Natural Resources Committee on Feb. 2nd, 2012

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

What improvements could we make to our refineries now to make them more competitive on the environmental front?

Mr. Newman, could you answer that question?

[Keith Newman]

Actually, it has more to do with engineering. I do not really know what it would take specifically to make our refineries more environmentally efficient. I believe that we should certainly apply the best regulations in the world. Furthermore, if we import products from countries with less stringent regulations or if we export our oil to those countries, we contribute to environmental pollution at the global level. However, I cannot specifically answer your question on which measures should be taken.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

Do you have any data on the subject?

Mr. Quinn?

[John Quinn]

When you talk about environmental performance, there are a couple of places where we do meet what I would think are probably some of the best standards in the world. One is on emissions from the sites. You know, NOx, SOx, and volatile organic compounds. They're highly regulated. We're very much in compliance. Today there is ongoing work with Environment Canada to move forward on quality standards for air coming out of our refineries. We work very closely with Environment Canada to put in place a framework that meets the needs of industry as well as Canadians.

One of the points I would like to raise this morning is that we are looking for the kind of flexibility that says: here are your air quality standards for that site; go meet them. It's an outcome-based approach, as opposed to an approach where we go in and have dictated to us exactly how each piece of equipment needs to operate in the plant. So we're really advocating for an approach in which you tell us what you need around the facility in terms of air quality, and we'll go out and meet that standard. We'll figure out how, inside the plant, we can best do that. That's one.

From an air quality perspective, I think we're in a frame that's among the best in the world, if not the best in the world. I don't know that for certain, but I'm sure the Canadian government is very interested in making sure all industries are in that kind of framework.

The second one is on greenhouse gas. Again, there is lots of work ongoing on greenhouse gas, as you know, with governments today. We would really like a policy framework in this country that wasn't patchwork and that wasn't province by province. In fact, if the biggest bang for the buck on greenhouse gas is at site A, then we can do it at site A, and not have to do the same thing at every single site necessarily. We'd like a nice harmonized policy approach to some of these things.

Our biggest move on greenhouse gas in our refineries is for energy efficiency, and we work hard at that. There are rewards for us, obviously, in energy efficiency, and that's something we're very committed to.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Day.

We go now to Mr. Anderson for up to five minutes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Mr. Chair.

Right now my part of the world is very active in oil exploration and drilling and those kinds of things. There's so much activity there it's unbelievable. We've been told this morning there's a shortage of feedstock. Do you have a shortage of feedstock for your refineries?

[John Quinn]

I'm not sure. I don't think we do in the west.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

We were discussing shortage of feedstock for the refinery, and we were left with the impression that there's a shortage because exports are taking too much. Do you find that to be true?

[John Quinn]

No.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Okay.

I just want to talk a bit about the impact of new technology. Certainly, in our area we had an oil field that was pretty much at the end of its life. They came in with the horizontal drilling, and it's completely revolutionized. I'm just wondering if you can talk a bit about the impact of some of the new technologies on refining, and what's changed over the last few years. Are there any significant changes?

[John Quinn]

Again, I'm not going to touch on the oil production side of the technology. It's not at all my area of expertise. For us on the refining side, the technology has been in adapting plants to new types of crude, different types of crude. There's enormous investment in that. Of course, we are a capital-intensive business and a technology-driven business, so that is very much at the heart of what we do. It is changing all the time. We work closely with the top engineering companies in the world to make sure we have the latest and the greatest as we reinvest in our sites.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Mr. Ervin talked a little while ago about the cost of mandated changes, and of course every time there's a regulatory change it costs money. We've talked a lot about regulatory burden and approval structures here and in another study we're doing. I'm just wondering if you have any suggestions for the committee. The government has talked about improving the regulatory structure and approval process and those kinds of things.

Do you have any suggestions? I'll actually go to all three witnesses in that area who are before the committee.

[The Chair, Conservative, Leon Benoit]

We'll start with Mr. Ervin.

[Michael Ervin]

I think a key recommendation is—and the word was mentioned just a few minutes ago—harmonization. Whatever product quality standards are contemplated in Canada, it's very important that there be a harmonization of those with the United States. The implementation of sulphur reduction was an example where that didn't take place, and as a result it raised the real threat of isolating our market from the United States for that period of time. So it's very important that whatever standards do come under consideration, they be made in consultation and in harmonization with the United States, in particular.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

The testimony the other day was that the witnesses saw North America as one system, I think it would be fair to say. I assume we'd have a little bit of a difference of opinion about that at the table today.

Did you have something to contribute about the regulatory approvals?

[John Quinn]

Yes, it's the same thing. I mentioned air emissions as being an example of the discussions that are under way today. Please, give us the outcome that is desired and allow us to help figure out how to best arrive at that solution.

Harmonization across regions is the other piece, and not just on the potential.... There are two provinces today with greenhouse-gas-type policies out there, and they're different. We also have a patchwork of renewables legislation across the country. It's boutiquing the fuels.

Our Edmonton refinery has to now supply to four provinces in the west, each with a different standard around ethanol and biodiesel blending. That increases the cost of how you do it, the number of tanks you have to put up there, and how you manage your base blends at the refinery.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

We are aware of the jurisdictional issues.

[John Quinn]

I'm sure.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Gentlemen.

[Keith Newman]

The Irving refinery in New Brunswick was meeting higher standards at one time, before the rest of them came up. We believe that Canada should meet the highest standards—phased in over a reasonable time because you don't want to disrupt the industry. But that should be our goal, to have the best standards.

We also believe greenhouse gases are an issue. We should have a Canada-wide program for that and not a patchwork. It should be a responsible and very effective control on greenhouse gases as well, and on all environmental pollutants of various kinds, both toxic and non-toxic, the non-toxic being the greenhouse gases for the most part.

I think we can definitely meet all these, and I don't see why we wouldn't meet high regulatory standards.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Anderson.

We go now to Mr. Calkins, for up to five minutes.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Thank you, Chair.

It's good to get the mike back.

I just want to ask a quick question with regard to Mr. Newman or Mr. Gargiso. We're talking about disruptions. We've seen a disruption in western Canada. I believe there was an incident at a refinery in Saskatchewan that caused a price spike for diesel in western Canada in the last year or so.

The point has been made about energy security and so on. What would it cost to have a bunch of standby refineries, which meet today's current standards, ready to go in the event that we do have an incident at one particular refinery? Or do you think we should be implementing a mandate to have a certain number of barrels of refined product on hand in the event that we do have an incident at one of our refineries, so that we don't see these things? I know the United States has such a policy in place. What would be the cost or impact of having standby refineries ready, or of mandating a massive storage of refined product, to provide that security?

Mr. Ervin or Mr. Quinn—anybody?

[The Chair, Conservative, Leon Benoit]

Mr. Ervin, go ahead.

[Michael Ervin]

The cost of a standby refinery per se would be prohibitive, to say the least.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

But you're only running at about 85% capacity right now. The refining capacity across the country is at about 85% to 90% right now. Is that correct?