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

Issue 11 - Evidence - April 29, 2014

OTTAWA, Tuesday, April 29, 2014

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:03 p.m. to study non-renewable and renewable energy development including energy storage, distribution, transmission, consumption and other emerging technologies in Canada's three Northern territories.

Senator Richard Neufeld (Chair) in the chair.


The Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.

My name is Richard Neufeld, I represent the province of British Columbia in the Senate and I'm chair of the committee.

I would like to welcome honourable senators, any members of the public with us in the room and viewers across the country who are watching on television. As a reminder to those watching, these committee hearings are open to the public and also available by webcast on the website. You may also find more information on the schedule of witnesses on the website under "Senate committees." I will now ask the senators around the table to introduce themselves. I will introduce the deputy chair, Senator Grant Mitchell from Alberta.

Senator MacDonald: Michael MacDonald from Nova Scotia.


Senator Massicotte: Paul Massicotte from Quebec.

Senator Boisvenu: Pierre-Hugues Boisvenu from Quebec.

Senator Seidman: Judith Seidman from Montreal, Quebec.


Senator Black: Doug Black from Alberta.

Senator Wallace: John Wallace from New Brunswick.

The Chair: I'd also introduce our staff beginning with our clerk Lynn Gordon and our two Library of Parliament analysts, Sam Banks and Marc LeBlanc.

On March 4, 2014 the Senate authorized our committee to undertake a study on non-renewable and renewable energy development including energy storage, distribution, transmission, consumption and other emerging technologies in Canada's three Northern territories. Today marks our second meeting on this study and I am pleased to welcome the witnesses.

First, from Aboriginal Affairs and Northern Development Canada, we have Michel Chénier, Director, Petroleum and Mineral Resources Directorate; Catherine Conrad, Director, Environment and Renewable Resources; and from Natural Resources Canada, Terence Hubbard, Director General, Petroleum Resources Branch, Energy Sector.

I will begin with Mr. Chénier. You have the floor.

Michel Chénier, Director, Petroleum and Mineral Resources Directorate, Aboriginal Affairs and Northern Development Canada: I would like to thank the committee for providing the opportunity to share the department's perspective on energy developments in Canada's North, in particular respecting northern oil and gas resources.


I am Michel Chénier, the Director responsible for Petroleum and Mineral Resources Management at the Department of Aboriginal Affairs and Northern Development, as the chair mentioned.


My remarks will outline how the North is home to world-class energy supply, an energy source that has potential for the Northern territory and Canada at large, and Aboriginal Affairs and Northern Development's role in the management of oil and gas resources. The responsible management of Canada's Northern petroleum and mineral resources supports the Government of Canada's Northern Strategy. Specifically, it supports the economic and social development of Canada's North. It's conducted in a manner that balances Northern and national interests in the context of Aboriginal land claims.

It promotes responsible resource development in the North as well. It produces jobs for today and generates long-term social, cultural and economic benefits for Aboriginals and Northerners well into the future. It also ensures that developments occur in a way that respects the traditional lifestyle of Aboriginal communities and safeguards the environment for the benefit of future generations.


Northern Canada is rich in oil and natural gas resources. Approximately 38 per cent of Canada's remaining marketable resources of natural gas are located in Northern Canada, as well as 35 per cent of the remaining light crude. These figures do not include the potential in unconventional resources such as shale oil and gas.

In earlier phases of exploration, more than 1,500 wells were drilled which led to abundant discoveries. Some discoveries were developed for production to support local energy consumption — the Ikhil gas field, for example, which feeds the town of Inuvik, or Imperial Oil's Norman Wells installation, which contributes to the town's energy supply. Those two fields are now declining and alternative supply options are in the works.

These situations exemplify that much remains to be studied about the resource potential and additional associated reserves in many of Canada's northern petroleum basins, especially those which have not yet been tested through modern exploration.


Petroleum management in the North is legislated under the Canada Petroleum Resources Act and the Canada Oil and Gas Operations Act. Land, royalty and benefit matters are managed by Aboriginal Affairs and Northern Development on behalf of the minister pursuant to this act.

The National Energy Board of Canada administers the Canada Oil and Gas Operations Act and the associated technical regulations. This arrangement provides for organizational separation between policy, land management and royalty roles of my department and the technical, regulatory and advisory roles of the National Energy Board of Canada. The National Energy Board of Canada takes the lead role in approval of operations, including safety and environmental decisions.

While offshore oil and gas reserves remain under federal authority, the northern territories are now more than ever strongly engaged in responsible resource management. For instance, a few days ago on April 1, 2014, the Government of the Northwest Territories assumed responsibilities for onshore land and resource management in the territories with the coming into effect of the Northwest Territories Devolution Agreement Act. In the Yukon, the transfer of land and resource management responsibility occurred in 2003. In Nunavut, we are continuing discussions toward a devolution agreement.

Devolution gives Northerners control over resource development decisions, among other things. For example, the Northwest Territories Devolution Agreement provided for the transfer of over 100 oil and gas licences from Canada to the Government of the Northwest Territories, including several production licences as well as numerous exploration licences in what is referred to as the Sahtu Settlement Region. The licences are attractive to industry for its unconventional shale potential.

These new responsibilities allow the territories to take full control over exploration, production and supply of oil and gas to Northern communities and beyond.

In the regions of continued federal jurisdiction, Aboriginal Affairs and Northern Development Canada officials worked to create the conditions for a positive investment climate that enables the private sectors to successfully compete in the North. There is a well-established, market-driven oil and gas issuance process with an annual opportunity to obtain oil and gas rights through a competitive leasing process. This process of regular calls for bids increases investment confidence in Canada's frontier lands.

Prior to initiating each rights issuance process, the department undertakes consultations with Aboriginal groups' land claimants to seek views on environmental and cultural sensitivities. Community support and knowledge is essential for companies exploring the North. Mutual understanding among governments, companies and communities is key to realizing the economic and social benefits of these new investments.


Now I would like to turn to some of the more noteworthy developments under federal management that are promising to reshape the north and to open up new economic opportunities for employment, training and business.


The Beaufort Sea has well-known petroleum potential with over 60 discoveries made to date. In addition, several companies hold exploration licences with what are referred to as cumulative work commitments of over $1.8 billion. Major companies such as Imperial Oil are planning work and have filed extensive drilling proposals with Northern regulators. This drilling proposal is a first for Arctic deep waters and is the first after the release of the National Energy Board of Canada's 2011 report on offshore drilling in the Canada Arctic. That report confirmed that the NEB's regulatory regime can address matters related to the safety of Northerners, workers and the environment.

Stewardship will always be a key consideration in resource management that requires accurate environmental and other scientific, social and economic data to support decision-making. We are always looking for innovative programs to advance responsible development and to increase Canada's knowledge of the North.

One example is the Beaufort Regional Environmental Assessment initiative, with funding of $21.8 million over four years, aiming to ensure that governments, the Inuvialuit people, regulators and industry are ready for renewed activity in the Beaufort Sea.


To support strong and responsible resource management, last January 2014, the Minister of Natural Resources introduced Bill C-22, the energy safety and security act, which proposes to modernize safety and security for Canada's offshore oil and gas industry, ensuring a world-class regulatory system and strengthening safety and environmental protections. The proposed changes focus on four main areas, prevention, response, accountability and transparency, and they help to further strengthen safety and security to prevent incidents and ensure swift response in the unlikely event of a spill.

Industry activity in Nunavut is limited with respect to oil and gas exploration. While potential exists, reserves in the High Arctic and eastern Arctic offshore are not currently subject to leasing or exploratory drilling. A seismic program in the eastern Arctic offshore is currently before the National Energy Board for consideration.


In preparation for this future potential interest in Canada's eastern Arctic, Aboriginal Affairs and Northern Development Canada is initiating discussions with the Inuit territorial and federal stakeholders on the future of oil and gas exploration in this region. These discussions will form the basis of what is referred to as a "strategic environmental assessment" for the region and will be used to guide any future decisions in that area.

Even though Nunavut does not currently have oil and gas exploration, mineral exploration is attracting a significant amount of industry interest. The Kiggavik Project, for instance, is expected to supply 40 per cent of Canada's uranium. In addition, coal deposits are known on Axel Heiberg Island, Ellesmere Island and Baffin Island. Further exploration and analysis is required to fully understand these resources that exist in Nunavut.

The North is indeed rich in natural resources. Most of the resource projects are situated far away from communities and must factor in all costs associated with stand-alone power generation, for instance. The lack of roads and transportation, the vastness of the lands, the scarcity of energy and the rarity of skilled labour, combined with the small population and the absence of existing processing facilities, all weigh heavily on development projects and are a combination of significant challenges.

As a result, on the energy side, costs are high and the complexity of any given project is amplified. Looking to realize the resource potential, mining companies in Canada will increasingly have to locate and develop new mines in very remote areas that lack many basic components of public infrastructure.

In conclusion, the northern resource potential is a key asset for Canada but is still very much at the embryonic stage of exploration and development, offering opportunity for economic and social development through investment, jobs, training, infrastructure as well as revenues from revenue resource development.

Given this world-class potential, throughout the Arctic, it is imperative that exploration continues responsibly and that Northerners continue to be actively included and benefit from development.


Thank you, and I am now available to answer your questions.


The Chair: Thank you. We will turn to Ms. Conrad now.


Catherine Conrad, Director, Environment and Renewable Resources, Aboriginal Affairs and Northern Development Canada: First, I would like to thank you for this opportunity to discuss renewable energy in the north. I am Catherine Conrad, the Director responsible for Environment and Renewable Resources in the Northern Affairs organization at the Department of Aboriginal Affairs and Northern Development, which includes our ecoENERGY program for Aboriginal and northern communities. That program has, for several years, provided funding for renewable energy initiatives, which I am going to talk to you about today.

I am very pleased to be here today to brief you on energy in the north. For your consideration going forward, I would like to begin by describing some context for each territory and challenges that northern communities face with regard to energy sustainability. Then I will describe what we have been doing to help address some of those issues through the development and implementation of renewable energy projects, and similarly touch on the developments surrounding the Canadian High Arctic Research Station, or CHARS, and its new programming.


According to the National Energy Board, the North accounts for only 0.3 per cent of Canada's population and energy use, but with a population of just over 115,000 people dispersed over 3.5 million square kilometres, the cost and logistics of energy distribution are obviously major issues. Energy costs are major contributors to the high cost of living in the North and the per capita energy use is almost twice the Canadian average. All of the 80 communities located in the territories are considered off-grid because they are neither connected to the North American electrical grid nor to the pipe natural gas network.

This said, 24 communities in Yukon and the Northwest Territories are connected to one of several regional hydroelectric grids and these are backed up with diesel support for peak loads and backup power. Two communities in the Northwest Territories are also supplied with power from natural gas generators. My colleague spoke a little bit about Imperial Oil, which will unfortunately be discontinuing this supply in coming years. The remaining 54 communities of those northern 80 rely solely on diesel power generation in isolated grids. As such, the communities in the North generally rely heavily on imported refined fossil fuels for meeting their electricity and heating needs.

In 2011 it was estimated that Northern communities consumed 76 million litres of diesel fuel for power generation and 219 million litres of fossil fuel, diesel or propane for heating production, resulting in a total of over 800,000 tons of greenhouse gas emissions annually.

Skipping over some of the details in the next paragraph, I will end by saying that in particular for Nunavut, it must be noted that the electricity needs for all 25 of its communities are fully met by diesel generation.

Outlining the specific roles and responsibilities associated with energy generation, storage and distribution in the North is complex, and energy regimes differ in all three territories. They vary based on the degree of advancement of devolution; Aboriginal rights negotiated through treaties, land claims, self-government agreements; and generally due to the geographical and renewable or non-renewable realities of each territory.

Aboriginal Affairs and Northern Development Canada does not have a direct role in providing heating or electrical generation in the North. The territorial governments, due to their legislative roles, mandates and proximity to Northern citizens have a direct role in ensuring that the local energy supply, as well as the overall social and economic well-being of the regions, is looked after. Each of the territorial governments has established public utilities that are charged with developing energy supplies for their territories, and invest in generation, transmission and distribution of energy when private corporations will not.

Yukon and the Northwest Territories also have privately owned utilities, but in Nunavut the territorial government imports and distributes all petroleum products because of their importance to the overall energy requirements of the territory.

Although dependent on the level of devolution in each territory, Aboriginal Affairs and Northern Development Canada has a residual role in enabling the development and implementation of energy products through its roles and responsibilities related to environment, lands and water management. As my colleague mentioned, the Yukon Territory was devolved more than a decade ago and the Northwest Territories only this month, on April 1, 2014.

Other federal departments and agencies share in the responsibility related to energy in the North.

To start off, and most notably, the energy sector of Natural Resources Canada is the lead on energy policy for the Government of Canada, a leader in clean energy research and technology development and the knowledge centre for scientific expertise on clean energy technologies. The National Energy Board also has a goal to promote safety and security, environmental protection and efficient energy infrastructure in markets, and the Canadian public interest within the mandate set by Parliament in the regulation of pipelines, energy development and trade. The Canadian Northern Economic Development Agency, or CanNor, has responsibility for acts to improve the economic base for the North, which is largely dependent on the development of natural resources, including oil and gas reserves as described by my colleague.

There are economic, social, environmental risks and liabilities associated with energy in the North. Economic challenges include underperforming energy infrastructure, disruptions in energy supply and limitations or barriers to economic development associated with these energy supply or infrastructure problems, and increasing costs of fuel and transportation costs for that fuel and its delivery. Social challenges include increasing demand associated with rapidly increasing population and emissions affecting local air quality with direct impacts on human health. Environmental challenges include fossil fuel spills associated with transportation, local storage and fuel transfers, potentially resulting in environmental damage to sensitive habitats and the associated flora and fauna.

In addition to climate, geography, community remoteness and a dispersed population with low density and small loads all contribute to a unique pattern of energy use that must be considered when developing or considering renewable or other energy projects, strategies and solutions.

Despite these challenges, renewable energy opportunities definitely exist, from small $15,000 solar heater-type installations to much larger, half a billion dollar hydro projects and related potential. There is great potential for improving Northern energy sustainability and expanding economic development in the territories. Addressing the North's energy challenges will ultimately support each of the four pillars of Canada's Northern Strategy, which are protecting the environment, promoting economic and social development, exercising Canada's sovereignty, and ultimately in improving and evolving governance.

Renewable energy sources will contribute to greater energy security and sustainability. Locally managed energy systems can promote local economic development opportunities, facilitate private sector partnerships, increase employment and skills development and meet the demands of growing populations. Increasing renewable energy supply will reduce greenhouse gas and air emissions, reduce fuel spills and contamination, thus improving human health and preserving the local environment.

A reduced reliance on imported fossil fuels coupled with improved energy efficiency reduces territorial, community and residential energy costs. In general, improved and diversified energy infrastructure will result in sustainable and secure energy sources, improved economic opportunities and stronger more sufficient Northern communities.

So with that, let's turn to what AANDC has been doing. Through our climate change programming, our department has been fostering the development of energy efficiency and renewable energy projects at the community level since the early 2000s. Over the years, a series of programs funded awareness and capacity development on energy efficiency, renewable energy, wind monitoring, feasibility studies, energy efficiency measures in community buildings and community energy planning, both in the North and for Aboriginal communities throughout Canada, with a growing focus on off-grid communities.

It's worth noting that the challenges we are speaking of today for the North are also the same ones that are experienced largely by Aboriginal communities or other communities in the northern parts of provinces like Manitoba and Ontario that are off-grid.

Since 2007, our department has been implementing the ecoENERGY for Aboriginal and Northern Communities Program as part of the government's Clean Air Agenda. The program funds the installation of small renewable energy technologies into community buildings and the feasibility work for larger renewable energy projects. The program funds roughly 30 projects per year at an average of $100,000 per project.

The first four-year iteration of the program finished in 2010-11, but the program was renewed for five years in 2011. In its seventh year of operation thus far, the program has gradually increased its presence in the North and its focus on supporting off-grid communities both north and south of 60. The program is working directly with territorial governments and other stakeholders to support the development of community-based renewable energy opportunities. In the North, the ecoENERGY for Aboriginal and Northern Communities Program has funded 36 projects in 25 communities since 2007, with a total investment of $3.2 million. That's $3.2 million among the $18 million spent in the program overall during this time.

Of these projects in the North, roughly one third were for solar photovoltaic-type installations; roughly a third were residual heat or energy planning/energy efficiency-type activities; and the remainder focused on biomass, mostly in the Northwest Territories, and wind projects in the Yukon, as well as one geothermal project again in the Yukon.

Let me give you three specific examples. Of particular interest in the Yukon, the ecoENERGY program provided $185,000 for feasibility work on a 300-kilowatt wind-diesel project by the Kluane First Nation for the diesel communities of Destruction Bay and Burwash Landing. The proposed wind project, planned for commissioning in 2015, is expected to displace 160,000 litres of diesel per year, or about 27 per cent of the diesel for the two communities, making this the first medium-penetration wind project in the North.

I note, however, that this diesel displacement only represents .05 per cent of the Northern diesel use overall across the North.

In Nunavut, the program also has supported almost $1 million for feasibility work in residual heating and district heating projects in communities. Qulliq Energy Corporation, the public utility of sorts for Nunavut, has successfully implemented residual heat/district heating systems in five communities that displace approximately 2.5 million litres of fuel annually. That's more like 1 per cent of the Northern diesel use, again across the North, and is starting to make a significant impact.

In the Northwest Territories, the ecoENERGY program has supported the Tetl'it Gwich'in Council biomass heating project. The community has implemented a biomass heating system, connecting two buildings, with plans for expanding the heating system for new customers in three to five years. The community is also creating local employment and economic development opportunities and is building community capacity to manage the business of operating a heating plant and to harvest, produce and supply locally sourced biomass.

On the latter point, AANDC's Strategic Partnership Initiative has also supported this development of a new industry with $1.2 million to create unique partnerships between the department, the Government of the Northwest Territories, CanNor and NRCan, in order to support this new initiative — which is a first for Aboriginal ownership in the North — for this biomass industry.

In addition to the efforts with respect to the ecoENERGY program and the Strategic Partnership Initiative, our department received the mandate to deliver on the Canadian High Arctic Research Station for which construction is expected to begin in fall 2014. The station was announced in Budget 2007 and will be a year-round, multidisciplinary research facility on the cutting edge of resource development and environmental issues in the Arctic, with start-up planned for 2017.

Through the research program, the station will map renewable energy sources at scales appropriate to investment, provide a platform and funding for testing and refining renewable energy technologies used south of 60 to work under Northern conditions, and will foster research into renewable diesel integration systems and storage systems for various renewable sources, such as wind.

In closing, I hope to have given you at least a flavour of the challenges and diversity of roles and responsibilities in the North and Aboriginal Affairs and Northern Development Canada's specific contributions to the Northern energy programs. I thank you again for this opportunity, and I look forward to taking your questions.

The Chair: I appreciate both of those submissions. I will ask a few questions before we start going around the table.

Michel, you said that the North contains 38 per cent of the natural gas in all of Canada and 35 per cent of the oil. Are those proven reserves or estimates?

Mr. Chénier: I'll preface my answer by saying I'm not a geologist, but these are proven resources, yes.

The Chair: Okay. I'm fairly familiar with oil and gas. Could you, then, tell me what the proven reserves — it's hard for me to imagine proven reserves out of 1,500 wells have more oil than we have in the oil sands. Those numbers confuse me a little bit. Can you tell me what the numbers are? If you don't have them, I'm fine with that; you can get them to us later through the clerk. I would like to know what the proven reserves are for natural gas and the proven reserves for oil. If you could do that, that would be great, unless you have them right now.

Mr. Chénier: Probably the safest approach is for me to provide this as an undertaking. As you know, there are various categories of reserves that exist. When we get into the non-traditional types of oil and gas, such as shale gas or oil sands, those are other categories in themselves. I'd be pleased to provide the committee with detailed statistics on all aspects related to oil and gas geology in the North.

The Chair: That would be great. If you split it out between conventional and unconventional, that would be better yet.

Can you also tell me, in regard to drilling in the Beaufort, are the regulations much different than they are for offshore Newfoundland?

Mr. Chénier: Actually, the regulatory framework is very similar to the East Coast. We have the same set of regulations and legislation that exist. The same principles are applied in both areas; that is, we have a goal-oriented regime that's embedded in the regulation. Obviously, there are different operating environments in each sub-region, if I can refer to them as that, but on the whole, the legislation that exists on the East Coast and in the North is very similar. In fact, we work closely with our colleagues at Natural Resources Canada and our colleagues from the East Coast provinces to review and develop legislative and regulatory changes when they're warranted.

The Chair: The Beaufort Sea and the offshore of Newfoundland or Nova Scotia are much different weather-wise, for one thing. I know they have ice in Newfoundland, but they have a lot more ice in the Beaufort. I'd be interested if you could provide us with the differences instead of all the regulations — we can get those — but where the significant differences are between drilling in the High Arctic or drilling offshore of Nova Scotia or Newfoundland. I'd like to see what those differences are. That's for deep water in the Beaufort, not just offshore a little ways. You're talking about deep water, right?

Mr. Chénier: Yes. The current plans in the Beaufort Sea are for drilling in what are referred to as the deep offshore — depths that are significant. Again, this is probably more suitable for an undertaking; I can come back to the committee with some documentation on specific differences.

I would note that the regime is oriented to dealing with specific applications and plans put forward by companies. Each one is in a different location, and often plans and forecasts use different types of equipment, and obviously then the regulatory oversight is very much in tune with those specific plans put forward by industry.

The Chair: I appreciate that. Thank you for bringing that up. I want to add that in January and February it's a lot tougher climate in the Beaufort than it is offshore of Nova Scotia.

That would be very helpful if you could provide that information.

To Ms. Conrad, I have one question. Could you tell us where we could find a list of the things that you explained, and what kind of federal money was applied to each one of those projects? If that isn't too much work — if you could do that for us?

Ms. Conrad: Yes. I believe most of our projects are already posted on our website for the ecoENERGY program, but I don't know if all the specifics are there. We'll certainly provide something in terms of a detailed listing.

The Chair: If it's already there and up to date, just let our clerk know where she can find that. She probably knows already where to find that. That would be great.

Ms. Conrad: Will do.

Senator Mitchell: Thanks to both of you. It's been perfect for a sort of base as we begin this important study. You've laid out the issues really well.

My first question is to Mr. Chénier. It strikes me from your presentation that, in the North, the government — your department, perhaps — is taking the lead role in consulting with Aboriginal and Inuit groups, First Nations and others, which seems to be a model that's different than what's used in, say, the case of the Gateway Pipeline proposal, where it seems the lead has been taken more by industry, by the company. I'm wondering whether that's just for structural reasons, capacity reasons, or whether it was a conscious decision to do it differently.

Mr. Chénier: Thank you for your question. I'll try to clarify my comments. I was referring specifically to consultations that occur before the Minister of Aboriginal Affairs and Northern Development actually issues oil and gas licences, which is essentially the tenure instrument. Following the issuance of this tenure instrument, we have private sector interest holders who will have specific operational plans associated to their exploration activities, and the private sector, then, is expected to undertake a significant amount of consultations as well, at that particular time, on the very specific operational plans put forward. To summarize, consultations occur at every step of the planning and operations. What I was referring to was specifically the consultations that occur prior to issuing oil and gas leases.

Senator Mitchell: Thanks for that clarification.

My second question is to Ms. Conrad. I was struck that all 25 communities in Nunavut receive their electricity through diesel, and yet, at the same time, there is progress to this district heating. I'm assuming, first, that that district heating is excess heat from the generation of the electricity, and, second, I'm asking: Why would it be that there isn't more of an effort or more progress being made to displace diesel production of electricity?

Ms. Conrad: The first part of your question is to answer yes, you're right. The residual heat is capturing the heat from the actual diesel generators. I think there's a great opportunity there, and I think there's more that can be done. It's stuff that makes sense and is very economically feasible for the particular situation of Nunavut, which gets to the other part of your question: Why is there not more renewable energy there? I think the great distances of their communities, the size of their communities, makes this particularly challenging in Nunavut. I think, generally, the diversity of the challenges that they face as a territory probably also brings conflicting interests and priorities that make it difficult to invest in renewable technology changes, which I think you would realize generally represent a fairly significant upfront investment. I think raising the capital for technological changes for renewable energy projects is not an insignificant challenge for these smaller communities, which are evident in Nunavut in particular.


Senator Boisvenu: Thanks to the three of you for being here and for your very interesting testimony.

Mr. Chénier, in your brief you mentioned municipalities whose resource fields will soon be depleted. Are they looking at alternative solutions? How are they managing the situation? It must be stressful for those people to see that their energy sources will one day be exhausted. Is a plan B in the works?

Mr. Chénier: Yes, I thought I should mention those two situations in two specific communities. Discussions and efforts are under way to develop a plan B. Talks are being held among several stakeholders to promote lower-cost solutions for users and, in the longer term, to look at how they can supply themselves from other fields around those communities. They are looking at two situations, one short-term and the other long-term.

There is energy potential around these communities and other communities farther north. It could be characterized as a long-term opportunity.

As my colleague mentioned, there are short-term alternatives, more conventional resources such as diesel, importing propane gas and other energy sources, which can be made available to users specifically in those two communities.

Senator Boisvenu: These people live in a territory where it is cold all year long, or nearly so. Do families pay the entire cost of the energy they use? For example, are heating costs borne entirely by families, or do the federal government and territories partially subsidize them?

Ms. Conrad: In the Northwest Territories, the government was, and I believe still is, offering a subsidy program for electrical and heating costs. Apart from that program, I believe that families must bear the costs.

Senator Boisvenu: Could you provide us with data on the contributions made by the territories and the government to cover energy costs? If you administer an energy savings program, but the government supports part of it, that is not an incentive for people to save energy. It would be interesting to see how much it would cost the government per region to support those families.

Ms. Conrad: We can send you that information.

Senator Boisvenu: Ms. Conrad, you say that renewable energy is increasingly being developed. I suppose you are referring here to hydroelectric power, wind energy and wind-diesel, which is also very effective. What is the current percentage of energy produced, or rather used by families, from those methods relative to conventional methods, that is to say from hydroelectric and wind power as opposed to diesel generators? What is the percentage of energy used from those sources?

Ms. Conrad: Of the 80 communities, 24 have access to energy from hydroelectric power stations. We mentioned two in the Northwest Territories that currently have access to natural gas. All the others rely on conventional sources.

Senator Boisvenu: Has a plan been established to convert those users to natural gas, hydroelectric power or wind energy?

Ms. Conrad: Every area has strategic plans for wind energy or for hydroelectric capacity.

Senator Boisvenu: But there is no overall strategy?

Ms. Conrad: There is no overall strategy for the north. Responsibility falls to each of the territories and is related to the contributions I mentioned from the various federal programs on these matters.


Senator Black: Thank you both for laying the table for the matters that we need to discuss over the next number of weeks. I found it extremely helpful. I'd like to build on the questioning of the chair and the deputy chair, if I may, please, starting with renewables, if possible, Ms. Conrad.

First of all, what I'd like to do with you — because I'm trying to understand the magnitude of the issue here — is enter a discussion with you around potential possibilities, and then you just comment, as frankly as you possibly can, whether that does or does not make sense.

The starting proposition that I have for you is: For any renewable asset that will be developed in the territories, is it the view that the Government of Canada would be the funder for those assets?

Ms. Conrad: I think it is.

Mr. Chénier: See you in the North.

Ms. Conrad: I can certainly say the question is asked regularly of the federal government. Infrastructure Canada or others could probably speak to that more directly. Sometimes those questions come through discussions with Aboriginal Affairs and Northern Development, and they are pointed to various federal government departments and programs.

Senator Black: If the Government of Canada did not underwrite the cost for renewable, could they be developed?

Ms. Conrad: Again, I think that's highly dependent on what the specific project is. As I indicated, there's a wide diversity of types of investments and projects that can be created.

Senator Black: We can let that go. That's helpful.

I'm going to put a couple — or more — potential alternative sources of energy to you, and can you just comment, if you will, as to whether or not they make sense.

The first one, in no particular order, is mini hydro. What is your view of run-of-the-river projects?

Ms. Conrad: Certainly the Government of the Northwest Territories has a specific hydro development strategy, and I understand it is looking to focus specifically on run-of-the-river. There has certainly been a lot of potential hydro development identified in the North, across all the territories, and small hydro is certainly among that mix.

Senator Black: How about wind?

Ms. Conrad: Wind energy experience I think is mixed at this point. Probably the most successful example is Diavik mine's four turbines. It's just under a 10-megawatt experience that has been operating, and I was told it had a return on investment in the 10- to 15-year range. I think it is a positive demonstration there of a fairly large wind capacity. Others have been less successful, I would say mostly because of challenges with maintenance and dealing with the Northern climatic context.

Senator Black: What about the possibility of a tie-in from Muskrat Falls in Labrador?

Ms. Conrad: I don't know that I could comment on that.

Senator Black: Fair enough. It's speculative. It's clearly out there. But is it a possibility?

Ms. Conrad: I think I would have to get back to you on that. I really don't know. The only comment I would make is transmission costs are obviously enormous.

Senator Black: You bet.

Ms. Conrad: I think you're talking about something that would have to cross the ocean in some way, shape or form.

Senator Black: Or go under.

Ms. Conrad: Or go under.

Senator Black: I'm just trying to explore our range of possibilities. The City of Toronto is now doing heating and cooling by accessing heating and cooling under Lake Ontario. Is there a possibility projects similar to that could basically use the heat of the earth to heat homes and businesses? Have you looked at that?

Ms. Conrad: In terms of geothermal projects, we have funded one which was assessing the use of geothermal heat for school application. I don't believe the project is, at this point, far enough along to determine whether or not it's going to go forward. It is fairly recently funded.

Senator Black: A possibility, perhaps?

Ms. Conrad: It is a possibility.

The Chair: Senator Black, one more question and we'll have to move on.

Senator Black: I'll go to the second round. Thanks, it was very helpful.


Senator Massicotte: I am going to continue somewhat in the same vein. The purpose of this meeting, at least for me, is to establish an overview of the situation. We are planning a trip to the north in an effort to understand the overall situation, factors and consequences.

At first, I believe that committee members — and this is definitely my case — were very much concerned about the environment and reducing CO2 levels. Now, however, we are also very concerned about all these great green projects that are appearing and that cost the government of a lot of money in grants. Some provinces have good programs and are facing costs in the several billions of dollars.

When you look at all the new projects in the north, the idea is to replace diesel generators, for example, but are all these other projects practical? Is a major grant necessary for the project to be cost-effective? Are these projects cost-effective or are people still hoping that someone else will pay?

Ms. Conrad: I believe the projects we have implemented show that these investments can be cost-effective. Once again, however, that depends on every individual evaluation, every community and circumstances on the ground. I believe it is ultimately more difficult to find funding to establish renewable energy programs and technologies.

Senator Massicotte: If it is cost-effective and can be paid for by consumers, I do not understand why you would not be able to find funding. Is this based on unrealistic assumptions that scare investors?

Ms. Conrad: Once again, I cannot say that is the case of all projects, but I believe that is part of a dynamic that we also see in the south and that is therefore not unique to the north, and that is that these projects become cost-effective over several years, sometimes over 15 or 20 years. It may be hard to summon the will to make these investments, which will generate returns over the quite long term, when conflicting priorities are involved. This is a significant issue for many of these projects.


I don't know if perhaps my colleague from NRCan could speak to that point. Again, it is the time delay in terms of recovery of initial investments for renewable energy technology programs, which is not unique to the North but may be exacerbated in the North.

Terence Hubbard, Director General, Petroleum Resources Branch, Energy Sector, Natural Resources Canada: Certainly. It's obviously one of the bigger challenges in terms of adopting new technologies in the North. NRCan is quite active in terms of our research and development agenda, looking at new technologies and opportunities to support deployment of some of these new technologies to facilitate new renewable energies in some of these remote communities.

In particular, some of the Northern mines offer an opportunity to deploy and test new equipment in a setting where we can provide some learning and opportunities to test some of these new practices that can be deployed on a larger scale going forward, like working to identify small, efficient biomass power technologies for remote communities. We've started to have some conversations with the Canadian Gas Association as well in terms of the potential for LNG or compressed gas to support Northern mining operations. There's also the work that was mentioned earlier in terms of wind and photovoltaic technologies.

Obviously, the payback period on these investments is a key consideration, with the higher costs of conventional fuels these days providing increased incentive to look at these new technologies and providing increased impetus to move more quickly to accelerate the development of these technologies going forward. But the high capital costs are obviously —


Senator Massicotte: A lot of diesel generators are being used to produce electricity. Are the reasons for developing other energy sources related to cost or the environment? I understand the cost is nearly twice that in Quebec. Is that not true?

Ms. Conrad: The investment cost?

Senator Massicotte: Diesel.

Ms. Conrad: The cost of diesel is a motivator; it is certainly rising constantly, and the risks inherent in having to import that fuel are factors that increase interest in renewable energies and technologies. So is it that aspect or the environmental benefits that make these projects appealing? I believe both are contributing factors. I do not know whether one contributes more than the other.

With your permission, I would like to go back to your other question. The idea of demonstrating technologies in the northern climate is important. This is a major risk factor. I believe that the investments planned for the CHARS program would afford us more ample opportunities to demonstrate technologies in that environment. These technologies have been tested, but not necessarily in that extreme northern environment.


Senator Seidman: Ms. Conrad, I will ask you a little more about the Canadian High Arctic Research Station that you mentioned in your presentation and also discussed in the State of Northern Knowledge in Canada report that we have now. It says that there is an identified need to prepare for large-scale resource development in the North, including mapping and surveys.

You did mention the Canadian High Arctic Research Station will map renewable energy sources. Could you please explain a little further what this process will involve? Why is this so important in the North?

Ms. Conrad: I am certainly not familiar with the specifics that are planned for CHARS in this regard and could follow up with colleagues in order to get you the details. Generally speaking, in terms of mapping renewable resource potential, we're talking about doing wind studies and doing geothermal potential analyses and, again, looking at those types of possibilities. We talked about hydro as well.

I think that's been in general largely done for the North. As I understand, the interest CHARS is proposing is to scale that down to the community specific level. As I've indicated in other responses, it really comes down to a case-by-case assessment of what's feasible and what's not and what has a good return on investment for each community.

Mr. Hubbard: I have a couple of comments on the mapping aspects. NRCan also has its geo-mapping for energy, minerals and mining program that refunded last year an additional $100 million over the next seven years to support mapping and identification of Canada's natural resource potential in the North. It's estimated for every dollar of federal geoscience activity to identify these resources it will facilitate or attract an additional $5 of private sector investment in exploration activities.

As Mr. Chénier mentioned earlier, the potential of our northern resources is largely untapped at this point in time and these investments to fully identify our resource potential and support private sector investment will help to tap that potential going forward.

Senator Seidman: You're saying that energy resources in Canada's northern territories are not mapped out to any great extent, if I understand you correctly.

Mr. Hubbard: To the extent of exploration activity south of 60 or other resource rich countries, the North is very much untapped. As we accelerate our exploration activities, we anticipate that those proven resources that Mr. Chénier was talking about in his presentation will only increase going forward as we have more and better information on the geological formations and the potential in the North.

Senator Seidman: Have you targeted particular resource assessments in particular areas at this point? Have you targeted areas for mapping?

Mr. Hubbard: The way the program works our colleagues work closely with private sector and territorial governments to identify regions and opportunities with the most promising resource potential and they begin with those areas. In terms of this new funding announced last year, they are in the process now of identifying those priority activities to move forward in the years ahead.

Senator Seidman: Doing the mapping is obviously important and critical for future development.

Mr. Hubbard: Certainly it provides not only a better idea of the resource potential, but it will also support governments going forward in terms of supporting the responsible development of those resources going forward in terms of understanding.

Senator Seidman: Mr. Chénier, I think you have touched on this but I wish to ask you about the whole issue of social licence and development in the North. I will be specific and ask this: Are companies required to maintain a standard of social licence that's particular to the uniqueness of the North?

Mr. Chénier: Thank you. Yes, that's a very pertinent question. Clearly the support of communities and partnerships developed on many levels with the communities is really key to have that, as you referred to it, appropriate social licence to operate.

As in the rest of Canada, there are many interests that need to be balanced and these interests are well understood in northern communities as well. I would say that northern interests are not any different from the interests of residents of Toronto or Montreal in the sense that they are concerned about environmental effects of operations and about operating standards but, at the same time, are interested in social and economic opportunities for their communities as well.

Senator Wallace: Ms. Conrad, as you point out and I guess not surprisingly, the cost of petroleum products in the North is much greater than it is in the South with the remoteness of the locations, small populations and so on.

On a cost comparison basis though, in comparing the cost of providing petroleum to fuel energy projects, to fuel power generation, versus a renewable energy source, is it fair to say the renewable energy projects would always be more expensive than the petroleum driven projects?

I know that's a broad, sweeping question, but I'm wondering if there are any examples. If you say there could be examples where the renewable energy was less cost and therefore it would justify an addition to the environmental benefits displacing petroleum. Are there any examples where renewable energy has proven to be less costly than fossil fuel?

Ms. Conrad: I think we'd have to get back to you on that, again. I think there you are getting into return on investment years if you go to the full life of a project.

Senator Wallace: That's fine. However, I realize costs have to be allocated and there are people who do all of those things to justify investments. I wonder if you have experienced examples where the renewable energy project was costed out such as to say it's a financial improvement over the fossil fuel use.

Ms. Conrad: The only one I know off the top is Diavik's experience with the wind energy farm. As I said, it was a 10-year to 15-year return on investment. Their just under 10-megawatt wind farm covered only about 20 per cent or less than 20 per cent of their total energy use and it did return. However, I don't have the specifics with respect to others.

Senator Wallace: If you could take a look at that it would be appreciated.

Ms. Conrad: Absolutely.

Senator Wallace: Are you aware of any renewable energy projects in the North that would have been funded solely by the private sector and not require some contribution from government?

Ms. Conrad: The glaring example that jumps out is the Diavik wind farm example.

Senator Wallace: Okay. Mr. Chénier as you point out, the offshore petroleum development in the North comes under the jurisdiction of the federal government. In terms of spill response capability in the North, my understanding is that it falls within the responsibility of Canadian Coast Guard, which differs from the scope of responsibility in southern Canada.

What would you say about the spill response capabilities that do exist in the North for this offshore oil and gas exploration?

Mr. Chénier: The regime is designed in such a way that we apply what is generally referred to as the "polluter pays" principle. The regulator, in this case the National Energy Board, expects the private-sector proponent to demonstrate that it has the ability to respond to any mishaps that could or would occur in the context of operations.

As you referred to, there are government agencies that have responsibilities for legislative and operational responses such as Transport Canada, Environment Canada or the Coast Guard, as you mentioned, but from the oil and gas operations prospective it's really a question of the specific proponent being able to either have at hand or have at its disposal the equipment, manpower, contracts, et cetera, to be in place to not only respond to a potential spill but really to satisfy the regulator's assessment of its preparedness.

Senator Ringuette: I'll try to be fast. I can understand it must be very frustrating for these communities to have those quantities of resources on the one hand and have to pay — for most — double the energy costs of other Canadians in other regions. It must be very frustrating.

I'm a visual person, so I'm going to ask you for two things: Could we have a map of the different communities in the North and the energy they are using, and the cost of the energy they are using?

Ms. Conrad: Yes.

Senator Ringuette: Mr. Chénier, could you provide a similar map but with the identification of what kinds of natural resources are being explored?

Mr. Chénier: Yes.

Senator Ringuette: Could you also indicate where the future resource exploration is already identified? This cost thing is really detrimental to the future of the region, so I think we need to understand the current situation of costs for the communities and for the business community also and if there are challenges there that can be surmounted. If that's possible. For me, a picture is worth a thousand words. Thank you.

Ms. Conrad: Certainly we have information on the communities and what type of energy is available to them. That's easy. In terms of costs of energy, we would be calling our territorial colleagues in order to find that. That may take some time. I wanted to indicate that.

Senator Patterson: I'm grateful the committee is looking at our region.

The three territories occupy about 40 per cent of the land mass of Canada. The federal government in 2009 committed $1 billion over five years under the Clean Energy Fund. You have described how some of that money has been utilized in the department's ecoENERGY program, and I think the number I heard was $18 million. I might be wrong about that.

Can anyone tell me what the North's share of this $1 billion fund has been and which department is responsible for administering that fund?

Ms. Conrad: I wanted to clarify with respect to the ecoENERGY program that it's $3.2 million that has been spent in the North on projects since 2007 — that's not quite your point of reference — of the $18 million that were spent during that time. So it is $3.2 million of $18 million of our program, which covers not just the North but North and Aboriginal communities across Canada.

I think NRCan is the majority of the rest of the programming.

Mr. Hubbard: Our ecoENERGY Innovation Fund and Clean Energy Fund have supported a number of demonstration projects as well as front-end engineering and design studies worth about $11.7 million in the North. Those are also moving forward with a number of additional research and development programs and funding.

Our colleagues have been in touch, I believe, with the clerk earlier today and have offered to provide the committee with a more detailed paper in terms of NRCan's research and exploration activity in the North to support your research on this issue. We hope to provide that by the end of week.

Senator Patterson: I was just at a round table in Churchill, Manitoba, the week before last called the Hudson Bay Neighbours Regional Round Table. For 20 years or so, there has been a dream of building a road or a hydro connection between Churchill where the hydro grid goes to date and the Kivalliq central region of Nunavut. This has been given impetus with the proposal of a gold mine at Rankin Inlet, and the committee will be learning about that on our study.

The round table included all the players one would expect: The Manitoba government; Nunavut government; Manitoba Hydro; Qulliq Energy Corporation; Aboriginal and municipal leaders from northern Manitoba and Nunavut; and industry, principally the Agnico-Eagle Mine. They decided to set up a working group to explore building this hydro line that Manitoba Hydro said is willing to build on a cost-recovery basis. They want the federal government involved in the working group.

Which department of federal government would be involved in such a project if the federal government was to agree to participate?

Ms. Conrad: Interestingly, I would say quite a few. In terms of environmental assessment of large projects in the North —

Senator Patterson: I guess I'm thinking about — we've heard about the costs and challenges, and I think there is anticipation — and it's very common in the North — that Ottawa will come and help make this project feasible. People are looking at the Muskrat Falls — support from the federal government in the form of a loan guarantee there. Putting aside all the regulatory and land use issues, if there were to be a federal government department that would look at this as a way of reducing greenhouse gas emissions and reliance on diesel in Nunavut, which department would that be?

Senator Massicotte: Follow the money.

Ms. Conrad: Yes, follow the money.

Senator Patterson: Who was involved in Muskrat Falls? Which departments were involved? There was a loan guarantee. Maybe this is a difficult question, but it arose the week before last. We'd like to get the feds involved. I wondered: Who would it be?

Mr. Hubbard: In the case of Lower Churchill and Muskrat Falls, the Department of Natural Resources and Finance Canada were the primary departments involved in that file. In terms of resource development in the North and the economic opportunities that go with it, there would be a number of different departments engaged in such an activity, including our colleagues at Aboriginal Affairs. But our colleagues at the Canadian Northern Economic Development Agency would have a number of programs in place to support economic development opportunities. I think the committee will be meeting with them in a couple of days. Our colleagues at Infrastructure Canada also have a number of programs in place in terms of funding to support infrastructure programming. It would depend on the exact nature of the proposal, but more often than not it will involve many different departments.

Ms. Conrad: If it's helpful, I'm not familiar with the Muskrat Falls example, but more recently there was the Inuvik to Tuktoyaktuk Highway example, which is not an energy project. Again, Infrastructure Canada took the lead with respect to the environmental assessment, the funding, the organization, if you want, of federal interests around that project. But because there are authorizations related to environmental impacts on these projects, Fisheries and Oceans, Environment Canada, Aboriginal Affairs and Northern Development, the Government of the Northwest Territories, Infrastructure Canada and CanNor were all actively involved in the assessment and permitting of such a project, and certainly the financing. I expect most projects would involve that full suite as well, and NRCan with respect to energy, obviously.

Senator MacDonald: The North relies overwhelmingly still on diesel. Diesel is portable, and for many years it was relatively inexpensive, but that's not the case anymore. It's expensive and it's filthy. The numbers show that it's filthy. It seems to me that the real solution up there is under their feet. The solution to energy in the North is in the ground. I'm thinking of natural gas, which is not renewable but is relatively clean compared to any other petroleum-based energy source.

You showed the example where devolution is a transfer of licences, for example, 100 oil and gas licences transferred from the Government of Canada to the Government of the Northwest Territories. Will this expedite matters or will it just back matters up even more? Is this going to make it more efficient to get answers and solutions to these problems or will it drag it out for years?

The North is growing — relatively slowly, but still growing. There are over 100,000 people. It's expensive to heat and to power. You want to develop mining projects up there, but they need power, and it's expensive to get the power to these projects.

I'll take as an example these 100 oil and gas licences that the federal government transferred. Have any been drilled? Has any geological work been done there? Will any be done in the next decade? Will this trigger anything positive? I'm curious how this devolution affects development in a real sense.

Mr. Chénier: That is a challenging question. I'll do my best to respond.

Devolution brings decisions closer to communities. We have the territorial governments now responsible for oil and gas management matters, that is, the leasing and management of those 100 licences that you mentioned. In addition, the territories have responsibility, as we mentioned in our remarks, for energy consumption and utilities in the North, so I am hopeful that the territories — and specifically the territory in this case is the Northwest Territories — will develop innovative approaches that will spur the rapid exploration and development of the existing resource base, all this with the ultimate goal of not only providing cleaner sources of energy but also more affordable sources of energy.

This is a general kind of response. I must add that often we see there are very high costs to building infrastructure to transport, for example, natural gas from a well to a particular community, and the economies of scale that we see in many parts of the country just don't exist up North. That is in itself a barrier. With that said, coming back to devolution, I think we have equipped the territories now to have all the tools in place to be able to make the decisions that affect their constituents directly.

Ms. Conrad: I would like to add that with devolution, or at the same time as devolution, certainly in the Northwest Territories case, we also implemented as a federal government responsible resource development improvements. While we have devolved and delegated or passed along a lot of our land and water management responsibilities and environmental assessment responsibilities for large resource projects, some of which the renewable technologies would certainly be, we've also done that in a way that sought to clarify and simplify the approval processes for these larger projects as well. I think those will prove out over time in terms of, again, giving more clarity to the private sector, who is interested in developing these projects, clarity in terms of how quickly projects can be assessed and approved. I think those are important improvements that were made along with devolution.

Senator MacDonald: Just a quick question, to go back to that. I'm curious how much activity there has been in these areas where there were 100 oil and gas licences, because we have the activity on the East Coast and other places. Is there any real activity in these licences? If not, why not? Is it just the prohibitive cost? Is it not lucrative enough for the oil and gas companies to go in and drill? The only things that will motivate them to go in are profit and greed. They will go in for that. You have to get them to the table. You have to get them to drill.

Mr. Chénier: Thanks for that added element. I will note an example. There is ample industry interest in the resources located in and around the Central Mackenzie Valley, specifically with the economics and the technical advancements in developing shale oil and gas that exist in North America, as you are probably aware. Those exploration techniques and approaches are now being deployed in the Northwest Territories as well. So, yes, there is a significant amount of current industry exploration in the Northwest Territories, for example.

I mentioned some of the earlier plans, obviously on a different scale and a different time horizon, for the Beaufort Sea that are really aiming at long-term oil and gas identification plans and exploration. As well, there is more — again, on a much different time horizon — with the resources that exist in Nunavut.

As Senator Patterson mentioned, given that we have a very significant and large land mass, there are what I would refer to as sub-regions. I provided a few examples of where it stands, but I can assure you that there are specific investments today that are occurring in areas of the Central Mackenzie Valley.

The Chair: Further to that, I would be interested to know where they are at, if you can mark that specifically on a map. I know some drilling is going on around Norman Wells, if that's what you're referring to. There's also some drilling going on at the British Columbia border in the Northwest Territories. But the Central Mackenzie Valley, I'd be interested if you could pinpoint that activity for us, if you would do that.

Mr. Chénier: Yes, that would be my pleasure. Maybe I will capture that in the geographic kind of undertaking that we've noted here.

The Chair: That would be great.

Senator Mitchell: Ms. Conrad, in your presentation, you make the point that the proposed wind-diesel project for Destruction Bay and Burwash Landing will replace 160,000 litres of diesel per year. Could you give us an idea — maybe not now — of what the price of diesel is times $160,000 to give us a figure that you would then compare to what the cost of that wind installation is going to be? I'd just like to see. If it's 10 bucks a litre, that's $1.6 million a year. If the wind costs $1.5 million, wow, what a deal, but it may not be that easy.

Ms. Conrad: I'll have to get back to you on that.

Senator Mitchell: Mr. Chénier, you mentioned that one of the big problems is getting financing for projects. I think that's what you said. In any event, do you work with the First Nations Financial Management Board in that? Are you aware of what they do, and are you working with them in that regard?

Mr. Chénier: I guess the short answer is probably that I was referring to a different type of financing, maybe in a general sense. I can't recall any specific examples that relate to our program that we've worked with the board on.

Senator Black: Just a quick question, if I may. To the best of your knowledge, is any of the oil and gas that is being produced in the North today being consumed by Northerners?

Mr. Chénier: Thank you for that question. As I mentioned, I think, in my remarks, there are at least two communities that currently consume natural gas that was discovered relatively nearby. There are two communities that currently heat their homes and use natural gas for domestic, commercial and industrial purposes.

Senator Black: Just so we understand, that would be 2 out of 85 communities, roughly? Can you identify which those communities are?

Mr. Chénier: Yes, the communities of Inuvik and Norman Wells, in the Northwest Territories.

Senator Black: Do you have any view as to whether or not the oil and gas that is being produced in the North could or should be being used more widely by Northerners to address the types of issues we're hearing about today?

Mr. Chénier: Again, I think the most appropriate answer to this question is that it really comes down to a cost-benefit analysis. We sometimes have this false impression that there are ample oil and gas discoveries relatively near to communities. Why aren't communities tapping directly into those? Unfortunately, there are, in many cases, significant costs to develop and transport those resources what may seem to be relatively small distances on a map, but, when you hit the ground, there are still significant distances and challenges.

The Chair: All the oil that's developed in Norman Wells will go to your fine province to be refined and then move back so that they can actually consume it.


Senator Massicotte: You are referring to the fact that there has to be a return on investment. When you say that, I get the impression you are saying it in a negative way.

I repeat that it is not negative; it is fundamental to any cost-benefit equation, and it is very normal. The other comment I wanted to make is that people often say it "costs twice as much as electricity." Electric power is very expensive in the south, but I would note that it costs twice as much in Manhattan and New York, and there is no lack of density there. That is farther south than Quebec.

It has to be said that most countries pay two or three times as much for electricity. Perhaps that is because it is not expensive enough in the province of Quebec.

Mr. Chénier, when you present the information on petroleum resources to us, I would like you to identify the ones that are cost-effective because we may discover something depending on the price of oil, but it may not be cost-effective for 100 years.

Can you characterize the resources for us so that we know what is really available, what we can tap and what is cost-effective today?

Mr. Chénier: I will be pleased to try to characterize the level of available resources as accurately as possible. However, I should note that, since we live in a market system, it is up to the private sector to determine what is cost-effective. It is not up to us to come to those conclusions.

The private sector obviously makes the same calculations to determine return on investment as it does for other investment projects. These decisions fall first of all to the private sector.

Senator Massicotte: People constantly submit tables to us showing that resources are there, whereas other tables suggest that those resources are cost-effective and that that is valid today. I am not asking you to calculate exactly whether it is $90 or $100 a barrel.

Mr. Chénier: I will be pleased to characterize the resources. What I am going to provide will essentially concern the resources in place that can be marketed tomorrow relative to other resources that can be potentially be marketed as a result of technological development or other factors.

Senator Massicotte: That is excellent. Thank you, Mr. Chair.


Senator Ringuette: Just additional information that I would like to have on the exploration and resource map: Could you also identify if and where there is international disputed territory? That is also very important for us to understand. You can add that to the information on the map.

Mr. Chénier: Okay.

Senator Ringuette: Thank you.

Mr. Chénier: That would be my pleasure.

The Chair: Thank you very much. Both of your presentations were very interesting, and the questions and answers were great, too. Thank you, Ms. Conrad, Mr. Chénier, and Mr. Hubbard. Thank you very much for your time. We appreciate it very much. Have a good evening. We are adjourned.

(The committee adjourned.)