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

Issue 19 - Evidence - March 1, 2011


SAINT JOHN, Tuesday, March 1, 2011

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 12:58 p.m. to study the current state and future of Canada's energy sector (including alternative energy).

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

[English]

The Chair: Good afternoon, ladies and gentlemen. Welcome to our witnesses. This is a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. We are delighted to be in Saint John today. I think our guests are aware it has been a rather circuitous route for us. In any case, we are here and we are delighted to be here. Mr. Coon, we are delighted that, although we missed you this morning, you are able to be with us this afternoon.

We are on a tight schedule, so I would ask everybody to be crisp and tight with the questioning.

My name is Senator David Angus. I am a Quebec senator and I chair the committee. Senator Grant Mitchell, who will be joining us in a minute, is from Alberta, and is the vice chair. On my right are Marc LeBlanc and Sam Banks from the Library of Parliament, and they do a great job helping us understand the technical things you tell us. Nest to them are Senator Richard Neufeld from British Columbia, Senator Daniel Lang from the Yukon Territory and Senator Robert Peterson from Saskatchewan. To my left is our wonderful clerk, Lynn Gordon. I think you have all had the pleasure of dealing with her. To her left is Senator Bert Brown, the only elected senator, from Alberta. To his left is Senator Elaine McCoy, another senator from Alberta.

We are continuing our study on the energy sector, which is front and centre globally these days. It is of enormous importance to our future. We are always conscious of the fact that our Canadian federation assigns responsibility for different sectors to different jurisdictions, and that energy and the environment are more within the provincial sphere than the federal, although there is concurrent jurisdiction in this field. That makes it very interesting as we proceed with this study.

We are trying to identify a strategic way forward for a more efficient, more sustainable, cleaner energy future in a country that is blessed with great sources of traditional and alternate energy. In terms of generating electricity, we are well ahead of most nations at 75 per cent clean and green already. We are looking forward on this particular trip to Atlantic Canada to hear what you have to say and what you would like Canadians in the rest of the country to hear about what you are doing here in Atlantic Canada.

We were in Nova Scotia yesterday, and we heard about the new initiative to have some regional cooperation in the energy field. That is something that the great New Brunswick Premier, Richard Hatfield, tried to achieve more than thirty years ago. Now it seems to be back on the agenda. We think it makes a lot of sense. In any event, you will tell us about it from your perspective.

We also know that there have been some difficulties here over the refurbishment of the reactor at Point Lepreau. We know about the issues with New Brunswick Power and we hope to learn as much as we can in the short time we are here.

Without further ado, let us hear from our witnesses. Dr. Yves Gagnon holds the K.C. Irving Chair in Sustainable Development at the University of Moncton. With him is Dr. Liuchen Chang of the University of New Brunswick, who also works in the environment field.

First, we will hear from Mr. David Coon, who is the Executive Director of the Conservation Council of New Brunswick.

David Coon, Executive Director, Conservation Council of New Brunswick: Thank you very much and welcome to New Brunswick.

A quarter of a century ago, on behalf of the Conservation Council, I participated in a series of exhaustive consultations that were initiated by the then Prime Minister, Brian Mulroney and his government. The results were published in this document in August 1988: Energy and Canadians into the 21st Century. This was an effort to engage Canadians' interests in what kind of energy strategy Canada should pursue going forward into the 21st century. Sadly, it did not turn into an actual strategy. I believe we remain in need of a national strategy.

We are in the 21st century — welcome — and it is interesting to read this document again because a lot of things that were talked about then remain relevant to today. The difference is that now, instead of the possibility of climate change, we find that we are entering a time of runaway climate change. Instead of the possibility of running out of cheap, inexpensive oil, we are at a time of high oil prices with the crushing cost that that will bring to gasoline and heating oil, fuel oil and so on. This report pointed out that there are limits to the amount of growth in energy overall that can run through an economy. That was a point made by David Brooks, an economist sitting on the advisory committee to this initiative.

If there is a time for a national energy strategy, it really is now. In thinking about where you start and how you put it into some kind of framework, we would argue that the development of such a strategy needs to be guided by kind of a moral compass. We need an energy policy that is about the future, not simply about helping businesses seize opportunities in the energy sector. It needs to be focused on pursuing both the social well-being of Canadians and ecological sustainability, not simply on business opportunities. Such opportunities should be pursued through economic development strategies and through industrial strategies, but not, fundamentally, through a national energy strategy.

Our world is going to look very different in the next 10 years and the national energy strategy is obviously going to have to anticipate that. We cannot solve the problems we are facing today and in the future with yesterday's approaches. We need to bring a new consciousness to this which should be guided by our moral compasses, not by short-term expediency.

What is a national energy strategy for? It is to ensure Canadians can heat their homes and light their offices and operate their factories and have reasonable mobility in ways that are ecologically sustainable and contribute to the overall well-being of Canadian society.

I think, however, that it is useful to consider the context in which we think about developing public policy with regards to energy. It is essential that we develop fully the social, ethical and environmental context for a national energy strategy. In so doing, various policy options can easily be evaluated in terms of public interest and, therefore, we can more readily answer the question about what sort of strategy or what elements in a strategy best serve the public good in Canada.

In the environmental context, we are clearly in a crisis. We have failed miserably to protect the environment. Otherwise, we would not be facing a destabilized climate and oceans which are facing acidification. Already, the Department of Fisheries and Oceans (DFO) is classifying certain ecosystems in our coastal waters in the Maritimes as dysfunctional. The environmental imperative is there and it really is focused on restoration, trying to back away from the damage we have done. This requires a transformative approach: transforming our society and our economy in ways which are consistent with that objective.

Energy distribution, production and use taken together have a bigger ecological footprint than just about any other activity you might think of. This is true, for example, whether it is the environmental problems and disease caused by uranium mining and petroleum refining or whether it is the industrialization and pollution of rural areas of Quebec and New Brunswick that could occur from shale gas development, if it is incorrectly controlled.

The environmental considerations of an energy strategy need to run broadly and deeply. I must say that this 1988 document made the first really comprehensive stab at that and it set itself apart from previous efforts.

We think an ethical framework should be applied to developing a strategy. Against what sort of principles ought Canadians to be able to measure that strategy? James Martin Schram has developed an ethical framework in a recent book called Ethics, Energy and Public Policy. It sets out a way of thinking. He proposes four moral norms to apply: Sustainability, sufficiency, participation and solidarity.

In brief, sustainability is about ensuring a long-term supply of energy resources to meet our human needs without undermining the resilience of our communities or our ecosystems. That would preclude dramatic increases in domestic energy consumption and certainly would require us to shrink our energy footprint today.

Pursuing sustainability would require a transformative energy strategy. This would focus on how, over the long term, we shift our dependence away from non-renewable fossil fuels and uranium and toward solar energy in its various forms and toward geothermal energy from the earth.

We were part of a national effort 30 years ago to examine the feasibility of doing just that. The results were published in 1983 in a book called Life After Oil, which formed the basis of our intervention in the consultations that resulted in the 1988 report. It was a feasibility study. Many others have been done since then, but that work I think is of interest.

We think about sufficiency in terms of meeting everyone's basic needs for secure sources of supply that are equitably available. In Canada there are huge volumes of hydro-electricity in some provinces and none in others. I think one issue a Canadian strategy needs to grapple with is how to ensure that those resources benefit all Canadians before they benefit citizens of the United States. In our region it is a particular issue, because we are dependent on imported fossil fuels. We do not have access to Western energy and the natural gas grid ends at Levis, Quebec. In terms of sufficiency, that is a serious concern for us.

Pursuing sufficiency also means discouraging wasteful and extravagant, harmful consumption, while encouraging conservation and frugality. It means that an energy strategy in Canada would ensure that the poor can maintain healthy households and travel to work and school. This is increasingly going to become a problem with gasoline and fuel oil prices under peak oil conditions. It is going to make it increasingly difficult for people to own and operate private vehicles. An energy strategy needs to contemplate that.

His third moral norm is participation. That is a strategy that actually empowers and engages citizens in the decisions around energy that affect them in their communities. It is not only about citizens, but about how we reflect the voices of the rest of the world, other species in the world, non-human species. That is something sorely lacking these days. Environment Canada and DFO are apparently more fearful than in the past to address these issues publicly, and all too often are hounded by government spin doctors when their scientists are out and about in public venues.

The fourth moral norm he puts forward is solidarity. That is a number of things: solidarity with the rest of nature, recognizing the fundamental interdependence of all Canadians with the rest of nature, and our obligation to future generations. How do we develop a national strategy if it does not consider our obligations to future generations, both human beings and other species here and in other lands. The impact of our use of uranium is largely going to be borne by future generations in terms of dealing with things like radioactive waste.

In more recent times, in the near past, uranium and Canadian technology for its use have led to the proliferation of nuclear weapons on the Indian subcontinent, which poses a horrible risk for people in India and Pakistan and that entire region. Solidarity would suggest that those issues had been thought through well ahead of time, before they occurred.

It is unjust for the present generation to burden future generations with the consequences of our energy use, our energy choices and our energy system today, whether it is global warming or radioactive waste repositories. When we act without thought of these issues, we are essentially asking our children and our grandchildren to make sacrifices when we are prepared to make none. I think an energy strategy needs to consider that.

In conclusion, we would argue that a national energy strategy does not need to entrench the status quo, but instead must recognize the urgency of the need for transforming the way in which we use and supply energy. This is a challenge, no doubt, with which you are grappling as you have been holding these hearings and thinking about writing your interim report. Unfortunately, in the end it was avoided in 1988, the last time there was a national discussion.

I encourage you to move ahead. I wish you good luck and make one suggestion. To give this gravitas nationally, in the public's mind and in the minds of both houses of parliament, you should as part of your ultimate report recommend to the Prime Minister that he convene a First Ministers' meeting to grapple with this issue. I think it is the kind of issue that deserves that kind of attention. It is of sufficient gravity that it requires a First Ministers meeting. You do not want to have such meetings at the drop of a hat, of course. However, as the Chair said, this issue crosses constitutional jurisdictions, provincial and federal. Both levels of government need to be involved. Holding a First Ministers' meeting would be a way to engage at the political level and also to garner the attention of Canadians. It would send a message that this is a very important issue and we need everyone to be engaged on it.

The Chair: Thank you very much, Mr. Coon. Yesterday, we heard from a group in Nova Scotia called Efficiency Nova Scotia. It sounds similar to Conservation New Brunswick. Is it the same sort of organization?

Mr. Coon: No. We are an environmental, non-government organization. In New Brunswick, we have Efficiency New Brunswick, which is a Crown agency and we are all very proud of it. It invests directly in tapping the potential for energy efficiency in the province. We hope and expect great things from it in the future and it has done wonderful things in the last few years. But it is a Crown agency.

The Chair: What is your organization?

Mr. Coon: We are a charitable organization supported by donations. We work in the area of promoting solutions to environmental problems to the public and decision-makers.

The Chair: Thank you, sir.

Professor Gagnon, please proceed.

Yves Gagnon, Professor, K.C. Irving Chair in Sustainable Development, Moncton University: Thank you for giving me the opportunity to speak about the energy future of Atlantic Canada. I will touch on some challenges and opportunities. I will be working from the PowerPoint presentation which you have, and I will refer to these slides as I speak.

The first page, bottom slide, is data on anthropogenic emissions of greenhouse gas in the world. On the left side, we see that it is increasing. The pie chart on the top shows that more than half of the greenhouse gases that we put into the atmosphere are coming from the burning of fossil fuel, and when you look at the pie chart on the bottom, a big chunk, the largest single contributor of greenhouse gas emission in the atmosphere, is the energy sector.

We used to dump waste anywhere on land. This is not possible anymore. We used to dump waste water and toxic chemicals, in rivers. We cannot do that anymore. However, we can still put anything we want into the atmosphere. The atmosphere is like the last global dump. The premise of my presentation today is that at some point sooner or later, we will have to reduce the volume of chemicals that we put into the atmosphere.

On page 2, the two slides come directly from the International Energy Agency (IEA), part of the OECD, which is the premier energy agency in the world. The IEA is saying that we need a revolution in energy production and consumption. To do that, we need a long-term perspective. It might look trivial, but we had a government here in New Brunswick whose long-term perspective for the energy sector was five years. The future of the energy sector is a lot more than five years, and we need to look at it that way.

The IEA says there is an urgency to take action immediately. The long-term perspective shows we need to act now and there are going to be some technical challenges. We are moving towards a low-carbon economy and, therefore, we need to restructure energy systems. We need to develop more low-carbon technologies to achieve that.

Essentially what the IEA is saying when it speaks of "variable renewable energy" is that we need to move from a traditional system balance and traditional grids. The grid we have in developed countries is that we import and export power and regulate those who can generate electricity. We need to move toward a more efficient grid and one element of that is that we need larger balancing areas. We need to balance grids over a much larger territory. In Europe, they are looking at developing what they call the "super grid" that would include all of Western Europe and go all the way to northern Africa.

We also need to move towards coherent and flexible market-based systems. Perhaps most importantly, we need to work towards active control of grids, commonly called "smart grids." My colleague will speak about that, so I will not address that here.

Let me bring those challenges to our context in New Brunswick. In Atlantic Canada, one of challenges is the need to phase out fossil fuel-based electricity generation. That will have to be done over the medium-term, but we need to aim for that. While we are doing that, we need a strategy to develop the renewable energy sources that we have in abundance here in Atlantic Canada. I will show you the various renewable energy sources that we have here.

We also need a complementary approach to electricity generation. We need large-scale electricity-centralized systems as we know them now. We also need to work toward distributed power generation where we have much smaller units of generation that are much closer to the load and have less power loss, et cetera. Again, my colleague will address that issue of distributed power generation as a way to generate electricity.

Finally, as a complementary approach, we need to move towards what is called community-based energy generation. Widely implemented in Europe, it has great economic impact in communities that own their own electricity generation sites.

I will talk about what sorts of resources we have in terms of renewal energy here in Atlantic Canada. I will start with wind energy. Since I am a professor, I had to have one slide that nobody would understand, and it is the one at the bottom of page 3. If you look carefully, you will see a map of the world. The darker colours on that slide reflect the highest winds. If you look carefully on this planet where there is land and where there is the highest wind is Atlantic Canada. We have the best wind resource in the world here in Atlantic Canada. We should do something about that.

What are we doing? If you look at the top slide of page 4, you will see the global installed capacity of wind energy. In 2009, there was almost 40,000 megawatts of installed capacity of wind energy in the world. This was an $80 billion industry in the world in 2009, a huge industry. You see that the total capacity is almost 160,000 megawatts of installed capacity.

We have done a lot of resource assessment, including wind resource assessment, and at the bottom of page 4 we show that in New Brunswick, we could have 10 times more energy generated from the wind than all the installed capacity we have right now. That is hydro, nuclear, coal, everything that we have. We could have 10 times more energy from the wind alone.

What do we have in terms of wind farms? We have roughly 350 megawatts of installed capacity, which is quite small compared to what we could have in terms of generation. We also see that these wind farms are owned by foreign companies, except for one owned by TransAlta. For the senators from Alberta, I am sure you will not categorize it as a foreign company.

We have also documented clearly that those who control the profits of the wind farm are the ones who benefit economically from those wind farms. We have documented that clearly through reports. As you see here in New Brunswick, we do not own the wind farms. They are owned outside New Brunswick. We feel that there is an opportunity missing here in terms of wind energy development for New Brunswick.

On page 6 at the top, we show some data for Nova Scotia. The wind resource map for Nova Scotia shows a huge potential, like New Brunswick. On Prince Edward Island, you can install a wind farm almost any place you want. Not only will you generate green energy, but you will make a tonne of money by doing it. There are exceptional wind resources on P.E.I.

I am Vice Chair of the Wind Energy Institute of Canada, described on page 7, the top slide. In Atlantic Canada, we have the privilege to have a national institute on wind energy that is contributing to the development of wind energy in Canada. We have benefited from the federal government's Clean Energy Fund for help to build a wind R&D park. This was announced by the prime minister last fall and we will start construction this summer. The message here is that we need to make sure that in all energy sectors we have the necessary research institute along with training programs in universities and colleges to assure that we will have the labour and the knowledge to develop the sector here in Canada.

Moving to biomass, I will concentrate more on the forestry sector. I had the privilege to appear before the Standing Senate Committee on Agriculture and Forestry a few months ago to discuss a vision of developing wood biomass as a large-scale energy source for Canada. We know that the forestry sector is facing some major challenges, in the paper industry in particular. The lumber and sawmill industry is also very cyclic and subject to many economic constraints. The question we are asking is, could we use the wood biomass of our forestry sector as a large-scale energy source for Canada and, in particular for the discussion here today, in Atlantic Canada?

There are models in Atlantic Canada. I list three here, very specific models. In Charlottetown, they heat 130 buildings by burning municipal waste — garbage — and the waste from the sawmill on the island, and also generate electricity. Twin River Paper, a pulp and paper mill in the northwest of New Brunswick, is generating heat from bark and waste from sawmills in the region as well as 45 megawatts of power. New Page in Port Hawkesbury in Nova Scotia is doing the same thing.

There are also several biomass plants for heating purposes, whether for sawmills or schools or hospitals. The vision is to increase the utilization of wood biomass as a large-scale energy source, but there are some constraints, such as what is the supply? We are currently working on the availability, the potential availability of biomass here in New Brunswick for large-scale energy generation. There are also many issues in terms of the environment and sustainability that we will look at if we move towards large-scale biomass systems.

There is also potential for small hydro-electricity systems in Atlantic Canada.

The Chair: Just before you go on to hydro, you keep posing nice questions like "can we sustain a critical mass for a biomass source here in Atlantic Canada?" What is your answer?

Mr. Gagnon: My answer is that we are trying to answer those questions right now.

You see, in the forestry sector, a lot of work has been done in resource assessment for pulp and paper purposes or for the lumber industry. We have not seen studies on the utilization of wood biomass as a large-scale energy source, so we are working on that both in terms of the availability and also in terms of the carbon cost and the economic cost of transporting the biomass.

The Chair: It is a work in progress.

Senator McCoy: The pulp and paper had adopted biomass. That is how they literally eliminated greenhouse gases from their operations. However, you are talking about moving, then, beyond the pulp and paper industry?

Mr. Gagnon: Yes. The pulp and paper industry has shown that we can use wood biomass as a large-scale energy source for heat and power. The fundamental aspect is both combined heat and power, so you generate electricity, but you do something useful with the heat as well, whether you heat a building or for greenhouse agriculture or for other types of utilization processes, for plants, et cetera. Essentially, it is looking at our forests from another angle, the angle of large-scale energy generation. If we push the analysis a little bit further, if you bring in the community approach to using biomass, then you create wealth and prosperity in various regions of the countries where biomass is available.

We have not developed small-scale hydro-electricity systems in Canada because we were doing large-scale ones. We are doing some work with the Department of Energy here in New Brunswick to quantify the small hydro-electric potential of New Brunswick. Here again we are quantifying that potential to develop eventually.

For a large-scale hydro system, we hear a lot about the Lower Churchill Falls. I think it is a great project and on page 9, you will see how it fits within the whole sector. However, there is also a smaller project on the Green River in the northwest of the province, which I have called an embryonic project. I have been involved with it in the part of the province from which I come. It is looking at building a peaking load dam on a river that would be part of the energy portfolio of New Brunswick and the region here. It would also be an opportunity to create economic development in a part of the country that needs some economic stimulus right now.

Solar power, on page 10, is quite interesting in the longer term both for electricity generation, but also eventually for heating systems.

Tidal power is also on page 10. I am sure people in Nova Scotia have spoken to you about this. I think tidal power is a longer term energy source, but if we want to position ourselves as leader in the world, we need to start working on tidal power right now to develop the technology and work to install those technologies.

On page 12, at the top, there is a summary of how we can bring all of this together. I have called it a big renewal energy vision for Atlantic Canada. We do not have oil, we do not have natural gas in large quantity, but we have a lot of renewable energy. We have an exceptional, world-class wind resource in Atlantic Canada. We have significant biomass potential for energy generation, we have undeveloped, small hydro potential, we have a promising tidal power system. We have hydro-based balancing power available right next to us in Quebec, but also in Newfoundland, which is very interesting, with the connection through Nova Scotia.

Our exceptional renewable energy sources plus balancing power nearby make it possible for Atlantic Canada to make a difference in the energy sector and foster sustainable development economically and socially, while we protect the environment.

There is some information that I will pass over, but this is possible, it is scalable, and there are many ways to work together to achieve that.

The last item on page 12 is that we could look at creating an Atlantic green power corporation to put into place such an approach to make sure that we capitalize on our renewable energy sources in Atlantic Canada.

On Page 13, my conclusion is that renewable energy can be an important source of electricity for Atlantic Canada. It can also be an engine of economic development and a source of wealth for the region if we do it correctly. We need to do it with a long-term perspective, but we need to start acting now if we want to achieve those benefits.

The Chair: Thank you very much, Professor Gagnon.

We will move right away to Professor Chang from the University of New Brunswick.

Liuchen Chang, Professor, University of New Brunswick: Thank you very much.

I am delighted to present my thoughts about green energy in the electric power industry, linking the environmental benefits with economic development. My work is about developing technologies. As a result, my presentation is pretty much from the technical point of view.

Looking at Slide 3, I would like to mention that the electric power industry has been developed into a reliable and sophisticated system. It has undergone drastic changes in the past few years, the past few decades, and this will continue into the future. There are two trends in the electrical power industry. One is that we are changing from the traditional, centralized generation system into a more distributed generation system. I am using Denmark as an example. The yellow on the chart will show you that 25 years ago or so, there were many central, large generation stations in Denmark. Now there are thousands of small generators in combination with large generators. That is the model of the future and we are following that trend in Canada, too, but slowly and gradually.

The other trend is a development of the traditional power industry system that included generation, transmission, distribution and consumption. Now, this system is being combined with the communication control and Internet system, the IT information industry.

By putting these two large infrastructures together, we now have an early stage of a smart grid that will enhance the efficiency and will provide a lower cost solution for our power industry. Certainly, all these developments will bring environmental benefits. It will certainly have the technical benefit of being reliable and efficient. The question is, how can we achieve the economic benefits, particularly in the Atlantic Region?

Please turn to page 5. There are two pages in one sheet. I would use Denmark's wind sector as an example of success. In the early 1980s we started in Canada roughly on the same footing. Denmark now has 27 per cent of its electricity produced by renewable energy. The wind industry exports power worth roughly $ 5.7 billion a year, which is 7 per cent of the country's total exports and 20 per cent of the global wind share in the year 2008.

Why were they were successful when in Canada, starting on the same footing, we are now purchasing all our wind turbines from Denmark?

I think from a researcher's point of view, I can point to three reasons. One is that Denmark had sustained R&D support from the government and a long-term incentive from the government and power companies. It started with capital support and that was followed by a feed-in tariff that is still applied. That created a sustainable business. The other important factor is local ownership of power generation systems. Certainly, they have large-generation wind farms, but by far most of the owners of the generators are in small, local businesses, farms and residents.

Coming to the bottom of the page, we do have a possibility in the Atlantic Region for a sustained renewable energy market. We have the need, we have the resources and we have the infrastructure. Then, how would we be able to change the possibility into the reality?

In my opinion, on page 7, we should follow the lead of Denmark and other countries, following their success, combined with our specific situation. We should have sustained R&D support to support innovation and the development of reliable and cost-effective products and processes. We should have sustained incentives, both from the federal government and the provincial government, particularly the feed-in tariff. Ontario is very aggressive on the feed-in tariff. Across the country, we should have these feed-in tariffs to ensure the long-term growth of the renewable energy industry. Importantly for Atlantic Canada and particularly for Canada, we should encourage local ownership of these renewable energy systems. It is only through the local ownership that we could obtain the economic benefits.

On the same front, at the University of New Brunswick, we are making efforts in the development of renewable energy technologies. I will just briefly mention the philosophy we used and successfully applied, which is research, development, demonstration and deployment. In the power converter area, which is the interface between small generators and the grid, we developed one-stop solutions and we worked together with small companies, wind and solar, to put these systems into real world operation. I mentioned to Senator Peterson that we had over 50 units for small wind generators in Saskatchewan alone.

The second-last sheet, presents a partnership of Atlantic utilities, universities and governments in technology innovation looking into smart grid applications in the integration of renewal energy. We recognize that we need resources to balance the renewable energy. Traditionally, the balance is provided by all the generators. With this project, we are creating a new class of system resources. We use residential and commercial loads to shift the usage to create the new system resources to facilitate the integration of more renewable energy systems into the grid.

That brings me to the conclusion, the last page. In my presentation, I brought forward the points that the development in distributed generation and the smart grid technologies can present opportunities for the sustained renewable energy business in Canada and in Atlantic Canada. To support the long-term growth of this renewable energy industry and bring the economic benefit to the Atlantic Region and to Canada, we need long-term R&D support, we need long-term government incentives and, most importantly, we need local ownership.

I would like to stress as well that the partnerships and regional collaborations of industry, government universities and end users are important for technology innovation. Thank you very much.

The Chair: Thank you very much, professor. We have 16 minutes for questions. I would like everybody to keep their questions and answers tight and crisp. I will start with Senator Mitchell.

Senator Mitchell: Thank you very much, professor. Gentleman, those were very stimulating presentations.

The question I ask of most witnesses is, do we need a price for carbon, and if so would you go cap and trade or carbon tax? Who goes first?

Mr. Coon: It is a good question, and the question is, I guess, what do you want to do with the revenues? I think the discussion needs to occur in the context that if we pursue kind of a transformation that all of us have been talking about here, then there will be some need for new sources of revenue for the government side, even just to support R&D. So one way of getting that is through a carbon charge. Probably the most efficient way to apply that carbon charge is where the carbon comes into the economy rather than at the consumer's end. In the case of New Brunswick, levying a charge where the oil comes in from offshore to the refineries, or where the coal gets unloaded to the power plant from Colombia, or the natural gas gets pumped out of the ground, would generate revenue which you then could apply to helping to solve the problem. That is my answer.

On the cap and trade, I guess we would favour the Nova Scotia approach which is simply to cap with no trading. I do not know why we have ignored that approach. We demonstrated in this country how effective caps could be in solving problems by wrestling the problem of acid rain to the ground. You will remember that in the 1980s and late 70s this seemed intractable. Through a cap program, no trading, from Manitoba east, we effectively got those emission levels down and the deposition levels down below the carrying capacity of the environment, which we thought we would never see in our lifetime. I think we need to revisit that as a model.

Mr. Gagnon: What I would add is that voluntary measures of reducing greenhouse gas emission are not working. Therefore, we will need regulation for this to happen. Which model is the best? There are indeed many types of models. I agree with what David has said, and the answer is, let us make sure we find the right one. What is important is that there is regulation to limit greenhouse gas emission through legislation.

Senator Brown: Professor Gagnon, you talk about phasing out fossil fuels. Do you have some kind of a time frame in which you look forward to phasing out those fossil fuels?

Mr. Gagnon: Not precisely for New Brunswick, but there are principles I think that need to be followed. We need to assure energy security. We need some energy sources to replace what is supplied by fossil fuel plants. We also would need to look at the lifecycle of the fossil fuel plant. Maybe we could make sure that we gain some economic benefits from the newer ones, if it is indeed economical to generate electricity from those plants.

Essentially, I think it would be unreasonable to call for the closing of all fossil fuel plants at a certain date relatively short in time. I think it has to be part of a strategy where as we ramp up renewable energy sources in Canada, we phase out fossil fuel plants. At some point we will not rely on fossil fuel again for electricity generation, and we will use fossil fuel for other usage, which would be more useful.

Senator Brown: Yes, I understand it is pretty hard to put a time frame on it. We have companies, you mentioned Encana, which are already moving substantially to natural gas which reduces emissions, as you know. I cannot help thinking that where we get the energy from coal or natural gas or oil, it took nature thousands of years to produce this. We are going to try and use things like wood pulp whose energy took say 40 years for a mature tree. I wonder how we can make that change at any time or time frame that we could name. The energy in the fossil fuels is so strong and so compacted that I cannot envision how we can move over to some other fuel that was created by nature again but in a very short time frame. I leave you with that question, and I do not think there is an answer yet. Thank you.

The Chair: Do you agree there is no answer?

Mr. Gagnon: I respectfully think that there are solutions to that, but I think it can be done in a time span that is reasonable and it is within our own lifetime span.

The energy sector is living some major transformations. We are moving from centralized power generation to distributed power generation where we tap into renewable energy sources which are smaller scale. There are smart grid technologies that are moving very rapidly. The IEA is putting out, in about a month from now, a technology roadmap for smart grid deployment. This will change the way we generate electricity, but also will change the way we transport and distribute electricity.

There are solutions for us to remove ourselves from the large utilization of fossil fuel for electricity generation, and move toward more renewable based electricity generation. I think there are solutions, Senator Brown.

Senator Lang: I was surprised that there was no mention by any witnesses about the future of nuclear power, especially in view of the fact that you have your own reactor here being refurbished. One can argue about the price of the refurbishment, but its capacity is almost 700 megawatts. We talk about greenhouse gas emissions and obviously nuclear power negates that problem.

Perhaps, Professor Gagnon, you might comment why you did not mention it, and perhaps you can explore the future of nuclear energy for your province. Perhaps you could also comment on one other area, shale gas. You did not mention shale gas and the prospects that that could afford your community if it were environmentally feasible to proceed with it.

The Chair: Not just Professor Gagnon; none of them did.

Mr. Gagnon: I did not speak about nuclear because I thought David would. Hubert Reeves, a famous Canadian physicist, once said that nuclear power is a transition energy from fossil fuel based energy to renewable based energy systems. The life of nuclear energy may be quite limited in time. The Point Lepreau refurbishment is, in simple terms, a fiasco here in New Brunswick. It was a political decision to refurbish Point Lepreau, and it was against the advice the government was obtaining at that time. We are seeing the impact of that. We are a very small jurisdiction that is paying for technology development at AECL for them to be able to refurbish a nuclear reactor. It is very sad for this province. Do we need a nuclear reactor in New Brunswick? My simple answer is no. The proof is to flick any switch on a wall that you see while you are here in New Brunswick. The light will go on and Point Lepreau is not working. There is replacement power for that nuclear plant. For New Brunswick, because of our abundance of renewable energy, we do not need nuclear power.

Senator Lang: Where does the power come from?

Mr. Gagnon: As you know the power is a complex system. There is interconnection and there are other sources of generation. The total install capacity of New Brunswick is very high compared to our average base load. We have enough generation internally without Point Lepreau to satisfy our need, except for a few days where it is very cold in the wintertime. On those days we can buy power elsewhere.

Very shortly on shale gas: We need a regulatory framework for shale gas exploration and exploitation, a regulatory framework that we do not have here in New Brunswick, and practically do not have anywhere in Canada. It is kind of putting the cart in front of the horse to move ahead without regulation and before starting to consider the environmental, social and economic impact. We need to maximize all of those benefits while we develop the shale gas industry. This has to be done through a regulatory framework that is missing in most of the jurisdictions in Canada right now.

Senator Neufeld: Mr. Coon and Prof. Gagnon, I would like you to talk about natural gas, not shale gas, just natural gas. I almost hear from you that you are okay with using oil and natural gas as long as it is not used for generation of electricity. That is the drift I get from you, and so I want to know that.

Secondly, I want to know whether you have studied Alberta and British Columbia in shale gas removal. We have been doing it for quite a long time. We do have regulatory systems in place, but maybe you could explain to me whether you have studied those and let me know.

The last question is to Mr. Chang. I have had Denmark described to me so many times as some jurisdiction we should follow. Canada has 75 per cent of its electricity from clean sources; Denmark has 27 per cent. The average price for residential electricity in Denmark is between 30 and 35 cents a kilowatt hour; the price of electricity where I come from is about six and a half cents. The cost in Denmark is about five times more. We hear constantly that people cannot afford to pay more. If we copy Denmark and get to 35 cents or 40 cents, as in some European counties, and everybody talks about how great that is, how do the people actually pay for it out of their own budget to keep their houses warm or do whatever they do with their electricity? I do not think we need to follow Denmark. I think we need to build on what we have in Canada, be proud of what we have in Canada, talk about what we have in Canada, and move forward with what we have in Canada. As for a cleaner generation system, I do not have any problem with that. Maybe you could help me a little bit with that.

The Chair: Try to be brief, gentleman. He wants the whole day for that question, but we do not have it.

Senator Neufeld: No, I got all my questions into one.

Mr. Coon: Do you want us to start with shale gas?

The Chair: Go ahead.

Mr. Coon: I guess in my presentation I said we need to take a transformative approach and move away from fossil fuels of all kinds. Obviously for transportation that is going to be a much greater challenge than for electricity and for heating.

What we have said on shale gas in New Brunswick is we are not ready. We do not have the regulatory regime in place to deal with the environmental impacts. We do not have the planning regime in place to avoid the industrialization of our rural landscape at this point. Most of our rural areas have no form of government; they are unincorporated. There is no locally controlled planning. Those are important issues. As well, we have no energy policy or natural gas strategy in the province. We have argued that if natural gas is developed it needs to be seen as a strategic resource by New Brunswick, not simply as a commodity for export.

There is only a limited amount. How can it be used, if it is to be used, to the best advantage for New Brunswick? That might be in terms of its utilization, in terms of the royalties it might generate or in terms of whether or not it might finally leverage an interconnection with the so-called TransCanada pipeline to finally join us to the Canadian natural gas grid so we are no longer orphaned from that great national institution. That is the approach we are taking with shale gas.

We have some natural gas already in the province, of course from offshore, from Sable Island, but that supply is quickly running out. They are not having much luck in finding other significant reserves there. Of course there is the possibility of importing LNG into Saint John, which is imported and mostly being exported. There is that kind of gas available too.

It is really a question of meeting those three issues: Environmental regulation, planning and treating it as a strategic resource, and needing the necessary policy in place.

The Chair: Mr. Chang, are you going to deal with the Denmark issue or who is?

Mr. Chang: I will answer after Professor Gagnon has responded.

Mr. Gagnon: Essentially, shale gas is a worldwide movement. Most probably shale gas will be exploited where it is available. Shale gas, coming back to the comment of Senator Brown, was created millions of years ago. It is going to be there in five years, it is going to be there in 10 years, it is going to be there in 100 years. Essentially our message is, let us make sure we develop this sector correctly so that we have economical, social and positive environmental impacts here in Canada in general, but particularly here in New Brunswick where we have seen quite often giving away our resources and not having much impact.

I have a very quick comment to make on the Danish model. Yes, the price of electricity is in the range you mentioned. We have looked into that and a lot of that cost is taxes. There are big taxes on electricity in Denmark, and Europe in general. Revenue is not very clear because there are different types of revenue models for generators, but the revenues in Denmark are similar to what generators have here in Canada when you remove the taxes on the price of electricity.

Mr. Chang: I would like to add to my colleague's point that although we have 75 per cent of electricity coming from clean energy, that clean energy is mostly from large hydro systems. In New Brunswick we do have large hydro; we do have nuclear — or we did have. If you compare the greenhouse gas emissions between New Brunswick and Denmark where there is not a whole lot of nuclear and not a whole lot of hydro, they are pretty much the same. That means that they somehow, with their limited resources, generate power with lower greenhouse gas emission. On top of that, they created a new business based on renewable energy. From that angle I would say that we could learn from the success. We would not directly copy but we can create new businesses out of our own resources.

Senator Brown: Yes, they use lots of coal too.

Senator Peterson: Professor Chang, you mentioned that in wind power Canada is lagging behind the world, and that we have to purchase all our wind turbines from Denmark. Are you aware of a company in Nova Scotia called Seaforth Power, a world-class manufacturer and developer of wind power with turbines and the towers and the blades, the complete package, world class?

Mr. Chang: I am aware of that, on a small, small scale.

Senator Peterson: They are getting bigger and bigger. I keep hearing that we do not have this, but we do have it, and I think we have to remember that and not lose sight of it.

Mr. Gagnon: Quickly, Mr. Chair, on that question. In wind energy in Canada, it is not evident that Canada will be a player in the large scale wind turbines, the TransAlta turbines, et cetera. Where we have a niche, where we can become a leader in manufacturing and technology development is in the small scale turbine, residential and small companies. The company you have mentioned is one of those players, but there are a lot of them, including many from Saskatchewan. In proportion there are a lot more small wind turbine manufacturers in Canada than elsewhere in the world.

Senator Peterson: I think we should keep saying that. We should be excited. We are a player. We are not some tag-along.

Mr. Coon, you stressed that we have to reduce greenhouse gas but you pushed back on uranium. Do you think it is reasonable to believe that we can reach any of the targets that have been suggested without nuclear being considered as part of the solution? The coal plants are not going to shut down for another 20 or 30 years, no matter how much we think they will. I do not understand why nuclear is being pushed back here and in the rest of the world it is going very strong. That is particularly when now they are getting into modular units where they can get it down to 200 megawatts. I just do not think it should be discounted because it is green, it is clean.

Mr. Coon: There is nothing green or clean about nuclear power. It has not played out very well, has it? First of all, it is quite unethical, I think, to use technology which produces extremely hazardous waste to generate electricity. We have no way of knowing how to destroy or neutralize the waste, and we are going to leave that up to future generations. It is unethical.

Secondly, if you look at the whole system, uranium mining is hardly clean. It has caused lots of health problems in the communities that have hosted uranium mines, and it is a significant source of pollution and environmental contamination. You have the ever present risk of a catastrophic accident from a nuclear power plant. On top of that, you have the costs which are extraordinary. After hearing all of the evidence, our Public Utilities Board here recommended against refurbishing the nuclear power plant and called it not in our public interest from an economic perspective. There are a lot of reasons, ethical, environmental and economic, why we do not want to pursue nuclear power any further.

Point Lepreau did not last anywhere near as long as it should have. We had to write $450 million off. It cost three times the original estimates for its capital costs. The refurbishment now has gone way over time and budget. Every time there is a problem with a nuclear power plant it costs a fortune to try and repair it. There is nothing economical and environmentally sustainable about nuclear power plants and the system that supports them.

As I mentioned, they contribute to the proliferation of nuclear weapons in this world. Canada's technology and uranium is directly responsible for the nuclear situation on the Indian subcontinent. The Indians got the bomb because of Canada's technology. The Pakistanis, therefore, had to get the bomb too because the Indians had it. This is not a green or clean technology in any way.

The Chair: We are not going to enter into a debate here, but our evidence is the Canadian technology is non-enhanced uranium and has not contributed to the proliferation of the non-peaceful uses. That is not the issue. I think your position is clear on nuclear.

Senator McCoy: I certainly will follow up the lead and I will get the title of that book from you as you leave, if you do not mind.

I have read the 1988 study. I thought it a bit fragmented. I do think that we need to look forward into the 21st century. What astounds me is that we have yet to frame our questions for an energy strategy for the 21st century in this country in a transformative manner. I think the energy business is transforming.

I do not have much time here. I would like to pursue this debate, and the best way I know how to ask this question is this: Do you know of any research or have you heard of anybody working on an analysis of the highest and best use in terms of energy, inside Canada, the domestic applications? In other words, is anybody looking at what we use energy for? What is the optimal energy that we can apply to that, and what is the optimal way we can apply energy to it? Do you know of any research that is looking at that on a regional basis, preferably, because there are regional differences of significance?

Mr. Coon: The energy analyst, Ralph Torrie, who is based in Ontario has done a series of studies very much like that. He has looked at Quebec, at New Brunswick, at Ontario, and also looked nationally, taking that exactly approach you are describing, and those studies are available.

Senator McCoy: Thank you. I will get that from you as you leave too.

Mr. Gagnon: There is indeed some work done on those questions, but in terms of principles there is a fundamental element, which is portfolio diversification. It is important for jurisdictions to have a varied portfolio of energy sources that will minimize impact on the environment.

The Chair: Thank you, senator.

Mr. Chang, professor, would you have the last word, sir?

Mr. Chang: Not really. I think my points are mainly from the technical point of view. As a result I have very little to add on the policy issues.

The Chair: Thank you very much. You have given us a good sense. It is very clear what you think about nuclear power. You said it was a political decision that was taken to go ahead with the refurbishment at Point Lepreau. Are we to understand the alternative was just to mothball and close the plant down?

[Answer not recorded]

Thank you. Thank you professors. Are you a professor as well, sir?

Mr. Coon: I am not.

The Chair: You are a conservationist. You are a good man. Thank you so much.

Colleagues, of the two witnesses that we missed this morning, one was Mr. David Coon, from whom we have just hear. The second was Mr. John Herron, President of the Atlantica Centre for Energy and a former distinguished Member of Parliament. He is now with us and we will be hearing briefly from him later.

We now have with us Mr. Keith Cronkhite from NB Power Holding Corporation. Welcome.

Keith Cronkhite, Executive Director, Business Development and Strategic Advisor, NB Power Holding Corporation: Thank you very much for this opportunity. I believe you have a copy of my speaking notes, so I will be running through those. If at any time you have any questions, feel free to interrupt and I will certainly answer.

New Brunswick expects and deserves a stable, secure, cost effective and environmentally friendly supply of energy today and into the future. Competitive rates are an important part of that. It is recognized that Canada requires a modern grid and generation system, and NB Power is not unlike any other provincial utility. Due to the capital intensiveness of electricity infrastructure and lead time requirements, NB Power is now planning for renewal of its infrastructure.

The modernization of Canadian utilities will result in better environmental outcomes and more service and options for customers. At the same time, NB Power and other Canadian utilities will continue to provide safe and reliable electricity. NB Power looks to economic partnerships and regional collaboration with other provinces and utilities where practical and where the benefits are for all parties.

You have already heard today about some of the challenges we are facing today and into the future. They include aging infrastructure which drives required investment for energy generation, environmental controls and improvements, decrease in demand particularly in our region due to the economic downturn, energy efficiency mandates and renewable targets, upward pressure on operating costs and higher fuel costs.

What role can government play going forward? Regulatory certainty, enhanced efficiency and effectiveness for gaining permits for new projects and creation of incentives to support timely infrastructure renewal.

Today I would like to touch on four key items. The overview of NB Power and the impact competitive rates have on New Brunswick's economy due to our electric intensive GDP, NB Power's infrastructure renewal and commitment to reducing and shifting demand, integrating renewables, and finally the role that NB Power plays in Atlantic Canada.

NB Power today, as you know, is a public owned utility that safely and reliably serves New Brunswick's residential customers, commercial and industrial. Its vision is to provide sustainable electricity with a mission to proudly serve its customers. NB Power is well positioned, based on its generation mix, which comprises hydro, nuclear, wind, biomass and thermal. Thermal relates to coal, natural gas and oil. This mix is supplemented by purchases, largely hydro, that afford us the benefit of having over 70 per cent of our provincial energy requirements being met from non-emitting sources.

I talk about electricity and the New Brunswick economy and electricity and New Brunswick's GDP. Because of the preponderance of electric intensive energy such as pulp and paper, mining and petroleum refining, New Brunswick has one of the most electric intensive economies in the world. New Brunswick's economy is amongst the most electric intensive in Canada after Quebec. Compared to the rest of the world, the economy of New Brunswick is among the top five most electric intensive economies, comparable to that of Norway. Because of the electric intensive nature of its economy, an adequate, secure, reliable supply of electricity is of paramount importance to sustain economic growth within New Brunswick.

In addition to having an electric intensive economy, New Brunswick's economy is one of the most export-dependent provincial economies. A competitive electricity supply cost structure in New Brunswick is therefore of the utmost importance, to maintain the competitive advantage for New Brunswick exporters. New Brunswick competes in the forestry sector with low electricity rate jurisdictions such as Quebec, Wisconsin and British Columbia. Similarly, it competes in the petroleum sector with Alabama, Louisiana and the U.S. midwest. It is therefore important that New Brunswick maintain or improve its electricity rate competitiveness with these jurisdictions.

I would like to move on to infrastructure renewal. A cornerstone of NB Power's ability to provide reliable and competitive priced electricity with limited indigenous energy sources is its diverse portfolio of generation assets and our interconnections. This diverse generation mix has been an effective strategy to mitigate fuel cost volatility in the past and is seen to be an important strategy for our future.

From an environmental perspective, this diverse generation mix, supplemented by external purchases as I mentioned, largely hydro, results in over 70 per cent of the in-province energy requirements being supplied by non-emitting sources. Based on the province's electricity load growth projections, NB Power has adequate generation capacity for today and into the future for the next 15, perhaps 20 years.

Since this new electricity infrastructure is capital intensive, requiring significant lead time to build, NB Power is now in the process of making sure that we have the right resources in place when needed.

The Chair: Just so we understand, first of all, when you say "We are public," you mean you are a Crown corporation, a New Brunswick corporation?

Mr. Cronkhite: That is correct.

The Chair: Secondly, on infrastructure redevelopment, are you including nuclear?

Mr. Cronkhite: Absolutely, sir.

When we look more broadly, the Canadian Electrical Association estimated that the requirement for the Canadian power utility sector is to invest over $220 billion between 2007 and 2030, just to keep pace with the retirements and evolution of our industry. To make matters more challenging, these requirements come at a time of increasing scarcity of capital and constantly changing environment, regulatory and customer demands and expectations.

When we look at energy efficiency, NB Power believes that infrastructure renewal includes investments in technologies for demand-side management programming. We intend to integrate demand-side management in our utility system in a fiscal and responsible way. When we look at shifting our demands and reducing our demands, we need to look at a variety of areas such as education and energy efficiency incentives, the utility leading by example, changes to policy and standards and codes and technology to realize peak demand reductions.

We can look at two key areas when we talk about this specific item. The first area includes the decisions that will be made by our customers as they are required to change their electricity behaviours through conservation and energy efficiency programs. It will be important that consumers are able to mitigate future rate increases by altering their consumption. By offering this, NB Power will be able to offset some of the revenue loss with fuel and other savings. For example, electric baseboard heating in the Province of New Brunswick is the major contributor to our winter peak in comparison to our summer peak. There is approximately a 1,500 megawatt variance from summer to winter, largely because of residential baseboard heating.

Successful programs provide a wide spectrum of options to all customer groups. Currently, NB Power is partnering with Efficiency New Brunswick to deliver programs in the area of conservation and energy efficiency.

The second area of reducing and shifting demand is non-intrusive load shifting performed by the utility in cooperation with customers. This is only achievable through significant investment and information and communication technology. NB Power is taking a cautious and prudent approach in this area. We are evaluating advanced metering infrastructure to support two-way communication with the meter, customer demand response systems whereby the utility incents customers to reduce and/or shift demand, innovative rates such as time of use to send the proper price signals, and customer load and storage management where customers' space heating and water heating loads are adapted to energy thermal storage loads. Some customers may become electricity producers themselves.

Part of this, and a good example to which Mr. Chang referred in his presentation, is that NB Power is leading the Power Shift Atlantic Project. This project is one of 19 projects selected for funding from the Government of Canada's Clean Energy Fund in January, 2010. In collaboration with Nova Scotia Power, Maritime Electric, Saint John Energy, the New Brunswick System Operator and the University of New Brunswick, this project will utilize an innovative technology cluster to provide fast acting ancillary services for wind generation by controlling commercial, residential and industrial loads without affecting the customer.

As a modern utility it will also be important to optimize our ability to integrate renewables on our system. NB Power currently has approximately 300 megawatts of wind capacity under contract through power purchase agreements. Recent experience shows we are reaching the limits of our ability to integrate wind due to challenges in the variability of wind generation and the need for other forms of generation such as hydro and thermal generation to follow and provide back-up. It is vital that the proper balance be maintained to ensure system reliability.

When we look at the wind profile within Atlantic Canada, we have recent experience with contracts in northern Maine, in northern New Brunswick, in southeastern New Brunswick and Prince Edward Island. What we are finding is that the wind regime within these jurisdictions is very similar. It is all peaking or it is all declining at relatively the same time frame.

When we look at renewables within the province, we have a 10 per cent requirement for new renewables by 2016. By 2016, this will mean that 30 per cent of our energy is generated from renewables.

When we move on to regional collaboration and opportunities, the Maritime utilities, Quebec and New England have a history of over 50 years of collaboration through the purchase and sale of energy and capacity in the operation of the power system to benefit customers for each province or state. This started with the signing of interconnection agreements and continued with operating agreements. With the introduction of open access transmission tariffs, mandatory reliability standards became necessary to demonstrate to the outside world through North American Energy Reliability Corporation (NERC) that this collaboration results in safe and reliable interconnections with all our neighbours. By working together, the Maritimes have been able to minimize the operating cost to meet these standards.

With the recent announcement of the Muskrat Falls development in Labrador by Nalcor and ongoing hydro development in Quebec, the concept of regional collaboration envisages the participation of the four Atlantic provinces and Quebec. As noted, transmission interconnections are key enablers for regional collaboration to occur. As robust as New Brunswick's transmission is today, it is anticipated that investment will be required at the Quebec, PEI and Nova Scotia interfaces as well as inside NB Power's in-province transmission system, to maintain and enable further collaboration to move additional energy across these interfaces into the future.

In summary, when we review Canada's energy sector today and into the future, it is important to give consideration to a number of items for the electricity sector. Each province or region in Canada is different. The result of changes in regulations affecting electricity pricing and how they impact the province and provincial economies are different for each region and must be well understood. Infrastructure renewal at the right time with the right source supported by energy efficiency programs will achieve better results. A well thought out plan to modernize utilities will result in better environmental outcomes and customer satisfaction. Regional collaboration has proven to be very beneficial in the past and is a key ingredient for a more efficient energy sector in the future. It is important that regional collaboration be based on sound business principles to create win/win results. Thank you very much, and I will be happy to take any questions.

The Chair: Thank you, Mr. Cronkhite. We have been at this for nearly two years. We have heard about the problems you have had and we empathize with you.

Mr. Cronkhite: A few challenges.

The Chair: We do know. Colleagues, I remind you that the new government here in New Brunswick announced the creation of the New Brunswick Energy Commission, which was tasked with developing a ten-year energy plan for the province. The commission released a backgrounder in January, initiated a website, et cetera, and is currently holding hearings across the province. I understand you are very much part of that process, sir. Is that correct?

Mr. Cronkhite: We have been involved. The hearings, I believe, concluded approximately a week and a half ago, so now the committee, as I understand it, is convening to write the report and we would expect that in the coming next couple of months.

The Chair: Right.

Senator Mitchell: Thank you very much for being here and taking the time. It was great.

I have a couple of quick questions. You do refer to the issue of climate change emissions, it is implicit. It is not as explicit as it is in some presentations.

Mr. Cronkhite: Right.

Senator Mitchell: That is certainly in part explained by the nature of your perspective. We were just in Nova Scotia and permeating many of the presentations was the government structure of objectives and targets for reduction. Are you aware of the government's targets here? Do they have targets, and what are they? What is your relationship to the government on that issue?

Mr. Cronkhite: With respect to emissions, I will talk in a broader sense relative to CO2, SO2, NOx emissions and mercury. With respect to SO2, NOx and mercury, we have been working with our government over the past years, beginning in the 1990s, to reduce these emissions in a deliberate fashion. We did that through the installation of the first, third and sixth scrubbers in Canada. We are very much moving and conscious about environmental stewardship and reducing these emissions.

When we look at CO2, the file is more on a federal scale and basically the initiatives have been driven from the federal perspective on a global CO2 strategy. We are very much in tune with where those initiatives are today and what the potential outcomes are. I think the 45-year life associated with coal fired facilities means that when we talk about infrastructure renewal and the need to make sure that we extract a value from existing infrastructure, we have to do that in a deliberate fashion. We cannot prematurely close down or limit facilities without having a drastic effect on rates. As I mentioned before, the New Brunswick GDP's dependence on having competitive rates is very sensitive in that regard.

Senator Mitchell: With respect to the federal government's initiative to see coal fired electric plants phased out, or at least the kinds of greenhouse gas emissions that are associated with them phased out, you would suggest they could capture it if they had technology to do that, for example?

Mr. Cronkhite: Right.

Senator Mitchell: When do you see your fleet of coal fired electric plants, thermal plants phased out and what are you going to replace those with?

Mr. Cronkhite: On the coal fired side, we have one.

Senator Mitchell: Yes, right, but you have more thermal?

Mr. Cronkhite: We do have more thermal. Our coal fired facility would be phased out in approximately 2038. We are working today on looking at technology. We are looking at alternatives out in time, natural gas obviously being one of those potential options, nuclear being a second option. We are very aware of the current landscape and recognize that we have to make decisions in advance of 2038 to make provisions for those replacements. We are very much in tune with the different technologies that exist today and how that may look going forward, recognizing that one solution does not fit all. Natural gas is not necessarily the solution for all thermal facilities or coal fired facilities or oil facilities being shut down moving forward. We talked about a diverse generation mix in our past. We see that as being part of our future. We see nuclear as being a component of that.

Senator Mitchell: Are you looking at tidal generation?

Mr. Cronkhite: Tidal is one that we are monitoring today. As you know, there are a number of studies going on. We are staying very close to those. We are very interested in those. We are not actively pursuing those today, as there is enough activity right now to give early indications on the efficiencies and some of the challenges that Nova Scotia Power has experienced with their tidal program and the environment.

Senator Lang: I want to refer to your initial comments. You talk about the key role for government, regulatory certainty, enhanced permitting, efficiency and effectiveness for new projects.

I would just like to go maybe explore that a little bit further with you, and that has to do with respect to the requirements for both the federal and provincial environmental assessment processes. We have been hearing witnesses over the course of the last two years and it has come up on a fairly continuous basis that there is a great deal of duplication, a great deal of cost associated with the fact that we have two systems. Perhaps you could comment on that, and have you or your government made any representation to the Government of Canada to see what you could do to streamline that?

Mr. Cronkhite: That is a good question. I think you touched on it relative to the duplication of effort. When we bring programs or projects forward and look at our environmental strategy to move them forward, we are very conscious of the provincial view and we are very conscious of the federal view. We try to, where we can, mesh those two initiatives together to try to get a determination of whether it is a federal lead or does it remain as a provincial lead to move the EIA forward.

There is a group or a department that has been formed, I believe in the large projects arm of the federal government, which is looking to try to harmonize those requirements from a federal/provincial perspective in a more friendly or efficient manner. We have been involved through that large projects group in discussions more recently to see how that is supposed to work. Have we taken it to the federal environment group directly? No. Have we had discussions with the federal group relative to their large projects area or department moving items forward? Yes.

Senator Neufeld: We heard testimony before you, and I think I heard it right, that there is enough power in New Brunswick without Point Lepreau. Is that correct or not? I am not trying to corner you on a political thing.

Mr. Cronkhite: No, I understand.

Senator Neufeld: It was the public utility's recommendation not to refurbish Point Lepreau, but there was a political decision made to refurbish it. I think I have that correct. Can you answer that?

Mr. Cronkhite: I do not have the specifics as to what the key drivers were. I think the Utilities Board probably had a rate perspective or was looking at some of the cost issues associated with the nuclear side.

Senator McCoy: What was their recommendation?

Mr. Cronkhite: I believe their recommendation was not to proceed.

Senator Neufeld: Okay, got that.

Mr. Cronkhite: From there I think there was, I will call it a longer term view, as far as a recognition that we have a nuclear facility today; we have existing infrastructure that can be further optimized moving forward, and I think that the decision to move forward with the project took into consideration those types of items.

Senator Neufeld: I mean do you have enough power without Point Lepreau?

Mr. Cronkhite: We are meeting our requirements in-province today through our existing generation fleet which we are running more, and we are supplementing that with purchases. Moving forward, when we look at Point Lepreau, it is a key contributor to rate stability. Yes, there are cost increases there. There is no question about it. But when you look at a 700 megawatt facility, for the end cost we anticipate Lepreau will be delivered at, it is very economic moving forward. We have other facilities in our fleet, such as our Dalhousie station, that will be closing down next winter. While we are meeting that and running that today on oil, moving forward, the nuclear will pick up some of that capacity into the future.

The Chair: Senator Neufeld, did you get the date that he anticipates it is to start up again? I was distracted.

Senator Neufeld: Our notes say 2012.

Mr. Cronkhite: Fall of 2012. Yes.

Senator Neufeld: Yes, fall of 2012. Another two years from now. One year.

Mr. Cronkhite: Eighteen months.

Senator Neufeld: Closer to two years.

You also have greater connections with Quebec and Maine?

Mr. Cronkhite: Yes.

Senator Neufeld: At least what I see here, for your actual consumption. Do you import a fair amount? I am going to talk about Quebec because I am not sure about Maine.

Mr. Cronkhite: Right.

Senator Neufeld: Quebec's clean electricity?

The Chair: It is totally clean in Quebec.

Mr. Cronkhite: Absolutely.

Senator Neufeld: Can that supply your needs moving forward?

Mr. Cronkhite: It is part of the future; it is not a single answer. As I mentioned before, for the well being of the Province of New Brunswick, our diverse generation mix has served us well in the past and interconnection purchases have certainly been part of that. They will certainly be part of our future. We have had discussions with Nova Scotia, with Hydro-Quebec, and with New England about the right opportunities in recognizing the Nalcor energy that may come online and in recognizing other developments in Quebec. We are looking into how we can best supplement our generation mix within the province to bring in more of that energy moving forward.

Senator Neufeld: With Point Lepreau operating, hypothetically, are you a net importer or a net exporter?

Mr. Cronkhite: In that situation, we would be a net exporter in the early years.

Senator Neufeld: How much?

Mr. Cronkhite: Approximately, I will give you it on a per megawatt hour basis. During the spring, summer and fall, probably in the area of 300 to 400 megawatts. That is largely dependent on our hydro facilities operating as we expect.

The Chair: Thank you, Senator Neufeld.

We are hitting the wall on time, but what I am going to do, Senator Brown had his name in; you are going to have your question, and then Senators Peterson and McCoy, I am going to allow you to ask your questions to the witness on the record and ask that the witness provide us the answer through the clerk of the committee. It is not the ideal way of proceeding and I never have done it before, but that is what we are going to try today.

Senator Brown: I have a very simple question. We all know that wind is variable, but you used a couple of words under "wind" that kind of alarmed me. You said it was peaking and then declining. I wondered if you were just saying it was variable because peaking and declining makes me think that maybe somewhere where we have put wind turbines the wind just stopped, and I do not think that is true.

Mr. Cronkhite: No, no. It is the variability of the wind regime that I am talking about.

The Chair: Senator Peterson, can you live with that suggestion? Put your question to the witness on the record and then we will ask Senator McCoy to do the same.

Senator Peterson: I have a few questions. What is the New Brunswick consumer demand? Point Lepreau when it is going will be generating 650 or 700. What is the expected lifespan of Point Lepreau once it comes into operation — let us just say in 2012? Is New Brunswick going to get any of the power from Muskrat Falls, of the 824 megawatts coming out of there?

The Chair: Those are very good questions.

Senator McCoy.

Senator McCoy: I can get all mine on his website. It is all right.

The Chair: Are you okay?

Senator McCoy: I can do it all by research.

The Chair: I have one question. We know you are living in difficult times, but you mentioned quite a bit at the outset, this regional cooperation. We heard about it a lot in Nova Scotia, we heard that the energy ministers of all four Atlantic provinces got together in Halifax last week and that they had a good start in terms of this.

I remember Premier Hatfield talking about this back in the 70s and before and it never really happened properly. Do you see a good warming of the waters for this kind of cooperation?

Mr. Cronkhite: Would you like me to answer now?

The Chair: Yes. That one you can answer, chair's prerogative.

Mr. Cronkhite: I want to set the record straight a little bit in that from an electrical utility perspective, we have had good relationships in the past. We have had good sharing of resources in the past. To hear this concept of regional collaboration in our world is not new. I know there has been a lot of discussion around it recently. There are a lot of implied benefits. There are benefits. It is not to say that we have not been enjoying some of those in the past.

Moving forward, I think that through dialogue such as you are having here today and what we do on a regional basis, the more information we can share amongst the neighbouring provinces and states to better understand our current systems and where we are heading, we can get to a better end result. Absolutely. We have been doing a good job in the past and I think we can do more in the future.

The Chair: We wish you good luck, sir. We bring you greetings from our colleague, Senator Percy Mockler, up in Ottawa.

Mr. Cronkhite: Thank you.

The Chair: Thank you for coming today.

Mr. Cronkhite: I appreciate the opportunity.

The Chair: Colleagues, I commend you all. We are right on schedule and we are going to get our full complement of witnesses.

With us now we have John Herron, who was a distinguished Member of Parliament representing this area from 1997 to 2004.

I remember working with you with great fondness, John, and I understand and I remember you were active on the Standing Committee for the Environment in the House of Commons and that you now have been recently named the President of the Atlantica Centre for Energy. You have got a great new career going here in Atlantic Canada, and you have the floor.

John Herron, President, Atlantica Centre for Energy: I will try to walk you through a slide presentation and we will try to move through it as expeditiously as possible. I will do a virtual slide flip as we go forward.

I will give you a little bit of information about who we are and what we do. We are not your quintessential industry association. We were born initially out of a community development initiative where Saint John originally had bet on the energy sector to be one of its leading verticals with respect to driving our community. Although we were originally centered in southwestern New Brunswick, we now have energy professionals who are based in Nova Scotia, in Newfoundland, in Maine, but principally we are here in the Province of New Brunswick itself.

We serve as a bridge between corporations and the community. We are a meeting ground where industry, the community, academia and the government can come together to ensure that all perspectives about energy related issues are addressed. The federal government and the province sit on our board. Andy Noseworthy, from whom you will be hearing tomorrow, represents the federal government. He would be the point person for the federal government on energy related issues in this neighbourhood. Doug Holt, who is the Deputy Minister of Energy in New Brunswick, also sits on the board. That is about who we are and what we do.

Our members are shown on slide 3, and you can look at those logos when you have some spare time. The next slide is a map of the region of Atlantic Canada and New England. It is essentially an eye chart, but it really does demonstrate the connectivity within this jurisdiction in energy and how we are connected through transmission, through pipeline, obviously through sea. The size and the scale of investment that you have in energy infrastructure really mean that you have to think beyond your own jurisdiction. For the most part, the energy assets that we would have in this region are regional energy assets. They are also assets for Atlantic Canada and heading into Quebec.

I will move you to slide 6. Represented on our board, as in our region, there is a unique and diverse energy portfolio for our jurisdiction. For 750,000 persons in the Province of New Brunswick or even in the broader region of 2.5 million persons, we boast a very diverse energy mix. Nuclear power has been part of our history for over 25 years. We are a centre for arguably the most responsibly produced petroleum transportation fuels. Hydro-electric is in our footprint. We are very proud of the wind regime that we have and the commitment to renewable that are starting to emerge in our footprint.

Just for the committee's background information, and I am sure to a large degree you are familiar with this, I will move you to the slide starting with "Canaport LNG". Canada's first to-market LNG terminal is located just a few miles from here. What that means for us on a go forward basis is that natural gas is clearly going to be part of our energy mix in Atlantic Canada. Sable Island might have six or eight years of producing gas left and Deep Panuke will probably have between six or eight years. LNG assures that we have access to natural gas on a go forward basis. In New Brunswick, there is even indigenous natural gas. There is a producing facility by Corridor Resources that produces conventional and natural gas.

I will speak more about it shortly, but shale gas, unconventional natural gas, does have the potential to emerge in this footprint, as well.

The Chair: You should know, colleagues, I think you do, and the witness, that except for a quirk of climate change this morning, we would have been at the Canaport LNG facility, but unfortunately we did not get to your province until it was too late.

Mr. Herron: I know you guys have had some logistical challenges, but that is the nature of Canada in winter and through geography. But on your way to Canaport, you also would have seen Canada's largest refinery. The Irving Oil Refinery is Canada's largest. Six of every ten cars that are fuelled in Boston are fuelled from petroleum products refined here in Saint John. It really is a regional energy asset for the international northeast.

I met with the Consul General of United States, who is based in Halifax, just the other day. Twenty per cent of Canadian energy exports to the United States emanate from Atlantic Canada now. They are clearly paying attention to this particular region.

The Chair: You are not including Quebec as part of Atlantic Canada?

Mr. Herron: If we do, it gets even bigger. Eastern Canada is all one team in that regard.

Moving to another slide, the Maritimes & Northeast Pipeline and the Brunswick Pipeline itself are infrastructure that connects Atlantic Canada to New England. What I am trying to say is that when we think of energy in an Atlantic Canadian context, the connectivity that matters for the most part are north and south initiatives.

There is still room to for improvement, especially with electrons in terms of how we can have better connectivity with our provincial brethren. I would like to say more about that perhaps in a few moments.

I do want to point you to the slide with three maps of the Maritime provinces. Where there is red, there is feasible, economically viable wind. There is an immense opportunity for us to have a broader deployment of wind energy in Atlantic Canada that is clean, that is renewable. In order for that to happen, two things have to be in place. You can never optimize your energy assets unless they are more interconnected, unless you have the robust transmission between your provinces and between your markets. Investments in transmissions are enablers for generation, whether it be large scale hydro, natural gas generation or wind. Transmission is an enabler. You could almost consider transmission to be a peaking plant or making sure that you have access to the most economically viable electron.

The second thing is that you cannot have the deployment of renewables unless you have base load. The base load on a go forward basis is not coal and is not oil; it is going to be clean hydro, whether that is from the Province of Quebec in this region, from the Province of Newfoundland or even from natural gas generation. But that is the energy mix that we will see as we go forward.

The Chair: But those wind figures, renewables on page 6, those three maps, those are ones that are up and running?

Mr. Herron: Yes.

The Chair: There is greater potential for more wind, I suppose, that has not been exploited yet?

Mr. Herron: Yes.

I would like to make one comment: I took these results from the CanWEA (Canadian Wind Energy Association) website just two nights ago. I think they are a little out of date because we are on track to have 400 megawatts of energy deployed here in New Brunswick alone, which would represent 10 per cent of the energy mix in this province. If that website were a little bit more up to date, the numbers would be a little bit larger. That is where that reference point comes from.

I would like to briefly run through slide 13, "Success Measures for the New Brunswick Energy Commission." This is a summary slide of what we presented to the Energy Commission. Whatever policies or strategies that are deployed with our provincial commission, and I would suggest even for your commission, Mr. Chair, is that decisions and the guidance that this Senate Committee provides need to be future proofed. Energy has to be cleaner, has to be greener. That means hydro, that means nuclear, that means natural gas as a transition fuel, and renewables. I think energy strategies really do need to be flexible to regional opportunities that will emerge. In the Maritimes there are opportunities that will emerge once Lower Churchill comes online. There are opportunities even with Hydro-Quebec having even more robust transmission into this region.

Energy efficiency is clearly a role where the federal government can continue to invest on a go forward basis. The cheapest electron is the one that you do not use, and that is very important for our nation's competitiveness.

I would also like to point out that our economies are very much energy intensive. There are opportunities associated with the production of energy and the distribution of molecules and electrons, but energy can determine whether you can attract or retain economic investment.

I would like to pay tribute just for a brief moment, moving to slide 14, to the Atlantic Energy Gateway. Andy Noseworthy may speak about this a little bit more tomorrow. I would suggest that provinces have cooperated in the past. Our utilities have a very strong relationship right now with respect to cooperation amongst this region. However, there is a newfound spirit amongst the provincial governments in all of Atlantic Canada and all the utilities.

Right now they are trying to quantify what those benefits might be with respect to energy corridors, the cost and benefits of having a common regional market. Scale does matter. When you are a jurisdiction of only 2.5 million persons, it takes an awful lot of money to build these energy assets and generating facilities. You want to make sure you are optimizing all those energy assets and having more inter-connectivity.

Slide 16 is about two opportunities we see coming down the pipe. When the Lower Churchill project comes online, it is going to be an enormous opportunity, not just for Newfoundland and Labrador, not just for Newfoundland and Nova Scotia, not just for all of Atlantic Canada, but for the country as a whole. Consider the size and the scale of that project and the investment that is required. Look at the engineering that is required, that is SNC-Lavalin providing some thought leadership, and look at the construction of the project itself, the construction jobs associated. This is a huge enabler.

For that project to come online, it needs to have a robust transmission link. It is not just connectivity from Newfoundland into Nova Scotia, because ultimately the prize that Nalcor is chasing is selling electrons into New England. That transmission line will provide an opportunity for us to distribute and optimize our wind assets for renewable energies. That transmission line will enable us to have generation on natural gas.

Electrons flow both ways. A natural gas plant could emerge adjacent to the LNG terminal for electrons going to Nova Scotia so that we can address some of the challenges that Nova Scotians have with respect to coal and their coal plants. Looking forward, we can have cleaner, greener energy in the Province of Nova Scotia from electrons from Newfoundland, from natural gas potentially from New Brunswick and by optimizing the wind, whether that is in Inverness County in Cape Breton or Lamèque in northern New Brunswick or from the island of Prince Edward Island.

It is all about transmission. In your own report, section 4.53 is called "Strengthening Provincial Inter-connectivity". That section really is a game changer. We can do more by getting the right electron to combat climate change, the most competitive electron by having better inter-ties and using the region; that means Quebec, Atlantic Canada, Maritime Canada and the Nalcor project.

We are very excited about that project when it does come online. I guess that is all I will say about the project for the time being.

I would like to point out, too, is that there is another role that the federal government might want to take with respect to energy, and that is related to shale gas. Natural gas really is going to be the emerging transition fuel for this continent for quite some time and shale gas is going to be a huge component of that. It has been a game changer for economies, for example, in Arkansas. What our centre is in the process of doing right now is carrying out a comparative analysis of the most progressive regulatory regimes, paying attention to the management and stewardship of water, including what water is used in the fracking process.

We are looking at the best royalty regimes. It is a non-renewable resource, so we want to make sure that we actually optimize that opportunity, not leaving any money on the table. However, you do not want to be too aggressive so that you scare away investment. We are comparing the shale regimes in Fayetteville, Haynesville, other parts of the Barnett, Marcellus, what the folks are doing in British Columbia, Alberta and Saskatchewan.

Just for time purposes, I will move to the last slide, number 21. We see your study as a very constructive initiative intended to advance the energy dialogue. We think it is timely. The world is often a very uncertain place. We are seeing that right now in the Maghreb region of Northern Africa. Ensuring that we have more visibility of controlling our own energy requirements clearly makes sense.

Another messages I would like to be sent along is that any energy strategy really has to pay attention to our ethical responsibilities to combat climate change. The truth is that what India and China will be doing on a go forward basis in terms of how much coal they are going to be consuming and their emissions is pretty scary. In order for us to have the political clout in order to engage those nations, we have to lead first.

Mr. Chair, you might remember former Prime Minister Brian Mulroney, probably the most progressively environmental prime minister the country has ever had, knew that in order to engage the Americans on acid rain, we had to clean our own act up first. He later engaged the Reagan administration and that of the first President Bush, which resulted in the Americans reducing emissions of SO2 by over 40 per cent in their power generating plants. We have an ethical duty to do our own job from this end, as well.

Investing in leadership on energy efficiency and demand side management is clearly a role for the federal government. I think the federal government really needs to pay attention to supporting initiatives that strengthen inter-provincial electrical integration. That is very important stuff. Our ties north-south are pretty good. They probably still need to be better. As for relations between the provinces, I think it is a good thing to support initiatives such as enabling better connectivity between New Brunswick and Nova Scotia. Supporting initiatives that would connect Newfoundland and Nova Scotia is also good. What it also does is provide a circle for redundancy in transmission. We already have a path forward from Upper Churchill through Quebec and into New Brunswick, but having a redundant link going the other way helps provide better sustainability of the electrical system.

That would conclude my abridged presentation, and thank you very much.

The Chair: Well done, Mr. Herron. We are at the wall again, colleagues. There are three people on the list. I am going to ask you just to read your questions into the record. Then, Mr. Herron, you could send us your answers through the committee clerk.

Colleagues, there is a professional photographer here from the Saint John newspaper, and just as a formality I would like to have your approval that we would authorize her to take pictures of us in action with a minimum of disruption. Do I have your approval, colleagues?

Hon. Senators: Agreed.

The Chair: Any contrary? Thank you for that.

Senator Mitchell: We have heard from many presenters who are working on specific conservation strategies. The City of Halifax for example was assisting residents with the financing of solar panels to heat their water. There are lots of initiatives in that way. Do you have access to a list of the kinds of conservation projects that would be going on here and other projects that would be supporting, emphasizing producing incentives for renewable energy?

I agree absolutely with the need to address ethical responsibilities; you addressed climate change, which is fundamentally important, and the federal government's role in encouraging initiatives and projects that deliver clean and non-emitting energy. Do you have some ideas about projects that have existed that you like and projects that you would suggest? Could you give us some idea of that when you have a moment?

The Chair: Thank you, senator.

Senator Neufeld: I have a number of questions. Where is your LNG imported from? Do you think having an import facility now might curtail the development of shale gas on the east coast? We are looking at exporting, which is a change in the last four or five years from importing. Do you think that might have some effect on the ability to move forward with shale gas development on the east coast?

The Chair: When you say "we," do you mean British Columbia?

Senator Neufeld: Yes.

Mr. Herron: Senator Angus, just on the first one because it is short. The main source of LNG is Trinidad. The plant receives ships from Qatar, from Norway and from many sources, but the principal source is Trinidad.

Senator Neufeld: You have on this one slide that LNG is able to supply 20 per cent of the natural gas needs of northeast U.S. as well as Canadian needs. I do not think you mean all of Canada, but maybe I am at fault. I have got to get my questions out because we are running out of time.

Mr. Herron: Okay.

Senator Neufeld: Inter-connectivity, I agree with you that we have to look better at that kind of process. I think when you talk about the Atlantic provinces working much closer together, I think that is good news. This is a very good presentation and I appreciate it, so I would like you to tell me what you think the federal government's role should be? I mean it is great to say "The federal government should be involved." What should the federal government's role actually be? I believe it should be the provinces looking at one another, not the federal government telling us what to do.

The Chair: Senator Lang, do you have something to read into the record?

Senator Lang: I want to follow up on the shale gas and its implications. I am primarily thinking of the United States because when I look at your presentation, for which I want to commend you, I see an interconnecting line. I see some major developments taking place, namely in Newfoundland, but obviously some of it is going to be for export. I am wondering if there are any studies you know of that are being done looking at the American situation in view of the shale gas and its impact, from the point of view of our exports?

The Chair: Mr. Herron, thank you so much for a very thoughtful presentation. I think you sense the fact that we get it and we are listening.

Mr. Herron: Yes. Thank you.

The Chair: Colleagues, we now have with us Mr. Mark Mosher and Mr. Chris MacDonald from J.D. Irving. We have a lot of time for your company and all the great, wonderful things you do for the community and the help you have given to us in organizing these hearings. We also have David Plante from the New Brunswick and P.E.I divisions of the Canadian Manufacturers and Exporters. We had their Nova Scotia representative yesterday in Halifax. Thank you very much, all of you.

Welcome, gentlemen. I do not think I need to introduce myself or my colleagues. You know who we are and what we are up to. Please tell us what you would like us to tell the rest of Canada about what you are doing here in New Brunswick and anything else you would like to have us take on board in our study.

Mark Mosher, Vice President, J.D. Irving, Ltd.: I think the request is to keep the presentation short, leaving more time for questions. I want to walk you through three specific topics: A little bit about who J.D. Irving is, specifically some of the things that we have done around energy efficiency and how we really think energy efficiency can play a much greater role in the whole energy policy of the future, climate change, and then one of the topics that we, as J.D. Irving, have been very active in, which is the role forestry could play in carbon sequestration.

The Chair: I would just ask you, we know that the Irving empire, includes Atlantic Towing and the shipping branch and the refinery and the forestry division. I have always associated J.D. Irving with the Maritime side of things, but I may be wrong. Could you just put it in perspective?

Mr. Mosher: In terms of the total number of employees, you mean?

The Chair: What your part of the business is.

Mr. Mosher: J.D. Irving is basically made up of eight separate business units. Forestry is one of the major components. We have three forestry divisions: our woodlands group, which I will talk a little bit about, our sawmills group, which is predominantly solid lumber and speciality lumber products, and then pulp and paper, which I look after.

We are very large in the transportation business, in shipbuilding, and in retail. Kent Building Supplies is our primary outlet in the retail sector, and then we are in the equipment and heavy construction business. In total, we have about 15,000 employees. That is just J.D. Irving. It does not include the Irving Oil group of companies, which is really operated under a separate umbrella.

The Chair: Does it include Canaport?

Mr. Mosher: No. Canaport is under the Irving Oil side.

The group that I am directly involved in, forestry operations, comprises three distinct groups. We are the fifth largest landowner in North America today. We own or manage about 6 million acres of Crown and/or freehold land. We have the largest tree improvement program and have won many national records on our tree planting exercises. This year we celebrated planting our 822 millionth tree since 1957. That is our woodlands group.

In the sawmills group we operate 11 sawmills in New Brunswick, Nova Scotia and Maine, producing about 800 million board feet of lumber.

Then there is the division I look after, which is our pulp, paper and tissue group. It has seven operations, predominantly in New Brunswick, but we also have one operation in Ontario and one in Fort Edward, New York.

Combined, we produce about just over a million tonnes of products and have about 3,000 direct employees and about 4,000 indirect employees. We are one of the larger operations. You can see on the map where our operations are and where some of our wood holdings are.

What I really want to talk about today is that even though you called us an empire and locally we are fairly large, globally we are extremely small. In every business in which we operate, looking at the core forestry products businesses, our largest operation would be less than 5 to 10 per cent of whoever would be the global leader. This is a very global industry. Paper is a Finnish-led business, pulp is Brazilian, and you can read down through. Locally we are fairly large in this industry, but globally we are extremely small.

If you look at pulp and paper manufacturing operations, it is a pretty simple business. It is fibre, it is energy and it is capital and how you use your assets. The energy in fibre is really predominantly either derived or purchased from a local government entity or it is controlled by government policy of some form. In this part of the world a significant portion of wood is Crown owned. Electricity is our single largest manufacturing cost. I believe a previous presentation discussed where New Brunswick fits in terms of competitiveness on a national level. In a nutshell, New Brunswick has fairly high electricity costs compared with those of most of our competitors in this industry. Because of that, we have had to become very, very good at how we utilize that energy.

A number of years ago, we undertook an energy efficiency program. It was really a multi-year program with significant support from the federal government's Pulp and Paper Green Transformation Program. There was also a lot of support through Efficiency New Brunswick that got some money from the federal climate change program as well as internal funding.

Our strategy was to reduce our dependence on fossil fuels. We set a fairly aggressive target to reduce that by over 50 per cent. The resulting impact of all of those efficiencies as well as some fuel switching, was to reduce greenhouse gas emissions by about 60 per cent.

The point I am trying to make here is that the federal government through many of these programs is important. They always say that the cheapest energy is what you do not use, but many energy efficiency programs have very long financial returns. The incentive programs play a significant role in how quickly many of these programs can be adopted. We undertook that. We are about 80 per cent of the way through that initiative described on slide 9.

I will not go through all the specific projects, but I want to focus on two because a number of things that we did and are trying to do could play a large part as we frame energy policy for the future.

The first one is project number 7, district heating. I do not know how much this commission knows about district heating. It utilizes low-grade waste heat predominantly from manufacturing operations as an energy source for heat, ventilation and so forth. It is very commonly used in many European countries. As a matter of fact, in Scandinavia, just about every large manufacturing pulp and paper operation would be connected to a district heating program where the majority of the homes in the communities around would be heated through these programs.

We have been trying to develop a district heating program out of one of our operations on the west side of Saint John, taking the waste heat from this operation and spreading it to a number of our manufacturing facilities. We are also working with the City of Saint John, trying to look at how we might develop infrastructure from the facility on the west side of town through the uptown core to pick up a lot of the heating load in this area. It has a huge potential. If the infrastructure were there, a facility like ours, a pulp mill, could heat virtually the entire City of Saint John. There is that much waste heat.

Again, in Europe that would be done. A company like ours certainly could not undertake that level of infrastructure because this is very large complex infrastructure involving underground piping, pumps and so forth that needs to be installed. Then there are the politics around who owns the transmission, who puts the infrastructure in the ground and so forth. The City of Saint John has estimated that a project like this, to run the infrastructure around the uptown core, would take about $30 million.

I just summarized what is on page 11. This has the potential to make a significant contribution to the long-term viability of the forest sector because it adds an additional revenue stream to these forestry operations. It also sets the communities up for a long term low cost energy supply.

The second thing I would like to talk about is biomass. Most forestry product operations have a significant amount of waste fuel fibre available to put into biomass operations. They are very capital intensive. As you put your policy together for the future, you should take a look at how biomass can play a much greater role in providing for small district electricity generation.

Just about every small sawmill or pulp and paper operation has a reasonable heat load and sufficient waste resource on site to put in some small level of generation. Most of those do not make sense on their own if you are doing it just to offset some of your existing energy purchase. We have always proposed some form of program similar to what was done with wind power, the WIP program and so forth, to try to get a much greater penetration of biomass. It is one of the projects we are undertaking at our Lake Utopia facility, but we are not taking the final step to put in electricity generation because of some of the things that I just talked about.

Slide 13 shows what some of the federal incentives have helped us do to date. We have already reduced about 50 per cent of our greenhouse gases and about 88 per cent of our sulphur dioxide emissions, shown on slide 14, with a significant amount of work left to do. We have invested about $71 million and reduced about 400,000 barrels of oil.

I think the main point I would like to make is that when the federal government is looking at policy, energy efficiency should be a continued significant portion of that. We should take a look at how district heating might play, and we certainly need to take a look at biomass as a greater part of our energy supply in the future.

The Chair: Thank you very much, Mr. Mosher. Are we going to hear from Mr. MacDonald?

Christopher MacDonald, Director, Government Relations, J.D. Irving, Ltd.: Yes. I am going to take the section on forest management as part of the climate change agenda. This is something we have been working on for a number of years with the federal government and we understand where the climate change piece is. There is a lot that we are waiting for coming out of the United States, and we all understand that. Something we do not want to lose sight of is that we have a huge advantage here in Canada, given our land mass and trees, to become a carbon sink. We just want to explain a little bit of our rationale for saying that.

We know that there can be multiple strategies for reducing our impact on emission reductions. Obviously, there are cleaner fuels and energy efficiency, but there is also sequestration. You would have heard a lot in Alberta and other places about geological sequestration. Trees are really just the other side of the equation, which is biological sequestration. Something to remember is that the average tree in its lifetime consumes a ton of carbon, so it can have a huge impact, especially with the amount of forest land that we have.

In Canada we have over a billion acres, I am on slide 17 now, of forested lands. About 600 million are productive for forestry. Forest management, for those that may not be familiar with the term, aims to optimize production and enhance conservation values. There are a number of ways you can do that, including fire and pest control, pre-commercial thinning and tree planting. As Mr. Mosher mentioned before, we have now planted over 800 million trees ourselves. It also includes tree improvement, which is breeding the best of the best, resulting in more resistant and better growing crop.

Slide 18 shows what the impact of forest management practices are. The first block is cords per acre at 50 years of growth. If there is no silviculture, it is 17 cords. Thinning or pre-commercial thinning takes it to 35 cords, planting to 59 and planting with tree improvement to 70. What can happen through proper forest management practices is you can end up with four times the volume of wood. The corollary to that, shown on slide 19, is that the same thing can happen from a carbon sequestration point of view. If you can grow four times as much, you can sequester roughly times as much. That is a huge opportunity. We are certainly doing a lot of this on our own private land and we are doing it to a lesser extent on Crown land because of different management policies. However, we think it is a huge opportunity for the country.

Slide 20 shows we think there is a significant opportunity. We are not the only ones saying that. The National Roundtable on the Environment and the Economy back in 2006 issued a report that said land use and forestry could contribute a net sink of 100 million tonnes of C02 by 2040 or 2050. It also said it could be a significant contribution to achieving overall climate change objectives.

In order for this to happen, though, forest management needs to be recognized. You have often heard of an offset program. What we are talking about here is that you are going to have certain programs to deal with reducing emissions and you are going to have certain programs to address other things that can be done to offset other people's emissions. Really, this is what forest management is all about. It is about offsetting somebody else's emissions at the end of the day. That is it for us.

The Chair: This is real, is it, or is this potential? Is it happening?

Mr. MacDonald: This is happening today. As I said, we are doing a lot of this on our own. There could be more done, and I think this is the opportunity. There could be more done on Crown land across the country. There could be more done on private land. As Mr. Mosher mentioned, we have been planting trees since 1957. I believe we were the only ones in the country, maybe in North America, that started doing that in 1957. We have got a step up, but, others can follow. There is no question about it.

The Chair: Great.

Mr. Plante?

David Plante, Vice President, Canadian Manufacturers and Exporters, New Brunswick and Prince Edward Island Divisions: I would just like to very briefly close the loop on the presentation and emphasize some comments that Mr. Mosher had made about the application to the broader manufacturing sector.

Energy efficiency and conservation — energy management — is going to be the way of the future. There is a real role for the federal government in this. Let me give you an example of participation and support by both the provincial and the federal government here in New Brunswick, where leadership was shown by an industry. There was an initiative to take a close look at the industrial energy management potential in this province. That led to the establishment of Efficiency New Brunswick, which has won national and even international acclaim. Through industry efforts and with ongoing government support, they have been able to take on projects which are marginal, which do not have the necessary rate of return or have a long payback period. Quite frankly, rising energy costs are sapping the ability of companies to make the heavy capital investments that are needed to make real gains.

Those types of incentives and supports, either investment tax credits or direct incentives, are essential for the future of energy management in this country and the future sustainability of the manufacturing community. I want to really emphasize some of the comments that Mr. Mosher made, and what he demonstrated in real terms. This is $71 million over a short period of time in a very difficult marketplace. With that, I thank you.

The Chair: Thank you very much.

I am going to go first to a senator who was a great inspiration for our study, who has an ability that not all of us share, but wish we could, of seeing the whole forest and not being bogged down by the trees, and I speak of Senator Elaine McCoy.

Senator McCoy: I was just trying to catch up with you here, with what you are saying in terms of transforming how we use energy. I am very pleased to hear from a company of your stature. I do think that that is the first thing we need to look at, and I have been calling it the highest and best use of energy.

I am very interested in pursuing this a little bit more. Where I started with your presentation was on your page 6, which said you had 30 per cent energy as a percentage of your manufacturing cost. Then I asked myself "What kind of energy?" Perhaps you could just fill me in on that and be a little more specific. We could, for example, build a sidebar in our study as an illustration based on your experience and perhaps parlay that into being an example from which others might learn.

Mr. Mosher: Energy is really broken down into two main categories, electricity and fossil fuel or non-fossil fuel related energy. Electricity is just over 20 per cent of that. This was prior to starting our energy efficiency reduction program. By the time we are done, that wedge of the pie will be 3 or 4 per cent non-electricity related energy. Because of the efficiency programs, total energy will be down to about 25 per cent from 30 per cent. Of this, 20 per cent will be electricity and 4 or 5 per cent will be non-fossil fuel.

Senator McCoy: When you talk about eliminating the use of 400,000 barrels of oil, what were you doing with the oil?

Mr. Mosher: Burning it in a boiler to create steam or heat for the process. We have improved energy efficiency. If you have ever driven by a large manufacturing operation, you see a lot of stacks with a lot of waste heat.

Senator McCoy: Yes.

Mr. Mosher: We have basically recovered every BTU of excess energy that we could from stacks and drains and reconfiguring inside. Predominantly what we have done is a major rework of our entire systems internally and then converted any fossil fuel where we could to biomass.

Senator McCoy: Your own wood waste is what you use there.

Mr. Mosher: Correct.

Senator McCoy: Of course that meant you reduced your GHGs, which is another plus, as well.

Mr. Mosher: Correct.

Senator McCoy: That has been an industry-wide endeavour, I think?

Mr. Mosher: It certainly has as oil has run up to $150 a barrel.

Senator McCoy: As electricity has gotten more expensive.

Mr. Mosher: As electricity has gotten more expensive, yes, to drive up the non-electricity component.

Senator McCoy: One other question, I think, and then I will leave it because we are short of time today and others want to ask, as well. Maybe a request after that. What do you pay for electricity here? You would be a large industrial category.

Mr. Mosher: $67 a megawatt hour.

Senator McCoy: 67 cents a kilowatt hour?

Mr. Mosher: Or 6.7 cents a kilowatt hour.

Senator McCoy: 6.7 cents a kilowatt hour. Do you know what the residential rate would be?

Mr. Mosher: Prior to tax, about 10 cents, Mr. Cronkhite?

Mr. Cronkhite: In that range.

Mr. Mosher: In that range, 10 cents.

Senator McCoy: My other question is that, in 1999 or 2000 we went to the international climate change tables and lobbied very hard for including sequestration in the boreal forest to be included in the country calculations, and it was not. Did we not make some headway on that in Copenhagen?

Mr. MacDonald: It was included. Canada decided to opt out of inclusion because of Canadian Forest Service reports that indicated that overall we were actually a source of carbon rather than a carbon sink. That was largely because of the pine beetle and forest fires.

Senator McCoy: Yes.

Mr. MacDonald: At that time they decided to opt out. They also were quite encouraged by the opportunity that forest management had as part of the offset, as a separate offset program. That is where the concentration has been, more so than on the Kyoto rules around including or not including, but that is why we opted out at the time.

Senator McCoy: All right. If we were to get our staff to liaise with your staff and we could write you up as a case study, would you be willing to help us get the facts right and present it in a customer friendly way?

Mr. MacDonald: Sure.

Senator McCoy: Thank you very much.

Senator Grant Mitchell (Deputy Chair) in the chair.

The Deputy Chair: I am deputy chair, and I am also at the top of the list. I am going to defer to Senator Brown and then Senator Neufeld, and if we have time we will come back to me. Senator Brown.

Senator Brown: You talked about the useful heat that you get from some of your boiler plants and biomass. How far can you pipe that heat usefully? I am sure you use insulated pipe and so on. We were working on one of those in Calgary, and so I am very curious about how far you could usefully pipe that.

Mr. Mosher: That is a good question. I have been in a number of Scandinavian communities where they have piped it more than 15 kilometres.

Senator Brown: What heat range would you use? I mean, when you start out what would the temperature of your pressurized steam be, and then how much can you take out before you run it back through to reheat it?

Mr. Mosher: This is actually waste heat, so it is not steam. It is actually waste heat that is recovered in the process.

Senator Brown: It is hot water then?

Mr. Mosher: It is hot water. It is 150 degree hot water that most plants would have. You can pipe it through many homes. In a typical home, you are trying to set the temperature at 70 degrees Fahrenheit or 20 degrees Celsius. With 150 degree water, there is still more than enough motive force to pipe it long distances with a very small temperature differential.

Senator Brown: Would they these biomass boilers be dependable on a 24/7 basis or would they be intermittent?

Mr. Mosher: Most of these operations are 24/7 with less than one per cent forced outage.

Senator Neufeld: I want to go back to the carbon sink issue. I can appreciate what you said about the Canadian Forest Service. I think there was a bit of a disagreement about who owned the forest, too, which actually helped make some decisions, or rather hindered making some decisions on that. Would you agree with me?

Mr. MacDonald: Yes, I think you are probably right.

Senator Neufeld: I was wondering whether I was dreaming. The other thing is, in your tree planting process, how many trees do you plant for every one that you cut down? Do you have a number? Do you plant two or three? I think ours in British Columbia is three, three for every one.

Mr. MacDonald: I think ours is even higher than that.

Mr. Mosher: We always used to advertise three for every one that we cut. We have ramped up our tree planting program, so it would be slightly over three.

Senator Neufeld: It would be on average slightly over three. You say it is different between your private land and Crown land. Can you tell me why there would be a difference between private and Crown?

Mr. MacDonald: One of the things is fewer constraints. We have 20 per cent set aside on our private land to meet Sustainable Forestry Initiative standards and all the required certifications. On our Crown land in New Brunswick, there would be significant more constraints at the end of the day. It is also the policy around what they want to do.

we obviously look at it from a private sector perspective and we manage the land as aggressively as we can, whereas there are different standards and policies with respect to the Crown land and you have to respect that as a manager of that land.

Senator Neufeld: I can understand the thinning and the pruning and those sorts of things on your private land. You are saying you plant a higher ration of trees on your private land than you do on Crown land because of government policy? Is that correct?

Mr. MacDonald: Yes. We have more flexibility on our private land than we do on the Crown.

Senator Neufeld: The government here in New Brunswick tells you what to do?.

Mr. MacDonald: Yes, in New Brunswick.

Senator Neufeld: It tells you you cannot plant any more trees than that. Is that correct?

Mr. MacDonald: First, remember that we do not own the land.

Senator Neufeld: Yes, you do not.

Mr. MacDonald: You have a license. The government approves so much money per year for silviculture. You get an allocation of how much of that money is going to go to planting trees and where it is going. That determines how many acres you can replant. It is much more regimented.

Senator Neufeld: Yes. The allocation of money for tree planting is out of your own company, not from government, right?

Mr. MacDonald: For our private land.

Senator Neufeld: The industry where I come from actually pays for that.

Mr. MacDonald: Right.

Senator Neufeld: It is the same here?

Mr. MacDonald: In New Brunswick, the Crown allocates a certain amount of money each year for planting because once again, there is no guarantee you get the trees. That is the difference at the end of the day. I know that is the model they were looking at, how does that work. Because you do not have that assurance, the vast majority of people put the Crown money back into the silviculture because that is what is allocated.

The Deputy Chair: This has been a very impressive presentation and it is really interesting, I think, to all of us to hear what you have accomplished. Several years ago we had a group, the Forestry Association of Canada, make a presentation. They made the point that I think by 2007 your industry, the forestry industry, had reduced its emissions by 44 per cent under 1990 levels, arguing directly against this idea that you could not accomplish Kyoto. Your numbers are evidence that you have been a great part of that. How long do you think it will take you to actually make the $71 million you have invested? Maybe you mentioned it, but could you just reiterate?

Mr. Mosher: What price of oil would you like?

The Deputy Chair: I notice it displaces 400,000 barrels of oil, which would be at $80 a barrel, $32 million a year. Is that money that you have directly saved or the equivalent you have saved. At that price, you would pay it back in two years?

Mr. Mosher: Some of it is just pure displacement of oil to biomass, which of course has a cost to it. On its own without any of the federal or provincial programs we utilized, it would have been about a four-year return.

The Deputy Chair: It is just found money?

Mr. Mosher: Correct.

The Deputy Chair: You have alluded to the idea of offsets and so on.

There are two things. Are you actually now beginning to accumulate credits that you can sell internationally or that you can sell into a future Canadian cap and trade program?

Mr. Mosher: If there were a program in place, yes.

The Deputy Chair: Yes.

Mr. Mosher: We are now below the target that we would have had with still some projects left to come online.

Mr. MacDonald: The key factor there, to be quite honest, is what is the baseline?

Mr. Mosher: Yes.

Mr. MacDonald: If the baseline is 2006, absolutely. As you know, the baselines keep changing and so we get into a situation where people who were the early actors, early adopters, have a tendency to get penalized as things move on?

The Deputy Chair: You would prefer obviously an earlier baseline?

Mr. MacDonald: Yes.

Mr. Mosher: Yes.

The Deputy Chair: Is there any market for you in the European carbon market, which is $100 billion a year now? Can you sell there?

Mr. MacDonald: No.

Mr. Mosher: No.

Mr. MacDonald: Not according to our understanding of what we can do. You have to be a member state.

The Deputy Chair: So the $71 million and the recovery rate that you have just analyzed does not include what you might get if you were able to sell.

Mr. Mosher: That is correct.

Mr. MacDonald: That is correct.

The Deputy Chair: I should mention that we were in the U.S. last year as a committee and we met with a Democratic member of the House of Representatives who is directly involved in actually putting money into Brazil to people to pay them not to cut down their forests. The $30 million that it would cost this city to utilize your heat utilization program, how much would that save them in actual fuel costs? I am getting at how long it would it take them to get that back.

Mr. Mosher: That depends on the level of penetration. In their initial analysis picking up this hotel and some of the larger commercial buildings, it was $2.5-$3 million a year. What you really need to do is get a very deep level of penetration to all the new home construction and all the commercials, which is what most of the European countries do.

The Deputy Chair: What is the impediment, then? Is it simply up front capital cost?

Mr. Mosher: It is getting the infrastructure in place.

The Deputy Chair: Is there a way that other levels of governments could assist in that?

Mr. MacDonald: They have already gotten some fairly significant funding, I believe, from the Green Municipal Fund, the municipality fund. That is obviously a key to this. They are going to need some help for sure to make this worthwhile.

Mr. Plante: If I may add something. This is not an area that we are typically involved in directly, but it has to be understood that we are talking about municipal infrastructure which is displacing the price that citizens would pay for electricity, the cost of electricity. If the taxpayer is funding the implementation of municipal infrastructure, there would have to be some counterbalance on the ratepayers' side, as well. It is not quite as simple as all that. That is $30 million in infrastructure that a city that is struggling right now would have to find, either through the rate base or some other form.

The Deputy Chair: You mentioned in the discussion of the $71 million that you factored in incentives or subsidies from government. Would you have done some of these programs without initiative or incentive from government, and what were the programs that tipped you over to do it?

Mr. Mosher: The two main programs I talked about were the Pulp and Paper Green Transformation Program and Efficiency New Brunswick, which had a number of small programs. The short answer to your first question is that we would have done some components of the project, but that a significant majority of them would not have been done.

The Deputy Chair: Okay.

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

Senator McCoy: You did not tap into CIPEC, then? What does CIPEC stand for? Canadian Industrial something Efficiency.

Mr. Plante: Program for Energy Conservation.

Senator McCoy: Did you tap in? Are you members then?

Mr. Plante: CIPEC would not provide support for capital programs such as that. That is not necessarily its role. We would need a specific program offered through the federal government.

I would be remiss if I did not just speak a little bit with regard to the broader manufacturing sector. We have been very fortunate here in New Brunswick to have what they call our innovators, industrial energy innovators, and that has been going back more than three decades now. For the broader manufacturing sector, talking about energy use, electricity is in the order of about 10 per cent. Energy use goes up to from 10 to 30 per cent, typically divided half and half between petroleum products and electricity.

Senator McCoy: Yes.

Mr. Plante: You are trying to displace some of those fossil fuels to electricity. If it is originally fossil fuel generated, then it is still the same source.

Senator McCoy: Yes.

Mr. Plante: Payback periods for these types of programs typically run over the two-year benchmark. For some it can be five to ten year periods. The ability of some of these firms to access capital is severely restricted. That is why these types of programs are very important in terms of reducing that payback period and also providing access to capital. Although we have leadership here in terms of getting those types of programs in place, it is not necessarily the case right across the country. Nor is it necessarily the case when you start moving down into the smaller and medium industrials. In fact, we are working with Efficiency New Brunswick right now trying to design programming which will capture some of the opportunities out there.

It has long term benefits because it avoids a lot of the problems we are having to deal with, not only nationally, but internationally as well. That is a vision that I hope this committee does put forth.

The Chair: Senator Neufeld. This will be the last question.

Senator Neufeld: I am interested that you said in response to Senator McCoy's question that you probably would not have taken on these energy efficiency processes without government money.

How much of the $71 million that was invested was actual government money, taxpayers' money? When I look at it, and you are reducing 400,000 barrels of oil annually, at today's price that is close to $40 million. It would not have been two years ago, but even at $25 million a year, would it not make good sense for you to do that without a government subsidy? I am a little bit confused there. I mean when I look at $71 million invested and saved 400,000 barrels of oil, wow. It is a bit surprising, but maybe there is something else here that I am not understanding.

The Chair: That would be very unusual.

Mr. Mosher: It really talks to the state of the forest products industry at the moment.

Senator Neufeld: Pardon me?

Mr. Mosher: It really goes back to the state of the forest products industry at the current time. Typically for projects for significant capital projects, most companies would use a two-year threshold at best. Given the economic difficulties most of the forest products industry would be facing, it would even be shorter than that for significant capital. Most of these are multi-million dollar capital projects. In situations like that, the majority of companies would take a very short time horizon and very few of these projects would have met that requirement.

Senator Neufeld: I am not completely familiar with the pulp and paper industry in British Columbia, but I know a bit. They started this process a long time ago, before there were incentives, so that is what makes me wonder. I know that the industry changed over to using the biomass in their boilers. They produce 4,000 megawatts of electricity in British Columbia, which they consume themselves out of biomass, which used to be a waste. They just burned it in the beehive burners. The province said you cannot do that anymore. It does surprise me, and I understand the cyclical nature of your sales, too, but still those numbers look pretty impressive.

Mr. Mosher: The biggest proponent of both these programs has been the B.C. Forest Products mill operations.

Senator Neufeld: You still have not told me how much of the $71 million was government money.

Mr. Mosher: Oh, $30 million.

Senator Neufeld: $30 million?

Mr. Mosher: Right.

Senator Neufeld: Thank you.

The Chair: Thank you, gentlemen. It has been another very informative session. We are very appreciative of your appearance. We have one last session here this afternoon which we have to get to now, but I am going to adjourn the meeting.

(The committee adjourned.)