation, agriculture and construction, will add up to reduce greenhouse gas emissions a lot.

New technologies, which can be exported, are also a way to stimulate the economy. I believe that beyond energy gains, there are also interesting development opportunities behind a strategy like that. But for now, I am missing some information to be able to say this really comfortably.

The Chair: Mr. Bourke, we are at the end of your testimony. We appreciate your contribution to our deliberations. Your presentation was very clear and interesting.

[English]

Colleagues, we have to press on. We have another witness ready to go. You will see on your schedules that we were going to have Pierre Lemieux, who is the vice-president of L'Union des producteurs agricoles du Québec, but he is unable to be here. However, his colleague and partner is here. David Tougas is an economist, a research and agricultural policy man for L'Union des producteurs agricoles du Québec.

[Translation]

Welcome, Mr. Tougas. Thank you for being here, but also for drawing our attention to the issues described in your brief. We are going to listen to you with great interest.

David Tougas, Economist, Research and Agricultural Policies, Union des producteurs agricoles: Thank you, Mr. Chair. First, I would like to apologize for our first vice-president, Mr. Pierre Lemieux, who, unfortunately, was detained in Longueuil this afternoon. He would have liked to be with us, but, due to unforeseen circumstances, he could not be here.

I would first like to thank the committee for inviting us to speak to the work being done on Canada's energy systems.

Let me start with a brief overview of UPA. UPA represents the 42,000 agricultural producers throughout Quebec. So, year in and year out, 30,000 farms are investing almost $630 million in Quebec's economy. But we must remember that UPA also represents 35,000 lumber producers in Quebec's private forests who harvest roughly 6 million cubic metres of wood per year, for a value of $300 million. This is very significant.

Over the last few years, UPA was heavily involved in energy-related matters. UPA is a key player in developing the energy infrastructure in agricultural and forest areas. We are talking about power lines and wind facilities. By 2015, we are going to have over 30 wind farms in agricultural and forest areas in Quebec.

We are also dealing with pipelines, gas pipelines; we have the St. Lawrence pipeline project, Ultramar, which is currently under construction and which connects the refinery in Saint-Romuald to the refinery in Montreal East, through 240 kilometres of pipeline, mainly in agricultural and forest areas.

And of course, we have the most recent shale gas matter that has led to much talk in Quebec. The most targeted region remains the region between Montreal and Quebec, in the St. Lawrence Lowlands. Here too, it is a highly agricultural area, so there is definitely an impact on our members.

So, for all these types of infrastructures, be they transmission lines, wind turbines, pipelines, or shale gas, UPA makes sure the legal rights and economic interests of agricultural and forest producers are protected.

To this end, we negotiate framework agreements that define the relations between agricultural producers and energy promoters. These agreements include mitigation clauses to address the impacts of the infrastructure on agricultural and forest areas, compensation methods and relevant legal documents to protect the legal rights of agricultural producers. These agreements also ensure that all producers affected by an energy project are being treated fairly, all while keeping a high level of transparency in the relationships between promoters and producers.

In addition to these agreements, UPA has ongoing ties with both Hydro-Québec and the National Energy Board; it is also a member on the board's various committees that deal with the issues related to energy facilities in the agricultural setting.

UPA considers the National Board of Energy to be a major player and facilitator in defining the relations between agricultural producers and energy promoters across Canada.

Despite these framework agreements and the mitigation measures, the infrastructures are inevitably putting pressure on the agricultural and forest areas of the province, next to urban planning and other public infrastructures, such as roads.

In Quebec, energy promoters must submit their projects to the Commission de la protection du territoire agricole, better known as CPTAQ, which is a governmental entity. This required step guarantees that energy facilities in agricultural areas are developed using best practices in order to minimize the impact on agricultural and forest areas.

Not only do agricultural producers live near infrastructures, but, above all, they are also energy consumers; they rely on various sources of energy based on their type of production.

In Canada, energy expenditures in agricultural production amount to roughly $4 billion per year, or about 10 per cent of the sector's total spending.

In some sectors, such as greenhouse production, energy expenditures can represent more than 30 per cent of those productions' total spending.

So agricultural producers are also tied to some forms of energy, especially when it comes to oil products. In Quebec, energy efficiency programs focus mainly on electricity, while very few programs deal with alternatives to equipment that uses fossil fuels. In addition to energy consumption, agricultural producers can also be asked to contribute to the generation of energy, the production of agricultural biomass with a high energy potential, especially given the prospects offered by cellulosic ethanol, which should materialize in the next few years. Quebec has already started doing research in order to find high-performance plants that could be grown on currently uncultivated land, for food production.

There is also on-farm biomethanation, which is a rather interesting alternative for producing energy. This alternative has the twofold advantage of reducing animal droppings and having an excellent track record in terms of greenhouse gas emissions.

Forestry producers can obviously provide a very attractive forest biomass, which is available in almost all the regions in Quebec. This type of biomass has a number of advantages. The price of forest biomass has been historically more stable than other sources of energy. Forest biomass enables landowners to diversify their productions and revenues. It also makes it possible to increase investments on degraded land, and it can especially stimulate the economic development of rural areas, all while helping to reduce greenhouse gas emissions. According to Quebec's ministry of natural resources and wildlife, the volume of forest biomass from Quebec's private forests is around 6 million cubic metres.

In terms of issues, social acceptability is a significant issue for developing energy infrastructures in agriculture and forestry. It is important to keep and strengthen the ties between energy promoters and the people who have to live with the disadvantages.

The framework agreement model that we use at UPA should be the preferred model. We could also develop Canada-wide framework agreements that would provide guidelines for developing energy infrastructures to ensure fair treatment from one jurisdiction to another. Our cooperation with the National Energy Board allowed us to work on marking agricultural activities that can take place above the existing pipelines. In Quebec, we definitely have to keep the requirement to go through the Commission de protection du territoire agricole, to ensure the highest degree of conservation of agricultural and forestry land. We believe that this way of doing things should also be implemented in the other provinces.

We have to encourage energy production on farms and in private forests. Investments need to be made in research to support the development initiatives of new varieties of energy-generating plants. Financial incentives might also be necessary to support projects where energy production costs are not competitive, but where environmental and social benefits are significant.

A regulatory framework could also help to produce some forms of energy, if minimum standards were established. We could use the example of the minimum standard for mixing ethanol with gas, which came into force a few years ago.

In short, green energy markets will develop if sellers and buyers come out ahead, but that is not exactly the case right now. We have to invest money in energy efficiency initiatives to reduce agricultural production's use of and dependence on fossil fuels.

And finally, farmers' access to various forms of energy is not the same across the regions. In Quebec, we know that some producers are at a competitive disadvantage because they do not have access to the natural gas network.

To sum up quickly, agricultural and forestry producers may be asked to play a role as producers of energy in order to reduce our reliance on some types of fossil fuels, all while making a positive contribution to our environmental record and promoting job creation and increased economic activity in rural areas.

Producers as energy consumers have an interest in being energy efficient when they are working, and they are becoming increasingly aware of that. Governments should invest more in research and provide incentives to encourage the development of alternative energy sources such as cellulosic ethanol and on-farm biomethanation.

And to increase the social acceptability of energy projects in agriculture and forestry, some aspects must be considered in order to, as I mentioned earlier, minimize the impact of projects on arable land in Canada, by implementing the appropriate regulations. We could use as an example Quebec's Commission de la protection du territoire agricole.

It is also important to ensure the safety of energy facilities for farm workers, through proper regulations and inspection, and to ensure that the agricultural producers who are willing to use these types of energy infrastructures on their properties are in no way responsible for any damage, including damage to the environment that could potentially be caused by those infrastructures.

In conclusion, greater cooperation across Canada can be beneficial for improving the social acceptability of energy infrastructure projects in agriculture, while ensuring fairness in the promoters' approach. We feel that the National Energy Board could be involved in bringing people together, by setting up liaison committees with landowners and energy proponents as members.

This way of doing things would encourage greater cooperation across Canada and could be beneficial for improving the social acceptability of energy infrastructure projects in agriculture, while ensuring fairness in the promoters' approach, everywhere in Canada.

This is the end of my presentation.

The Chair: Mr. Tougas, I congratulate you on going through your brief so quickly. Your colleague would have been proud of you. Please accept our compliments for this.

First, Senator Mitchell will ask you some questions.

Senator Mitchell: Thank you, Mr. Tougas. I thoroughly enjoyed your presentation, especially the part about benefits for rural development through alternative sources of energy. I think there is great potential to help the more disadvantaged rural areas in Canada and Quebec, by establishing balanced and sensible policies. But I wonder if you are aware of farmers' efforts in Alberta; these farmers produce carbon credits for the carbon exchange. In Alberta, small businesses and farmers are making a lot of investments to produce carbon credits for the carbon exchange. This is not huge in Alberta, but there is a lot of potential for it around the world.

Mr. Tougas: Yes, the carbon market is actually not very developed in Quebec yet. But producing more of this type of biomass to get credits like that could really be a very attractive incentive for agricultural and forestry producers. We strongly support the development of these markets, but, unfortunately, Quebec producers do not have this option yet, but we look forward to seeing this market develop in the province.

Senator Mitchell: We would obviously need a cap-and-trade system to create an exchange for farmers and others.

Mr. Tougas: Yes.

Senator Massicotte: Mr. Tougas, thank you for being here with us. You are a very interesting speaker, and I have noticed that you are very present in your industry, even in the Richelieu valley where there is a lot of talk about shale gas. After all, it is a rural area. We talk about high density, but it is still a rural area.

Mr. Tougas: Yes.

Senator Massicotte: And when I look at your industry, you play a significant role in the economy: you are a major employer, you are a significant rural structure for those sectors; it is a question of maintaining Quebec's population.

But that comes with a price; you are still a major polluter as a result of using manure. I look at the Richelieu river and it is heavily polluted, in part because of farmers, but that is the balance of an economy.

My question is more related to your being aware of the consequences. Are you aware of the benefits of the agricultural industry?

Mr. Tougas: Yes.

Senator Massicotte: As a premier, managing a province is about striking a balance for all those things. But from this experience, what advice do you have and what is your position on shale gas? It is sort of the same thing; there are economic benefits and there are consequences. With your experience, what would UPA's advice be and what is its position on this potential development?

Mr. Tougas: Yes, in terms of shale gas, like my colleague, we also submitted a brief to BAPE, the Bureau d'audiences publiques. Generally, UPA does not actually take a position for or against energy projects. As I mentioned earlier, our goal is to protect the legal rights and economic interests of agricultural producers.

We are very aware that we are energy consumers. You have mentioned manure; the price of manure is closely linked to energy prices, especially in terms of nitrogen. So, we are tied to these energy sources.

In fact, UPA's stand on shale gas is that we are not against developing it. All we want is for development to be smooth throughout the area, with the least amount of impact on arable land.

The sector is now going through an exploratory phase in Quebec. We have about 30 wells that are actually in agricultural areas, but also on public land. At the moment, there is very little impact on agricultural land.

However, we also have to look at the longer term; there are wells, extraction and exploration sites, but, if the resource comes through, we must also think about the connection network that will be needed, meaning gas pipelines. This will also lead to constraints on agricultural areas. We have suggested all these things to BAPE, precisely to minimize the impacts on the agricultural sector.

So I would say that UPA's position is for us to get things right. We were also wondering about the short-term economic viability of developing shale gas, since we know that the price of gas has dropped quite significantly over the past few years. So is this the right time?

We were also wondering whether the potential economic benefits of the development would be sufficient to basically outweigh the disadvantages and impacts on the environment and on farmland.

We have shared these issues with BAPE. As I was telling you, we are not against or for development. We are tied to energy sources; we need energy for agricultural production, but we just have to make sure that we go by the book and minimize the impacts on agricultural land.

Senator Massicotte: In the east, if I understand correctly, the development period requires a larger area of land for drilling in the short term?

Mr. Tougas: Yes.

Senator Massicotte: But after the well is developed, a relatively small area is then needed?

Mr. Tougas: Yes.

Senator Massicotte: I understand that in Western Canada, in British Columbia, the area is exceptionally small and, as a result, farmers can really enjoy the benefits. If we do a bit of planning, using the right approach, as you say, and best practices, would that make a difference for your industry? Would it make a difference for local farmers? Is this something that would help them in a significant way, or is it something that is of little interest?

Mr. Tougas: Obviously, if we are talking about 30 wells or so right now, it is hard to imagine what the number of wells will be in 20 years. Several figures have been thrown out there. But the fact remains that there is still a lot of agricultural production in the area in question. Clearly, individual producers who get wells might be at a financial advantage, since this is likely to bring their revenues up. We can make that assumption. But will the wealth be distributed fairly across the region being developed? These are the types of questions that come up. Then also, as I mentioned, what we are seeing and are afraid of is a potential cohabitation problem among agricultural producers when the time comes to install pipelines to connect the wells. Though the money will mainly go to the producers who get a well or wells, other producers will have to live with the constraints imposed by the pipeline network, without necessarily reaping the benefits or as many benefits as the producers who get a well.

So that is what we are dealing with at the moment. We have a pipeline planned for Quebec and we have been involved in that. But if the project expands, we are afraid there might be some friction within the agricultural community because of the way the pipelines have to be built.

So these are just speculations, but we have to think long term, ask ourselves questions and try to prevent any friction.

Senator Massicotte: But what if all farmers are paid? The ones with the wells are, and I understand that there is also compensation when the pipeline is installed. I get the impression that farmers are arguing over who will benefit the most. But if there is no impact on their properties, why would they be jealous of the ones who get paid?

Mr. Tougas: Well, in all honesty, you would have to ask them that question, but we have already been experiencing this with wind farms. I will draw the parallel right away, because it is exactly the same concept. You have producers who have reached an agreement by mutual consent with an energy developer. Then, Hydro-Québec comes in to link the farm to their transmission network; there is no mutual consent there, but they have to install the line.

And we can see that the same thing is going to happen with Gaz Métropolitain; replace the wind farm with a well, the transmission line with a pipeline, and you get the same type of friction.

That is how it is with wind energy transmission lines. We are currently seeing the friction there. Although there is a framework agreement with Hydro-Québec, which I think is a good agreement, it is being revised. It is clearly defined, and there is compensation, as you mentioned. But there is always a bit more money involved in extracting natural resources than in transmission, and that is what is creating problems.

Senator Massicotte: I guess that is human nature.

[English]

Senator Banks: Following along that same line of questioning, those frictions have existed for a long time in Saskatchewan and Alberta, for example, where the ownership of the mineral rights in the land were taken by the Crown in the 1930s. In Quebec that did not happen until the 1970s, which for some of us with this coloured hair is very recent history.

Do your members, because they are now going to begin dealing with this, perhaps for the first time —

Mr. Tougas: For the shale gas, you mean?

Senator Banks: Yes, or for anything else. Do your members understand that they do not own whatever resources might be under the surface of the land?

Mr. Tougas: Yes.

Senator Banks: What did you mean when you said you thought that the compensation they would get should be distributed fairly throughout the entire land mass? I do not quite understand that. Extending what Senator Massicotte was asking you, do they understand that there is a sort of eminent domain concept that says that since that resource belongs to the Crown, to the people of Quebec, access to it and the means of extracting it and the means of moving it from one place to another, for whatever reason, will be mandated by the Government of Quebec? If that is clearly understood, what did you mean by distributing it fairly throughout the land mass?

[Translation]

Mr. Tougas: When I was talking about distribution, I was trying to answer Senator Massicotte's question, since I was asked whether the reason for this was to generate additional income for agricultural producers in the area affected by shale gas development.

The answer is obviously affirmative, but, as expected, the increase in wealth is not divided fairly among all producers, since not all producers will have a well on their properties. In terms of the resource belonging to the Crown, you are absolutely right, the producers are aware that the subsurface is not theirs, unlike the United States, for example.

When we compare ourselves to Pennsylvania, we see that American producers who receive wells get much higher compensation than what is offered in the province, which is normal, since they get royalties.

This is what happens with shale gas, but unlike shale gas, which belongs to the government, with wind turbines, the resource is considered to belong to landowners, and they earn royalties for that. There really is some extra money for those who get wind turbines, unlike shale gas.

Basically, what creates friction is money, but also the principle that, generally, when shale gas promoters approach farmers, they are able to come to a mutual agreement with the person. A producer who does not want an exploration rig for shale gas has the option to refuse. What we usually see in Quebec is that the promoter will then go to a neighbour and do the rounds until there is a mutual agreement with the producers.

As I mentioned earlier, the second step is the transmission lines and gas pipelines where mutual agreements are more problematic, since these types of networks are built in a straight line; a number of producers are affected, and clearly not all producers want to have infrastructure like that on their properties.

So yes, there is a question of money, perhaps less so with shale gas, and more so with wind turbines, but there is also a question of principle, since some producers are able to work out mutual agreements. But these agreements cause problems for other producers who have not been able to come to an agreement or take part in the decision to set up an energy facility on their land.

[English]

Senator Banks: I guess I do not quite get it. Am I correct in understanding that you are saying that a farmer can refuse to allow an exploration well to be drilled on his or her property?

[Translation]

Mr. Tougas: What I am saying is that, legally, there is always a possibility of expropriation, but so far, in the case of shale gas, our understanding is that they have reached a mutual agreement. So there was no expropriation, even though it is legally acceptable.

I will give you that; expropriation really is a possibility. But at the moment, since they have the opportunity to use horizontal drilling technology, they can move, so they can use the technology to keep moving, until they get an agreement.

[English]

Senator Banks: Is there nothing short of expropriation? In Alberta and Saskatchewan it is access, but no expropriation takes place.

Mr. Tougas: Yes, you are right.

Senator Banks: It would be access, not expropriation?

[Translation]

Mr. Tougas: Yes, they would basically make them sign an easement. They will not take over the land, but they will have a right of access. It really is an easement.

[English]

Senator Banks: Thank you.

The Chair: I have another questioner, Senator Peterson.

Senator Peterson: My question has been addressed.

The Chair: Are there any other questions for this witness?

[Translation]

Mr. Tougas, I would like to thank you again for being here and for your contribution.

Mr. Tougas: Thank you. Have a good day.

The Chair: That was very enlightening and interesting for the senators.

Our next witness is representing the Helios Centre. But first, is it Mr. Philip Raphals? Is that right, sir?

Philip Raphals, Director General, Helios Centre: Yes.

The Chair: Thank you for joining us and for your effort to be here with us this afternoon. It has been a long day. We have heard from a lot of witnesses since 8 a.m. this morning, and all day and evening yesterday.

We have learned some really interesting things. And just to set the stage, I am Senator David Angus. I am the chair of the Standing Senate Committee on Energy, the Environment and Natural Resources. To my right, we have the deputy chair of the committee, Senator Grant Mitchell from Edmonton, Alberta; our two Library of Parliament representatives who are our researchers and advisors on a wide range of topics; Senator Paul Massicotte from Quebec; the empty chair is that of Senator Richard Neufeld from British Columbia, their former minister of natural resources; Senator Robert Peterson from Saskatchewan and Senator Burt Brown from Alberta. To my left, we have our clerk, very skilled and efficient, Ms. Lynn Gordon; the honourable senator from Yukon; Senator Daniel Lang and Senator Tommy Banks from Alberta, my predecessor as chair of the committee.

Mr. Raphals: Mr. Chair, thank you for inviting me. I have to say right from the start that your clerk really is very efficient because she was able to convince me to come here in the first place. I am involved in a hearing at the Régie de l'énergie. I had refused, but I accepted as she kept insisting, which is an honour and I am very happy to be here.

[English]

I will continue in English; I think it is probably easier for most of you. I will tell you a little bit about the Helios Centre and about other projects I am involved in. Perhaps differently from any of the other witnesses here today, I do not have a prepared document. I do not have a brief for you. I looked at your mandate and your report, Attention Canada! Preparing for our Energy Future, and it seems to me you have bitten off something incredibly large and complicated.

The Chair: Everybody is starting to tell us that, and we are starting to realize it, too.

Mr. Raphals: Frankly, the questions that are raised are so broad that I do not really know where to start. I will share with you some reflections about energy policy in Canada after the 15 or 20 years that I have been involved in this field, and you can do with it as you wish.

The Chair: That is super, but first tell us about yourself, sir, too, and the Helios Centre, and then your observations.

Mr. Raphals: I should say I am an immigrant to this fair country. I was born in the United States. I studied at Yale University and Boston University and came here in my thirties. However, I am now a very proud and happy Canadian citizen, very glad to be here and be part of this great country and this great province.

The Helios Centre is a non-profit organization that we founded in 1996 with a goal, a purpose of doing research, publications and public education with respect to energy, the environment and in particular the interactions between those two questions. Our work has varied over quite a broad number of areas over the years. I will mention a few that have been the focal areas: renewables, policy, energy efficiency, various aspects of energy policy and regulatory policy that affect renewables and efficiency. Market structures, competition and transmission policy are another little family of issues that go together. We have worked a lot on questions around hydro power, environmental issues related to hydro power, social and Aboriginal issues, as well as their role in energy markets and the relationship between the green power markets and the concept of green power and hydro power and how those things fit together.

Also, we actually created the Helios Centre right at the time when the Régie de l'énergie, the Quebec energy board, was being set up. One of our real purposes was to provide an avenue for civil society in Quebec, of different sorts, to participate more fully in the more technical kinds of debates that would go on at the energy board, compared to the period before. Ever since our creation we have been involved at the Régie de l'énergie, and I have testified probably in 15 or 20 hearings, usually as an expert witness, on these various topics as they have come up over the years.

The Chair: When you say "we" set up the Helios Centre and "we" do this and that, do you mean Philip Raphals, or do you mean a group of people? Also, what is your personal formation? Are you an engineer, an architect, an economist?

Mr. Raphals: I have a bachelor's degree in philosophy and a master's degree in music, and the rest I had to learn all by myself.

Senator Lang: That makes you an authority in energy.

Mr. Raphals: Yes, of course.

The Chair: We have philosophical musicians around this table, as well.

Mr. Raphals: The Helios Centre was founded by myself, together with Philippe Dunsky, who left in 2004 to form his own consulting company.

We have a board of directors and a staff that has grown and shrunk over the years. I was going to tell you later, but I will tell you now, that a key factor in our shrinkage was the abrupt interruption of the product process towards a Canadian carbon market.

In the early 2000s we had decided to focus a lot of our energy on helping Canadian institutions and companies find ways to reduce their carbon emissions and to sell those credits into the soon-to-be-born carbon market. With the change of government in December 2006 and the events since then, which you all know, there is still no carbon market. All these events together have not made things very easy for our centre.

I think at our largest we were seven employees. Now we are actually without employees, and all the work we do is on a contract basis, putting together teams of individuals. You will see on our website that we have a network of collaborators, but it is really sort of ad hoc, project by project, to find the right group of people to execute them.

One of our first mandates was working for a committee like yours, a provincial standing committee on the economy.

The Chair: Is it a committee or a house committee?

Mr. Raphals: It is the National Assembly Committee on Labour and the Economy, which is the committee responsible for Hydro-Québec. They had set up oversight hearings over Hydro-Québec, and they engaged us essentially as their staff. We worked with the committee before, during and after the hearings in this in-depth examination of Hydro-Québec in its current and future role at the time. It was a fascinating experience to see what it is like from the other side of the table.

As I mentioned before, another theme that has been present since the early days is hydro power and green power markets. I have been personally involved in two processes, one in Canada and one in the U.S., that address this question.

In Canada it is EcoLogo, which you are probably familiar with. It is a trademark owned still by Environment Canada, I think, and managed by a company called TerraChoice, which issues EcoLogos for environmentally preferable products of all sorts, including renewable electricity. I was on the expert committee that crafted the first criteria for what constitutes environmentally preferable renewable electricity for EcoLogo, and I was also on the recent committee that reviewed those criteria.

Hydro power is a very knotty project for green power. I do not know to what extent you have been involved with hydro power questions, but whereas most types of resources can be thought of fairly generically — a coal plant is a coal plant, and a combined-cycle plant is a combined-cycle plant; we all know what they are, and we know their characteristics, and the same is mostly true for wind farms — hydro projects vary radically and dramatically, not just in their size but also in the nature of the project, where it is and how it is managed. All these regimes have to figure out when and in what circumstances hydro power should be thought of as green power; they have to deal with these very detailed and knotty questions. I have been working on this theme on and off for the last 15 years.

For a number of years, from 2000 to 2005, I think, we published a newsletter called Enjeux-ÉNERGIE. It was published in French only. Usually it came out every three weeks, about six or eight pages long. It was essentially a review of good news from around the world in renewables and energy efficiency. It was really for the Quebec public, although, actually we had a quite a number of readers in France and in the Francophonie, as well. As the Internet expanded and information became more accessible, the need for it became less and the funding became more difficult, and eventually we gave up publication in 2006. There is a huge amount of information out there, but reliable sources of digests of what is good and what is useful and how to understand it are still valuable.

Currently, as I think I mentioned, a very long hearing has been going on at the Régie de l'énergie concerning the conformity of Hydro-Québec's transmission tariff with the tariff from the FERC, the Federal Energy Regulatory Commission. Again, that is a question I have been involved with since the first hearings in 2000.

It is a question that might interest you from a Canadian perspective, because one of the strange things when you get into this territory is that whereas in the United States every state has a regulator, and for everything that is interstate, the FERC is the regulator, every province in Canada has a regulator, has its own energy system, but there is a vacuum in the centre. There really is no Canadian federal regulator in the same sense. There is the National Energy Board, which for certain issues is obviously the regulator, but with respect to electricity policy, the FERC is really the de facto Canadian second-level regulator. It is true in B.C., in Quebec and in New Brunswick, and I think it is pretty much true across Canada that the FERC is the primary reference, which, when you first look at it, is a very strange situation. There are reasons for it, which we could go into.

That brings us to the fundamental issue of Canadian energy policy. I was not here the last time we had an energy policy, but I heard that it did not go very well and that many people are still angry about it.

The Chair: It was not a policy; it was a program.

Mr. Raphals: A program. Well, as I said, I take no responsibility; I was not here.

As you are well aware, the regional differences are phenomenal. As I understand it, your mandate is to try to find a way for the Canadian federal government to be more involved in creating a national energy strategy or policy. I wish you luck, because it is really not obvious where to go, given the enormous diversities and the fact that each province really is master of its house and sees things its own way.

Just to tell you a little bit more about myself and where I am coming from, I am also president of a small company called NovoPower Ltd., which for two years has been working on a new innovative approach to producing electricity from low-grade steam with applications in industrial efficiency, applications in recovery waste heat, biomass, agricultural and also geothermal generation.

With a completely different hat, I have also been somewhat involved in the questions of innovation and start-ups and ways to move forward, because there is a huge innovation boat, and Canada is not really at the front of it. The federal government is involved and has some very powerful tools, but I imagine that is part of your reflections, as well.

The Chair: We figured you probably had a day job, sir. What about this Sustainable Development Technology Canada as a federal government instrument? What do you think of that?

Mr. Raphals: I think it is a great thing. I may be out of date here, but my understanding is that they were allocated a pot of money at the beginning, which is gradually shrinking away. I do not follow these things that closely, but there is a question pending of whether there will be another allocation that will allow them to go forward. I think they have started some great companies.

The Chair: They have, and they have applied for a recapitalization in the budget that will come down soon. I believe their representations have been well received. So let us stay tuned on that one.

Mr. Raphals: I have my fingers crossed.

I wanted to share with you some thoughts about what a sustainable energy policy would look like. It is not quite off the top of my head but really sort of standing back and trying to look at the big picture. I hope that it will be of use to you.

I should mention that in the early 1990s I was the deputy scientific director of the environmental assessment for the Great Whale project, a large hydro project, a very complicated administrative structure with federal, provincial and Aboriginal involvement.

At the time everyone was talking about integrated resource policy, integrated resource planning. One of the key drivers, why we needed integrated resource planning, was the phenomenon described by a Vermont regulator as ostrich economics. The term has been used now in many other ways, but he defined ostrich economics as being about how we deal with externalities — externalities being the environmental and social costs that our projects impose on third parties that we do not pay for.

We all know that the externalities are greater than zero. We all know that the externalities are hard to quantify and to monetize; therefore we will treat externalities as being equal to zero. We all know it is wrong, but we do not have a good methodology to do anything else, so at the end of the day we end up treating it as zero.

That was true in the 1990s, and in my view it is still true today. We are still living in a world of ostrich economics where the key decisions about energy projects are made with environmental and social externalities talked about but then put aside when it comes down to decision making.

The Chair: So, the ostrich quality or aspect has to do with the zero?

Mr. Raphals: Exactly.

The Chair: Got it.

Mr. Raphals: We hear a lot about opponents to projects, and usually we hear them dismissed as NIMBYs — not in my backyard — which is a very deprecatory way to refer to decent Canadians that like something about where they live and would like it to stay that way. I think, generally, we need to pay a little more respect to those people and to the impositions that large energy projects create on the human and the natural environments.

Obviously, all large projects and even most small projects do have impacts; they have environmental impacts, and they have human impacts. Those impacts vary greatly depending on the kind of project. If it is a fossil fuel project, those impacts are greenhouse gases and air pollution, primarily. If it is a nuclear project, there is nuclear waste, and there is getting fuel; there is a whole fuel cycle. We know those issues pretty well, even though we do not really know what to do about them. I was also on an expert committee of the Nuclear Waste Management Organization trying to think about this a number of years ago.

For renewables projects, it is a lot different. First of all, usually they are in rural areas, and when they are large projects, they are projects in rural areas whose ultimate purpose is to provide energy to urban areas. Right away an equity issue is raised. Regardless of whether people living in rural areas come from there or moved there because they like it, there are a lot of tough things about living in rural areas, and there are a lot of wonderful things.

For some people, energy projects take away some of the tough things because suddenly there are many people and you can sell a lot of whatever you sell, but energy projects also tend to take away many of the wonderful things. I really think that in our general approach to looking at large projects, we dismiss that much too easily. It is a serious issue that those qualities are being taken away from people who really have no responsibility for the need that the project is filling.

Back in the 1990s, all kinds of complicated methodologies were developed to integrate these questions into energy planning. They pretty much all got thrown away and torn up with the move to turn everything to markets. You are familiar with the restructuring movement of the United States and Alberta, which has many virtues and in some ways has worked well, although it has not worked quite as well as the people who planned it thought it would work. However, it is there, and that is the way things work now in many ways, and we have to live with that. However, at the same time, in that new world as well, we have to find a way to properly integrate environmental and social externalities.

That is true for the fossil and nuclear projects, and it is true for wind projects, and it is true for hydro projects. I am a big proponent of wind power. I think wind power is terrific, but big wind machines do make noise. If there happens to be one too close to your bedroom, you will not sleep very well. The obvious solution is siting, and in particular involving people in choices about siting, but it is easier, and in the end, some of our commercial arrangements do not really favour that.

For instance, in Quebec, we have now several thousand megawatts of wind power under development and with a tender program that is in many ways extremely well designed. It is well designed primarily in terms of value, customer value and utility value, to make sure that we pay as little as possible for those kilowatt hours. However, at the same time, the process was not at all designed to help to allow communities to get involved in deciding whether or not they want to have wind projects in the community, and if so where, and if so how, and if so what. It is not like that at all because it is a tender for individual proponents who have to make deals with individual landowners.

This problem is found around the wind industry, and there are good solutions. However, they are solutions that pass through more complicated community processes.

The Chair: We have not resolved this yet on the committee, but you may be interested to know that we had a gentleman come one evening and he gave us a glowing account. He was from CanWEA, the Canadian Wind Energy Association. He was an articulate young man and a passionate believer in this alternative source of energy, and everything seemed wow, what a great resource. Then we had an inundation of maybe 400 or 500 emails from the anti- wind people giving a plethora of reasons why this gentleman was allegedly dreaming in colour.

I think that is what you are saying, that you have to go beyond zero.

Mr. Raphals: Yes. I rented a cottage on Wolfe Island outside Kingston in Ontario the summer before last where they were just in the process of finishing the installation of I think 80 large machines. I asked people what they thought about this, and my impression was that it was an extremely complicated event with respect to the society of the island and the relations between people. Some people were really for it and others perhaps not. There are differences between individual interests because the landowners receive payments that their neighbours do not. However, there are payments to the municipality that end up helping everybody. I did not follow the way that that small community dealt with this issue, but the people seemed to have made their peace with it, more or less.

Again, I am not trying to get involved in any particular issues, particular cases, but I want to underline the importance of the democratic process, the democratic aspect of decision making in energy. What we have been watching on television in the last few weeks is not just for Egyptians; it is for us too. The involvement of individuals in communities and in the decisions that affect them very often gets tossed out the window when large energy projects come to town.

We have environmental hearings where you can stand up and say whatever you want, but it pretty much does not make any difference, because if you are lucky, you might get a clause that limits something, but the number of times that a project has actually been turned down because of a report from an environmental assessment panel you can count it on the fingers of less than one hand, I believe.

The Chair: They do get delayed substantially.

Mr. Raphals: Yes, they do.

Senator Banks: Are those panels usually right?

Mr. Raphals: Are they usually right?

Senator Banks: Right. Are they usually right?

The Chair: Not as opposed to left.

Senator Banks: No, no, correct. Are they usually correct, in your view?

Mr. Raphals: Regarding the ones that I have been involved in, I would have to say not usually.

Senator Banks: Not usually?

Mr. Raphals: Not usually. In general, I have been dissatisfied with most of the reports I have read. One of the fundamental reasons is that there is a huge problem about who addresses the question of whether we need the thing in the first place, or how badly we need it, or how much value will actually accrue from it.

I do not know whether it still works this way, but I did a report on B.C. regulation for the Quebec resource ministry in 1995, I think. I spent a couple of weeks in B.C. studying how their system works. I was very impressed with their system because of the way it interacts between the energy regulator and the environmental regulator.

The first step in their approach is an integrated resource planning process where the big question is what energy resources do we need: What energy services do we need? What is the best way? What are all the different ways we can meet that, and what are their costs and their impacts? They try to find the best solution that would make sense and would optimize things for everybody.

Once that has been done and that plan includes Project X, then you go and have an environmental assessment on Project X where you study it in detail and learn what it is really about and not just what it looked like in a three page summary in a planning process. Once that has happened, then it goes back to the energy regulator, who says, "Given what we now know about it, is this still the best choice?"

It seems to me that with that kind of sophisticated process, at the end of the day, even if you did not want the project and you are sorry it is going forward, you have been heard, and the choices have been carefully evaluated.

I would like to compare that with our current process in Quebec. To do this I will give you a little background on how this has evolved in Quebec. Back in the early 1990s, you are probably aware there was the Great Whale project, which was eventually withdrawn. I was on the staff of the committees. In the wake of that project came a process called the Public Debate on Energy. It was in some ways like what you are doing. It was not elected officials but a panel named by the government, and it included people from a wide variety of interests — energy companies, environmentalists, and Aboriginal people. Industry was somehow missing; I do not know why they forgot industry, but I thought that was very strange.

They toured the province and they heard memoirs. It was a very long and serious process.

The Chair: In what province was this?

Mr. Raphals: In Quebec, in 1995, I believe.

The Chair: Was this constituted by the private sector?

Mr. Raphals: No, it was constituted by government. It was called the Public Debate on Energy.

At the end of the day, the panel issued a unanimous report that called for, first of all, facing energy efficiency as the first priority for Quebec's energy policy. Second, it called for creating a regulator, which is now the Régie de l'énergie, which would have decision-making power over essentially everything with respect to Hydro-Québec and the gas distributors, with the explicit purpose of taking decision making away from the politicians and making it not a political question but a delegated question, so that after careful examination of all the issues, wise decisions would be made.

A bill was passed in 1996 that created a regulator with a law that did exactly that, and everybody was happy; this was a great consensus. Then suddenly Hydro-Québec was not happy. Hydro-Québec had a new CEO, André Caillé, who strongly believed that generation cannot and should not be regulated, and there were many years of pulling and tugging. Four years later, in 2000, the law was modified to deregulate generation and change the structure in many ways. Now the Régie de l'énergie still exists, but it regulates only distribution and transmission and has not a word to say about generation in Quebec.

A few years later, Hydro-Québec proposed a gas plant called the Suroît, a combined-cycle plant, significantly for export and also for Quebec needs. It was the first generation project under this new system where there was no regulator. To everyone's surprise, there were big demonstrations, and even in the middle of the winter on a really cold day there were hundreds of people in the streets. The government got scared and said, "We have to do something about this." So, what did they do? They asked the Régie de l'énergie to advise them. The Régie de l'énergie ended up holding hearings on a generation project, just after it had had its mandate stopped.

The Chair: Its teeth taken out.

Mr. Raphals: Yes, its teeth taken out, but the government said, "We would like you to advise us this one time."

The Chair: Notwithstanding the applicable amended law?

Mr. Raphals: The law gives the minister the power to ask the Régie de l'énergie for advice. It was in that context.

The Chair: Discretionary.

Mr. Raphals: No, it was perfectly legal. It was a little ironic, but perfectly legal.

The Régie de l'énergie had a very interesting process, and again I was an expert witness in it. Actually, the Helios Centre was an intervenor; that is the one and only time the Helios Centre has been an intervenor in one of these processes.

Many possibilities were examined. At the end of the day, the Régie de l'énergie said, "We do not think this project is necessary, but we do not think it is a bad idea." I did not entirely agree with their point of view, but it was fairly done; it was a serious opinion.

The Chair: Were you intervening to oppose?

Mr. Raphals: I did not take a position either for or against the project, but I did have a lot to say about the analysis that was being used to support it. I thought many false arguments had been invoked in support of it, which I thought needed to be rectified.

The Chair: In a philosophical and musical way, I am sure.

Mr. Raphals: Of course. The interesting thing is that in the last few pages of its opinion, the Régie de l'énergie addressed the fact that in Quebec today there is no forum for a structured public debate on generation projects. They said, "From the response that we have had and from what we have heard, we feel this is an important need."

It is a real problem with the institutional structure we have today that there is no forum, other than on the street or in the op-ed columns, where people can say what they have to say and what they think and can debate seriously the complicated issues that are behind going forward or not with a particular energy project.

Unfortunately, but not unsurprisingly, nothing has changed. It is still the case. There is still no forum in Quebec for a serious public discussion about an energy project, whether it is Hydro-Québec's or anyone else's, except for environmental assessment.

The Chair: Yes, I was just going to say.

Mr. Raphals: Exactly. With environmental assessment, first of all, you do not have the expertise or really the mandate to ask yourself about energy policy. Because everything is interrelated, if we have this, we do not need that. If we had that, we would not need this. It is really a lot to ask of an environmental assessment panel.

The Chair: The more recent one is La Romaine project.

Mr. Raphals: That is right.

The Chair: Just before that we had Eastmain, and Eastmain had a lot of trouble with environmental assessment. Was there a proper debate, because that is new power generation, is it not, in a post-Caillé era?

Mr. Raphals: Yes. First of all, there are two projects. There is the Eastmain 1 project, which was actually approved under the James Bay and Northern Quebec Agreement with no environmental assessment, but legal decisions concluded that none was required. Then there was the Eastmain 1-A and Rupert project, which diverted the Rupert River into the at-that-point unbuilt Eastmain 1 reservoir and built a new powerhouse.

There was a lot of objection to it. However, the objection was from the Cree — not from the Grand Council of the Crees but from the Cree communities located along the Rupert River. Actually, I was engaged by the chiefs of those three communities and wrote a brief for them on an analysis of the justification that was presented for this project.

It was a very odd situation. I should not go too deeply into Cree politics here, but back in the Great Whale project — and Great Whale is the smallest and most remote Cree community — the Grand Council's position at the time was, "You guys decide whether you want this or not, and whatever you decide, we are with you." In this case, the three most affected communities were all opposed to it, but the Grand Council — it was complicated, but a very different situation.

La Romaine, for instance, has been proposed by Hydro-Québec and by the government. There has never been a public debate anywhere in Quebec. I have never been asked my opinion as to whether this is a good thing or a bad thing, what the risks are, what the financial risks are, what the environmental costs are. All these things are simply not there anymore.

At the time of the Public Debate on Energy, at the time of the report, the whole idea, which is black and white in the report, the whole point of setting up the Régie de l'énergie was so that these decisions would not be made between the Premier of Quebec and the President of Hydro-Québec; and we are really back to that situation. Anyway, this is Quebec politics, which I know it is not really your mandate.

The Chair: No, but it is important because it is on a large scale. La Romaine had a full environmental assessment.

Mr. Raphals: It did, yes.

The Chair: As I understand it, your point in terms of a macro discussion on what is the right way forward in energy is that we have these massive projects, environmentally approved, conditionally, and subject to new deals that had been worked out with Aboriginal groups, for a consideration, I am sure, getting onto the books without a discussion on the whys and wherefores from the energy point of view. Is that your point?

Mr. Raphals: That is right.

There is another important detail. Quebec has been developing large hydro projects for many years. Until recently, the underlying justification was always that these are projects we need to serve our needs in the future. This was Premier Bourassa's justification in the late 1980s. We will build them early. We will build them before we need them and export up until we need them, and with the money we make from the export, they will be cheap for us by the time we need them. That was really the way that le grand project was justified.

What we have seen since the year 2000 — well, with Eastmain Rupert it was a little slippery. They still tried to say it was for Quebec needs, but also for export. However, the problem is that with the restructuring that took place in Bill 116, you really cannot build for Quebec needs unless you have won a tender with Hydro-Québec distribution. Anyway, this is what I had to say on the Régie de l'énergie at the time, but really to a very large extent these projects are now being built for export.

Building for export changes the dynamic very much, because when you are building for your own needs, the point is that you have to keep the lights on, so you ask what is the best way. Either you do this or you do that, because you have to keep the lights on. If you are building for export, it is really a capital project that you can either do or not do. If you do it, it is because the expected profit, taking into account the risks, exceeds the economic and other costs. If you are GM or anyone else, you are investing billions of dollars.

Senator Neufeld: Also there is the fact that you will probably need it in the future. I just want to break in a little bit. If you listen to everybody here today, at least what I hear all the time is the always underlying, "Well, we need — We will just build more electricity. We will use electric whatever." You have to build that stuff. That is what is always said. I say you cannot power everything with electricity, but you do need the electricity. I am not totally familiar with Quebec, but I am familiar with British Columbia, and we will need that electricity that we are building today, some 3,000 or 4,000 megawatts on the books going ahead today.

You will export it for a while, because you cannot use all that at one time. It worked well before, when we built the Columbia River system and the Peace River system.

Mr. Raphals: Yes.

Senator Neufeld: Actually, the cost of electricity went up, but today I had people sitting here telling us that British Columbians are subsidized because they are not paying enough for their electricity.

Mr. Raphals: I hear that often, too.

Senator Neufeld: "By golly! They should be paying more. They should be paying market rates, the same with Quebec."

The Chair: Yes.

Senator Neufeld: I do not always agree with all those ramblings, but at some point in time you are going to use it.

Mr. Raphals: The thing is, I do not know what the energy balance is — I have not followed it in B.C. — but we have a functional separation here. Hydro-Québec distribution, which is the division that is responsible for certain needs, has a 20-year surplus. A big problem is how to deal with this surplus; it has contracted for considerably more power than it needs for the next 20 years.

Senator Neufeld: Shut down Ontario's coal plants and get a deal with Ontario and give them some good electricity rates, and it is cleaner. Make a deal. Get into New Brunswick and make a deal. There are all kinds of things that you can do.

Mr. Raphals: Sure, but from Quebec's perspective, those are all export markets.

Senator Neufeld: Yes.

Mr. Raphals: That is very important.

Senator Neufeld: Exactly.

Mr. Raphals: Yes, and it is within those needs. I mean, it is not that somebody does not need the power. There are export needs.

Senator Neufeld: Yes.

Mr. Raphals: There are two other points I wanted to make to you. One is sort of a subset of this thing we have been talking about, externalities, but it is something I think really needs to be said, and it is about beauty. Beauty is something you do not hear about very much in the energy world. Yet Canada, as we know, has some of the most extraordinarily beautiful places in the world.

Somehow, when we come to one of these places to build an energy project, even if we are talking about the environment or even if we are talking about social impacts, we find ways — for instance, we can quantify how much people spend to come and visit a place. Economists do that, and there are numbers that go into the pot. However, at the end of the day, the actual non-renewable, non-replaceable, exquisite qualities of what is being sacrificed are rarely mentioned. I felt a need to mention that in this forum, because I think it is something we have to keep in mind.

Another closing point on this question of large projects is risk, which I mentioned before. From what I have seen of large projects by government and government utilities, it may be that the question of risk is dealt with very seriously behind closed doors, but in terms of documentation made available to the public, it is shocking how little risk analysis takes place.

For instance, La Romaine project is either a terrific idea or a phenomenal loss of money, depending on future electricity prices. That is a complicated question, but it is one that can be discussed, and yet it is never discussed in any serious way by the proponents of the projects. I think it is a very serious failing in the way that we present large projects. The future is unknown; there are enormous uncertainties, and there are important things to be done, taking into account those risks and uncertainties, and I think we need to be much more rigorous about that.

I will stop there and take your questions.

The Chair: That was quite different from most presentations we get at this committee. It was not whimsical, but it was sensitive, and it was very nice. Thank you for that.

Senator Mitchell: There are many things I would like to pursue. It has been very stimulating.

I would like to go back to your experience in the carbon markets. I am a proponent, but can you tell me, first, whether there is any hope that we will ever have one in Canada or North America? Second, could you address and alleviate potentially the concerns that people have with carbon markets, that they are not reliable and that carbon credits cannot be trusted? Third, could you comment, on the other hand, how they help us find the low-hanging fruit and, at least on a transitional basis, help us get to a different carbon emission regime?

Mr. Raphals: In answer to your first question, I do not know. I am less optimistic than I used to be. We went from rejecting solutions from elsewhere for a made-in-Canada solution, and now we have to wait until the U.S. does it. I am not very optimistic about the U.S. doing anything, so I do not know. The answer is I do not know whether it will happen or not.

Are carbon markets reliable? The devil is in the details, and the details are complicated. I am quite familiar with the Clean Development Mechanism, CDM, system at the UN, which is, I think, sort of the gold standard on which many of these things are based. The CDM has been criticized from both sides for producing credits that actually did not come from any reductions to being so careful to verify and to require what is known as "additionality" that nothing can ever get done.

Crafting the right regime is not easy, and there are many pitfalls, but at the end of the day, I think, yes, it is necessary for the simple reason that it creates an incentive for people and, more important, institutions of all sorts to pay attention to reducing the carbon emissions.

If it had happened in 2006, there are all kinds of places that people would be trying to think about in a structured way. For example, in municipal transportation systems, you see a lot of empty buses driving around, big buses with three people in them. Obviously it would be expensive to buy smaller buses and use them off peak, and there is no real benefit. What is the real benefit? You save a little bit of fuel. If you can make that more cost-effective by taking into account the reduced environmental harm that you would create, obviously you would help create incentives for the right answer.

Senator Mitchell: Get something back. If somebody could invest in that and get credit for it, yes.

The Chair: People could walk, and that would deal with obesity, but go ahead.

Senator Banks: I have asked this question before. We hear all the time from people about what we should do, almost aesthetically, almost as a duty, and we have to wrestle sometimes with what we can do and what can be done.

In that context, if you had a couple of magic words to say if you were envisioning not a national energy program or policy but a national energy vision, what would be the two or three most important tenets of it?

Mr. Raphals: You ask hard questions. I really do not know. I really do not know the answer to that question.

I think one element that might help guide it is the idea of best practices. Because of the Constitution and provincial responsibility, there are many things you cannot do. However, at the same time, look across the country and see what is being done here and there and point to something and say, "You know, there is a lot of merit to this," and invite the provinces to look at it. It seems to me that might be a way forwards. With respect to what I have been talking about, sort of large-project approval, I think that certainly is the case.

I was hoping to mention another issue and I ran out of time, but now that you opened the door, I will anyway: the small-scale, distributor generation, on-site generation, which many people, including me, think will be an increasingly important aspect of our energy picture. Either you save energy through efficiency or you produce it on-site and do not lean on the grid for it, and the technologies for doing that are improving dramatically. The company I am involved with is working on one of them, and there are many others, including solar cells.

The Chair: Nuclear?

Mr. Raphals: I am not sure that is one of them. However, there is a very uneven playing field across Canada in terms of being able to use these technologies, which has to do with the utilities' policies for interconnection and for net metering. I am sure you are aware that Ontario is one of the extremes where, through the green energy law, hooking up and actually selling your excess energy to the grid is a very straightforward process.

In Quebec, it is not straightforward at all. We have net metering, a provision that allows you to self-produce and to sort of use the gird as a buffer but never to produce more than you use.

For instance, I am working with a company that is developing an innovative small wind turbine, a 65-kilowatt wind turbine. It is really not obvious where you can do a pilot project, because you cannot win a tender. Hydro-Québec does not have a tender for those. As an individual user, you cannot produce the energy and sell it to anyone else. You have to use it yourself. You have to find someone that has a big enough load.

I think B.C. is also in the forefront on this, and it would be great.

Senator Neufeld: Actually, it is in place.

Mr. Raphals: Is it?

Senator Neufeld: Yes. For anything under 10 megawatts, BC Hydro will accept green energy after the last rate negotiated with the private sector for the generation.

Mr. Raphals: That is terrific.

The Chair: I hate to cut you off because this is such a fascinating discussion.

Thank you, Mr. Raphals. It was very interesting, and we appreciate your input. I think we may be calling on you again.

Mr. Raphals: Thank you very much.

The Chair: Colleagues, I want to thank all of you for being here. I would like to thank our researchers, our clerk and the interpreters and our stenographers. I think it has been a good exercise coming to la belle province, and bon voyage to those of you going back to the nation's capital.

(The committee adjourned.)