Natural Resources Committee on Nov. 20th, 2012

[David McGuinty, Liberal, Ottawa South, ON]

If we take your seventh point this morning—

[James Cameron]

Yes.

[David McGuinty, Liberal, Ottawa South, ON]

--when you said that policy, finance, and technology must be in close collaboration, can you help us understand comparatively...? What examples would you look to as the most innovative on the policy front? Perhaps you could particularly focus on fiscal measures. What are the Germans doing, for example? What are other jurisdictions doing that would help us to get that policy-setting right?

[James Cameron]

I think there are three things. I'll try to go through them as briefly as possible.

One, there is still some scope for procurement. Saying very clearly what you want produces a market response. Investors and entrepreneurs want to know a market space they can pitch into, particularly if it's a highly regulated sector where the incumbents are very strong. You can do it a dozen different ways. You can do it with feed-in tariffs, you can do it with renewable energy targets, you can do it with energy storage requirements, but being clear about what you want really helps as a market signal.

Please bear in mind, and this is true across the world, that when businesses say they want certainty, they don't really mean it. What they really want is to win competitively. When they say they want a stable regime, that's true, they do, but they want it in order to be successful as individuals.

Regulation can be extremely creative. Investors and entrepreneurs can respond very clearly around being told what to do, but it's not enough, so you have to have a market response. Use taxes. Use a reward for delivering an outcome against an unpopular tax. It could be a property tax, it could be a capital gains tax. Take that away in return for a reward. Have a price signal that's measurable against performance from a tax. Have a market mechanism that allows entrepreneurs to work around--like a price for carbon--in a trading system. It doesn't have to be the same one as the Europeans have tried and experimented with, although we've learned a lot from that, but have some kind of market mechanism for carbon. That itself is not enough for innovation. You need some other strategies to build capacity, including supply chain capacity, to sell into markets. Carbon pricing will help, but it won't do it on its own.

The final point has to do with information itself. Have a strategy on information. Make information as available as possible, as open-source as possible, through open government but also through our amazing ability to communicate now on networks.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Cameron, for my last 45 seconds, would you talk again about the importance of making sure your energy policy is fully integrated with your climate policy, and maybe also illustrate with what's going on elsewhere?

[James Cameron]

The first thing is that there are so many things that have to be combined. I don't want to have a conversation about renewables versus gas. These technologies need to be combined. We need a tremendous amount of energy supply. A lot of our debates are trivial.

We need to have a variety in our system, to build a system that has multiple nodes and a wide range of supply, where demand is managed in real time.

There are examples of systems being developed around the world, and not only in places like Germany: you see it very often in the emerging economies. Brazil and China are running big experiments at the city level, which also include giving more autonomy to mayors to run their cities in a way that is more sustainable. That's a manageable unit, and I know that takes place in North America too.

Ultimately what you want is devices that will reward the delivery of public policy and allow energy conservation. You want a variety of energy supply to produce a more robust energy system while delivering emission reductions. That is perfectly possible. It's not insurmountable. They're not opposing objectives, and we have all the technologies we need right now to begin that process. They're just not very well combined in any part of the world. There are good examples at the city level, but there are very few examples at the national level that you could point to as a wholly successful system.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Cameron and Mr. McGuinty.

We'll go now to Mr. Calkins for up to five minutes. Go ahead, please.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Thank you, Chair.

Thank you to our witnesses for being here today.

As an Albertan, I'll preface my remarks by saying it has been a long time since I've been employed in the oil and gas sector directly. Albertans love their clean open spaces. We love our rivers. We love our lakes. We love our forests. I've seen many fantastic things in Alberta's landscape from the floor of a drilling rig and from the floor of a service rig in my employment. I've been amazed since the nineties, when I was working out in the patch, about all the remarkable changes that have happened to date.

I do want to explore some of these questions with CAPP or with PSAC. When it comes to investments and your partnerships with academic institutions, whatever the case might be, how do you go about those partnerships? I know that your organization is coming together, and it sounds as if there is some harmonization or some cooperation in exploring technological developments that will further enhance everybody's outcomes, whether it's through the environment or whether it's through production outcomes. What's the primary motivator there? Is it a social push from the population at large, or is it a regulatory push from provincial and federal governments? Where is your push coming from, and how are you meeting those demands and challenges?

My second question will be this. When you have a private sector, there are a lot of entrepreneurs. There are several in my riding that have unique and innovative ways of extracting either oil or bitumen, without using SAGD or toe-to-heel air injection. They've got different technologies and they're looking for doors to knock upon. How do you guys accommodate those kinds of entrepreneurs and take a look at their technology and see if it's worthwhile pursuing tests and trials to make sure we get the best technology possible doing the job?

[The Chair, Conservative, Leon Benoit]

Do you want to start with Mr. Wicklum, Mr. Calkins?

[Blaine Calkins, Conservative, Wetaskiwin, AB]

It doesn't matter—someone from either of those organizations.

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Wicklum, please.

[Dan Wicklum]

I'd be happy to. Thank you.

There are three questions, as I understand it. First of all, where does the push come from to launch an organization like COSIA? Then, how are we going to address challenges in the future? Third, is there a mechanism whereby garage entrepreneurs or people in your riding could mesh into COSIA?

First of all, in terms of the push, we think of COSIA as the right idea at the right time. There's absolutely no question that there is a continuous expectation from the general public for all sectors—not just petroleum, not just natural resources, and not just oil sands, but all sectors—to continuously improve their environmental performance. Good companies and good sectors listen to that.

However, I think there's actually an artificial distinction between the public and the people who run and work for these oil sands companies. Every single person who works for an oil sands company is a member of the public and every single one of them wants to be on the right side of the equation and work for an organization that develops things responsibly. I think it's an artificial dichotomy, and frankly, there's an aligned view that just getting better and better and better on environmental performance is the right thing to do. That's why COSIA was launched. It's the right idea at the right time.

How will we actually address some of these issues? There's not lack of effort in terms of innovation and R and D. We have a very significant level in Canada and in Alberta. What we feel that we can bring initially to an organization like COSIA is a focus of effort toward specific ends. Let me give you an example of how some of that focus has come into play.

As you know well, there are two main ways of extracting oil sands. One is from a surface mine, where the deposits are very close to the surface, and the other is when they're deeper or too deep to mine. In that case they are in situ; you pump steam down and essentially melt the bitumen and then pump oil to the surface.

The mining companies got together about 18 months ago, all the COSIA mining companies, and partnered with the Province of Alberta through their innovation entities and with the Government of Canada through NRCan. They did a very comprehensive solicitation of any organization or institution that had an idea about how to produce fewer tailings or how to deal with legacy tailings in the landscape, and we have produced what we're calling a road map. We synthesized well over 500 discrete ideas that came into the road-mapping process into nine types of sub-road maps. We have nine working groups now that are dedicated to exploring specific opportunities in each of those nine road-mapping areas and launching new projects where necessary in order to advance those ideas.

In terms of a broader way for individuals or companies to mesh into COSIA, we recognized from the start that in order to do the best possible job we could as an organization, we had to look outward, not just inward. We had to look past the companies themselves into academia, into governments, into smaller companies, and indeed into other jurisdictions outside of Canada. We are about to launch an associate membership program whereby, in a very structured and formal way, we would bring people to our planning table and have them give input into the COSIA planning process and focus where our efforts would go in the future, not just using our internal resources and ways of thinking but leveraging external perspectives and resources as well.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Calkins.

Mr. Leef, you have up to five minutes, please. Go ahead.

[Ryan Leef, Conservative, Yukon, YT]

Thank you, Mr. Chair.

To continue building on that, Mr. Wicklum, you're talking about the road map for innovation, the associate member program. Earlier in the presentation you talked about the charter that COSIA came out with. In your explorations outside Canadian jurisdictions, are there other jurisdictions in the world, in other countries, that are following this level of approach in terms of the depth and breadth of what you're doing? You're running through a pretty impressive list of a charter and road map and associate member programs and all these things to move forward on innovation. Do you know any other countries that are as intensely involved in this work?

[Dan Wicklum]

Oil sands are almost a unique resource. There are very few oil sands deposits around the world, so specifically applied to oil sands, this is a unique enterprise. Certainly other countries are terribly innovative and they've developed models that would fit their system.

In terms of the fundamental model of COSIA, which is a sharing and leveraging model by which large companies that have historically worked independently now will actually share their intellectual property, all towards advancing their environmental performance, to our knowledge this is a unique model in the world. We had the privilege of having a gentleman called Michael Porter, who is a Harvard professor and a globally recognized expert on business innovation, come to the oil sands and speak to us through a number of different fora. When we put the direct question to him, “Are you aware of a similar model and a similar level of effort?”, he was not aware of anything like COSIA in the world.

[Ryan Leef, Conservative, Yukon, YT]

Can you repeat again how many members are part of COSIA?

[Dan Wicklum]

We have 14 of what we call shareholding companies. They are the founders, the producing companies that have signed a charter and are funding our infrastructure, but again we're in the middle of launching an associate membership program through which essentially any institution, organization, or individual who shares our vision of responsible development will have a way to plug in to the typical COSIA enterprise and activity so that we can harness their know-how and their ideas and bring them to bear on our issues.

[Ryan Leef, Conservative, Yukon, YT]

In respect to innovation itself, do you categorically break down where innovation occurs? By that I mean when you look at some of the oil sands development or development generated across Canada, some of it's occurring in arctic to sub-arctic conditions. It's northern climate or cold climate innovation and those sorts of things, and other technologies would apply in a different region of Canada.

Do you break those down? Could you touch on some of the innovation that might be unique to cold climate innovation in Canada?

[Dan Wicklum]

There's certainly a high level of innovation and effort going on in the country from coast to coast. Our individual member companies have individual relationships with a whole suite of other providers, again coast to coast, from academic institutions to governments and so on.

One of the things we can do with COSIA, though, is focus and organize. There were a couple of pilot projects or essentially predecessor organizations that really test-drove the concept of sharing intellectual property. One was on tailings, for example. Interestingly, when they figuratively opened up their kimonos and shared the efforts they were making on different research projects, they found that even among the small number of mining companies, there was a high level of duplication. Inside COSIA what we can do is decrease that duplication and have individual companies take leads on projects, which is fine, because everyone gets to share the output.

One of the fundamental principles of innovation is to link and to lever into sectors that have historically not been linked and levered. Step change in innovation often comes with taking ideas from subsectors or areas or individuals who frankly know very little about certain subject matters.

That's what we will do, and we're very confident that the new developments that will come out of COSIA will have application globally, and not just in the petroleum sector outside of the oil sands but in other non-petroleum sectors, especially in such things as water recycling and water reuse, which the oil sands are so heavily into.

[Ryan Leef, Conservative, Yukon, YT]

I have time for a short question. This one will be to Mr. Salkeld.

In your presentation you talked about $12.8 billion in innovation exports. What would be the most significant accounting of that dollar value?

[Mark Salkeld]

Right off the top, it would be labour and manufacturing. Lots of Canadian companies are providing skilled labour and supervisory knowledge, but it's also in manufacturing. We're manufacturing here and exporting. Then it would be manufacturing based on new technologies.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Leef.

We go now to Ms. Liu for up to five minutes.

Go ahead, please.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thanks to our witnesses.

I'd like to go first to Mr. Bleaney.

You mentioned the cuts to the SR and ED program. We've heard a lot from industry testifying at committee against these cuts; notably RIM came to the industry committee and also expressed concerns over these cuts.

We know the government has said they would take these and the money they would be saving from the SR and ED program and putting that into IRAP. What's your take on the allocation of funds?

[Bob Bleaney]

I'm not particularly familiar with the IRAP program, but I can generally observe that the work done that led up to these changes in the SR and ED treatment came largely from the Jenkins report and the government's review of that.

It turned out the Jenkins report really focused on small and medium-sized enterprises as the primary focus of that effort, and I think some of the changes they proposed were largely targeted at the SME area.

Our concern is that in our industry, the larger development projects we've been talking about today tend to be projects operated by larger corporate entities. In that situation the kinds of changes proposed from the SR and ED program are not as applicable to the broad-based pieces of pilot testing that need to be done, or I think the wording I would use is “pilot projects and deployment”.

Projects get developed on a continuum of innovation. They start with laboratory work that was discussed, and that evolves into further hypotheses being built about how we might be able to apply a technology. Then you take that new technology effort and you go out and pilot test it.

In our environment, these end up being very expensive programs, because you have to drill wells. A lot of this testing actually goes on in a relatively large scale. It's not done in a laboratory. It's done on the ground.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thanks.

I want to go on to some questions for Mr. Weis from the Pembina Institute.

All of us followed the U.S. presidential elections a few weeks ago. The President is committed to invest 3% of the GDP in R and D, while in Canada, our investment represents, I think, 1.8% of our GDP.

The Pembina Institute carried out in 2009 a study titled

“United States to invest over six times more per capita in renewable energy and energy efficiency than Canada”.

Would you take us through the results of this study?