Natural Resources Committee on Nov. 29th, 2012

[The Chair, Conservative, Leon Benoit]

I call the meeting to order

We'll go to Mr. Calkins.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Mr. Chair, last meeting we were in the middle of a debate on an amendment proposed by my colleague Mr. McKay, and we didn't have an opportunity to hear from witnesses. I don't want to see that happen again at this meeting. To ensure that we're able to hear from witnesses who have come here today, I move that the debate on the motion to study the economic impact of Alberta's energy sector be suspended until 12:45 today.

[The Chair, Conservative, Leon Benoit]

Let's go to a vote on that motion.

Go ahead, Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I appreciate the earnestness of the honourable member in respecting witnesses. It's a pity it didn't apply to last week, when I believe Mr. Julian wished to have the debate on the original motion moved to the end of committee business. That was apparently not such a good idea on Tuesday. Actually, I thought Mr. Julian was right.

In light of my respect for the witnesses and not wishing to expose them to the circus that occurred last Tuesday, I support Mr. Calkins' motion.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. McKay.

Is there any debate on the motion?

Go ahead, Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I just want to compliment Mr. Calkins for finally seeing that what we thought on Tuesday was the logical course of action, which is that motions be brought at the end and not at the beginning of a committee meeting. We flagged it in the NDP official opposition. I know that my Liberal colleague flagged it as well. We asked why you were bringing it forward right at the beginning of the meeting, because we had to hear the witnesses.

It turns out, Mr. Chair, that the two-hour debate was kind of pointless. Now Mr. Calkins, I understand, has understood that motions like this should be discussed at the end, out of respect for the witnesses. I certainly appreciate that he's seen the light. It would have been better, Mr. Chair, if he'd seen the light on Tuesday. We would have been able to hear from those terrific witnesses we had before us, but I compliment him on finally understanding what the logical course of action was on Tuesday, and it certainly is the logical course of action today. We'll certainly be supporting his motion.

[The Chair, Conservative, Leon Benoit]

Can we get to the vote so we can hear the witnesses?

We'll go to Mr. Anderson.

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

I have just one more point, Chair.

Notwithstanding the fact that multiple motions have come forth at the start of meetings, we're ready to go to the vote, Mr. Chair.

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I sincerely hope that 15 minutes will be sufficient to cover off all the motions I have in my hand. I'm quite looking forward to that 15 minutes.

Thank you.

[The Chair, Conservative, Leon Benoit]

Go ahead, Monsieur Gravelle.

[Claude Gravelle, NDP, Nickel Belt, ON]

Thank you, Mr. Chair.

I also have a motion I'd like to discuss at the end of the meeting.

[The Chair, Conservative, Leon Benoit]

Mr. Gravelle, you won't get to your motion if we're debating the other motion.

[Claude Gravelle, NDP, Nickel Belt, ON]

Maybe we can get lucky and debate two.

[The Chair, Conservative, Leon Benoit]

I hope so.

Go ahead, Mr. Anderson.

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

It's just a point of order.

We can't be studying two motions at the same time, so let's just go to a vote.

[The Chair, Conservative, Leon Benoit]

Let's go to the vote, then.

(Motion agreed to)

Let's get to the witnesses.

Thank you all very much for that.

We're continuing our study on innovation in the energy sector. We have with us today here in the room, from Gradek Energy, Thomas Gradek, president. From Titanium Corporation we have Scott Nelson, president and chief executive officer.

By video conference we have, from Edmonton, Alberta, from Alberta Innovates Technology Futures, Brent Lakeman, general manager, and Mary Pat Barry, vice-president of communications. Welcome to you.

Also by video conference, from Paris, France, from the International Energy Agency, we have Keisuke Sadamori, director of energy markets and security; Adam Brown, energy analyst, renewable energy division; and Anne-Sophie Corbeau, gas analyst. Welcome to all of you from Paris, as well.

One of the witnesses isn't at the table yet. Often we have delays getting into the building, so we will start with the second witness on the list today, who is Scott Nelson, president and chief executive officer of Titanium Corporation.

Would you go ahead with your presentation, sir, for up to 10 minutes? Again, thank you very much for being here today.

[Scott Nelson, President and Chief Executive Officer, Titanium Corporation]

First of all, thank you, Mr. Chairman and committee members, for the opportunity to appear today to describe a “made in Canada” solution to one area of oil sands tailings. Our technology will dramatically reduce emissions and recover bitumen, solvents, and valuable minerals currently being lost in tailings ponds.

Canada has a unique opportunity to create a new minerals export industry. Our company, Titanium Corporation, is federally incorporated and listed on the Toronto Stock Exchange. Our people hold advanced degrees and have deep experience in the oil sands and mineral sands industries.

Over the past seven years, our team of scientists has developed innovative technology solutions that remediate one of the most complex oil sands tailings streams, called froth treatment tailings. Our company holds six patents, and our technology has been prioritized and ranked in the top 20 technologies in the recent oil sands industry COSIA technology road map. The Alberta government is developing a new fiscal regime to support the production of minerals from oil sands and the recovery of bitumen from tailings.

Our shareholders have invested more than $50 million in developing these technologies, and government has invested more than $10 million, including $6.3 million of Canadian government Sustainable Development Technology Canada grant funding. Over the past three years, SDTC support has been highly valuable and instrumental in our success.

Our scientists have worked with the leading research and testing firms in Canada and the United States to find solutions, rigorously test them, and bring these technologies to commercial readiness. We have followed a highly disciplined program, involving more than 20 R and D projects with 12 expert organizations.

Before I describe the outcomes and benefits, I would like to briefly explain the oil sands tailings area we are dealing with.

We are working in the mining oil sands sector, in which large volumes of ore are truck-and-shovel mined. A hot water process separates the bitumen from the ore and creates large volumes of fluid tailings—sand, water, and bitumen. This process produces an intermediate product called bitumen froth.

After the extraction process, the bitumen froth is sent to another process, called froth treatment. In this process, a hydrocarbon solvent such as naphtha or condensate is mixed with the froth to remove the remaining bitumen and sand, creating a final bitumen product for upgrading on-site to light synthetic crude oil or for dilution and pipelining to refineries that can accept heavy crudes.

As in any large industrial process, there are small percentage losses after processing. However, due to the massive volumes of material processed by the oil sands, even small percentages amount to very significant values. The tailings from the froth treatment process contain losses of 2% to 3% of the original bitumen, lost solvent, and valuable heavy minerals. Today, all of the tailings streams discharge to tailings ponds, where the solvents and bitumen cause VOCs—volatile organic compound air emissions—and GHGs. The minerals are lost in the tailings ponds.

Our primary interest in the oil sands has been recovering minerals and creating a new minerals export industry for Canada. Along the way, we saw the opportunity to also recover hydrocarbons, which would reduce environmental impacts and create another value chain.

The benefits of implementing our technology at the oil sands mining sites, based on today's production volumes, are very significant for Canada. We would create a new minerals industry exporting 170,000 tonnes per year of zircon to Asian markets, valued at $425 million annually at today's prices. Some 28,000 barrels per day of bitumen that are being lost in tailings ponds would be recovered, at a value of $700 million per year. In total, this means more than $1 billion of additional resource recovery and more than $400 million of associated taxes and royalties to governments.

In the next decade, at projected growth rates for the mining sector, the annual value of additional resource recovery with our technology would surpass $3 billion per year. The environmental benefits are equally impressive. Recovering lost bitumen and solvents would eliminate 80% or 60 kilotonnes per year of volatile organic compound emissions from oil sands extraction and would reduce GHGs by 5.6%, or almost one megatonne per year of GHGs.

After our technology removes the hydrocarbons and minerals, the water from these tailings streams can be used for other services in the oil sands that currently use fresh river water. River water usage could be reduced by a further 25%. All of these outcomes have been validated by independent analytical and engineering firms.

Following recovery of commodities by our technology, the residual tailings will thicken much faster than at present, and the requirements for thickeners or polymers are less than for the other thickening methods.

Titanium Corporation has become expert in heavy minerals, and we see an exciting opportunity for Canada to enter international markets. Our management team has made numerous visits to Asia and to the world's largest and most rapidly growing markets in China. We have a vice-president stationed in Brisbane, Australia, the heart of the minerals production and technology industry, where we conduct our minerals testing with expert partners. We plan to first produce zircon, due to its relative higher value, and later on produce titanium. Zircon is primarily used to make ceramic tiles and other products that we use in everyday life. Zircon currently sells for $2,400 per tonne versus mined titanium, called ilmenite, which is valued at $300 per tonne.

We have completed the detailed R and D and demonstration piloting required to commercialize the three naphtha-based oil sands operations: Syncrude, Suncor, and CNRL. Over the past two years we conducted a $15 million demonstration pilot at CanmetENERGY for these firms.

Based on third party engineering cost estimates, facilities to recover minerals and lost bitumen at a large oil sands site are approximately $400 million. At these cost levels, the capital and operating costs of recovering lost tailings bitumen are one-third the cost of newly mined bitumen of similar volumes. The conclusion here is that innovative technology that recovers products from waste is highly efficient. This is the low-hanging fruit that many industries are harvesting.

We have a unique opportunity to move Canada's oil sands to the forefront, from a widely criticized and defensive position to a leader in innovation and recovery of value from waste.

Following the completion of our demonstration pilot last year, we have provided detailed technical reports to all of the participating oil sands firms, government agencies, third party independent experts, and other stakeholders. All agree that together with our industry, research, and independent partners, we have taken all measures to demonstrate the strong performance of our technology.

Despite the compelling benefits, industry has not moved forward with the first project, and we are concerned with the delays. The reasons for delays can vary, including regulations that focus on tailings volume reduction but not on recovery of any valuable products, no regulations around VOC emissions, concerns about the risks of new technologies, lack of resources in the oil sands for new projects, and a focus on operational reliability.

We fully understand these business pressures. However, there is a window of opportunity to create a minerals industry for Canada, to resolve an area of environmental concern, and to improve resource recovery.

In light of delays, we have been reaching out to stakeholders to inform you of our work, our success, and the opportunities that are now available. We have developed relationships with large international mining markets and customers for minerals, bringing them to Canada and the oil sands. They are keen to participate, but need to see willingness here in Canada by stakeholders to move forward.

Canada's energy sector is facing serious challenges, including growing new oil and gas supplies in the United States, opposition to pipeline projects to export markets, and price discounts affecting higher-cost crudes, particularly the oil sands. Canada's oil sands industry is the subject of widespread environmental concerns, threatening the industry's social licence to operate.

These issues combine to threaten Canada's future development of our energy resources and the country's economic prosperity. Projects like Titanium's address a number of these issues and must be moved ahead rapidly with support by government stakeholders.

We appeal to government, already invested in our successful R and D and demonstration piloting as a stakeholder, to lend your support to develop a collaborative venture to move the first project forward.

We believe there is a role for the ministries of natural resources, environment, and perhaps international trade to facilitate a new industry for Canada for the benefit of all Canadians.

I'd like to thank you for the opportunity to appear before the committee, and I look forward to any questions you may have.

[The Chair, Conservative, Leon Benoit]

Thank you very much for your presentation, Mr. Nelson.

While we're waiting for the first witness on the agenda to get here, we will go by video conference to Edmonton, Alberta, and to Alberta Innovates Technology Futures.

Brent Lakeman is the general manager, and Mary Pat Barry is vice-president of communications.

Go ahead with your presentation, please, for up to 10 minutes.

Thank you very much for being with us today to give us this information.

[Brent Lakeman, General Manager, Alberta Innovates Technology Futures]

Good morning, committee members.

I would like to thank the standing committee for inviting Alberta Innovates Technology Futures to present before the standing committee. I would like to send the regrets of our president and CEO, Mr. Stephen Lougheed, who is unable to be here today due to other commitments.

I'm pleased to see that the standing committee is reviewing the topic of innovation in Canada’s energy sector. This is a very important topic for my organization and for the Alberta government. While I will be speaking today on the topic of CO₂ capture and storage, Alberta Innovates Technology Futures, or AITF, is actively advancing a wide range of technologies to support environmentally sustainable energy production.

Briefly, part of the Alberta Innovates system, Technology Futures, comprises over 600 staff in five research facilities in Alberta. We undertake technical services and strategic research as well as the development and commercialization of technologies. We also administer programs designed to attract technical and scientific talent to Alberta and fund other academic institutions to stimulate research in emerging areas, including nanotechnologies, information and communication technologies, and “omics”.

AITF currently manages over $160 million in total revenue. We provide grants to universities and other institutions, undertake contract research work, and work with a wide range of clients, including industry, government organizations, and not-for-profit institutions.

Technological innovation has been a fundamental component of Alberta’s energy sector for over a century. The province’s early investments in science and research resulted in Dr. Karl Clark's developing the hot water process for oil sands extraction in 1921, a process that became the foundation for the first commercial oil sands project in 1967.

After commercializing the hot water process, Alberta recognized the need to invest in technologies to unlock the remaining oil potential found in Canada’s oil sands resource. In 1974 the Alberta Oil Sands Technology and Research Authority, AOSTRA, was created. AOSTRA pursued a range of technologies, including steam-assisted gravity drainage or SAGD, that have been instrumental in developing deeper in situ oil sands resources.

SAGD had marked advantages over earlier technologies. It enhanced bitumen recovery rates by up to 45%, significantly lowered natural gas—

[The Chair, Conservative, Leon Benoit]

Mr. Lakeman, unfortunately we've lost the link to you. I don't know whether you can hear me, but we can't hear or see you.

We will go to the next group of witnesses and come back to you when we get the technology fixed. Speaking of new innovation and technology, we have glitches from time to time.

We will go now by video conference to Paris, France. From the International— Just put that on hold.

Can you hear me now, Mr. Lakeman?

[Brent Lakeman]

I can hear you. I am not sure when you lost us.

[The Chair, Conservative, Leon Benoit]

It was about one minute ago, probably.

We will let you continue. Go ahead, please, Mr. Lakeman, with your presentation.

[Brent Lakeman]

Sure.

I'll move to carbon management.

Just as the province was a champion and an investor in oil sands technologies, Alberta has also been a leader in advancing the global adoption of carbon management technologies, including CO₂ capture and storage. It was through the innovation and foresight of scientists in Alberta that CCS, or CO₂ capture and storage, was identified as a key technology for carbon management and value-added resource recovery. As other nations started to investigate this option, the International Energy Agency estimated in 2008 that CCS could lead to approximately 17% of the global emission reductions necessary to prevent dangerous levels of greenhouse gases in our atmosphere. Alberta's work in this area, which dates back to the late 1980s, contributed to building the base of support in industry and government that has led to significantly larger-scale demonstrations, complemented by a supportive regulatory framework.

Currently, Alberta and Canada are regarded internationally as the leading jurisdictions for advancing CCS technologies in a timely and effective manner. What do these two examples have in common? They demonstrate the value of early investments in key technical capabilities; a collaborative approach involving industry, government, academia, and other stakeholders; and the wisdom of a clear road map and vision in unlocking the potential of these resources and technologies.

Before I get into the specific innovation topics the committee is exploring, I would like to summarize the process known as CO₂ capture and storage, or CCS.

While the focus is typically on the capture, transport, and storage of carbon dioxide associated with industrial facilities, it is important to remember that the process for converting the resource—coal, bitumen, oil, or natural gas—into useful energy, such as electricity, greatly influences the technologies and costs of CO₂ capture.

For example, a coal gasification process will result in a high-purity and high-pressure stream of CO₂ that can be captured relatively easily. Conventional coal combustion technologies used for power generation, while lower cost, result in low-purity and low-pressure CO₂ streams that require more expensive CO₂ capture systems.

Depending on the nature of the CO₂stream, different technologies can be used to capture it, including conventional amine chemical-based systems. Emerging capture technologies include the use of membranes and solid absorption, and other technologies. Over the past decade there has been a global effort to develop new approaches for CO₂ capture that are less costly and less energy-intensive than the current amine processes.

The CO₂ enters a pipeline, where it is transported for storage in a geological formation or utilized for value-added resource recovery. Formations where CO₂ is injected are at least one kilometre underground, beneath several layers of non-permeable caprock. The formation may be a deep brine formation or a depleted oil and gas well, an underground coal seam, or an existing oil reservoir. Each formation will have undergone a detailed geological characterization. As with other similar industrial practices, companies model the expected behaviour of the CO₂ and undertake surface and subsurface monitoring to verify that the CO₂ is behaving as predicted.

It is important to recognize that in addition to the technological issues related to CCS, there are a variety of important socio-economic factors that must be taken into consideration, including public and stakeholder perspectives and financial and economic analysis, all of which can be as important to a project as the technical details.

Canada has built its leadership in CCS literally from the ground up. Recognizing that one can't import geology, Canada has based its leadership on the country's significant geological endowment. The western Canadian sedimentary basin, spanning the four western provinces, is truly a world-class location for CO₂ storage. The same geological forces that have provided Canada with vast amounts of oil and natural gas and coal also provide value-added opportunities for using CO₂ as well as for storing it in a safe and permanent manner. Our geological expertise around CO₂ storage and other similar applications is sought out from around the world, with our experts collaborating with leading international organizations in advancing CCS technologies.

Our leadership is also a reflection of the extensive regulatory framework that has been established to manage oil and gas development in Alberta. Because Alberta has had the foresight to develop regulatory expectations related to applications such as CO₂ enhanced oil recovery and acid gas injection, the province has been able to move forward in a clear and logical manner in the regulation of future CCS projects. Alberta's CCS regulatory framework assessment process, which will soon be delivering recommendations back to government, is providing leadership to other jurisdictions from around the world that are now starting to advance their own CCS projects. As well, Alberta experts have made contributions to a new CCS standard recently developed through the Canadian Standards Association.

Alberta's leadership comes from the collaborative approach the province has taken in engaging industry, the academic sector, and government. This approach has been used by organizations such as Carbon Management Canada, which pulls together 27 research institutions from across Canada to pursue interdisciplinary research related to CCS.

Much of our focus is on key industry sectors, such as oil sands producers searching for carbon management solutions. While the costs of CCS technologies will be higher in the oil sands sector due to the dilute nature of much of its CO₂ emissions, reducing capture costs will result in an acceleration of the deployment of CCS technology in this sector.

Where should we focus our efforts? With respect to CCS, the issue is not necessarily one of research but of accelerating commercial deployment of integrated CCS systems to reduce costs for greater economy of scale deployment. Globally this has been challenging, as the focus has been on integrating CCS into the coal-based power generation sector, a typically risk-averse sector. The situation is further complicated in North America, where low-cost natural gas resources have deferred investment in CCS demonstration projects.

Since 2008 there has been a global effort to acquire practical experience with CCS through commercial or near-commercial demonstrations. In Alberta, the Quest project at the Shell Scotford upgrader and the Alberta Carbon Trunk Line that will take CO₂ from the proposed North West upgrader in Fort Saskatchewan are being closely watched. In Saskatchewan, the Weyburn CO₂ EOR project has been a leading example of CO₂ injection for over a decade, and the proposed aquastore project will allow for CO₂ capture and storage associated with SaskPower’s coal-fired power generation facility at Boundary Dam.

CO₂ capture costs remain significantly higher than costs of CO₂ compliance. For example, while Alberta has a CO₂ charge of $15 per tonne for CO₂ emissions above regulated levels, the cost to implement CCS at an in situ oil sands project may be more than $150 per tonne of CO₂. I put together a chart that's prepared by Alberta’s CCS Development Council, which shows the gap between CCS costs and the benefits of action, including avoided compliance costs and the sale of CO₂ for value-added activities.

Industry and governments are investing in a range of alternative technologies for CO₂ capture, and some of them will ultimately drive down capture costs, but the challenge is enormous. In Alberta, organizations such as the province’s Climate Change and Emissions Management Corporation, known as CCEMC, have recently invested in several projects aimed at driving down CO₂ capture costs.

In the short to medium term, what is required is an economic driver encouraging CO₂ use, such as the production of more oil from depleted formations or the production of new products with existing markets. While CCS represents a backstop technology that can be turned to when no other options are available, it would be preferable to find ways to make use of CO₂ so that it ultimately does not need to be captured at a high cost and stored in geological formations.

Finally, we should not forget about building greater public understanding and confidence. In certain jurisdictions like Alberta, there is a strong history and good understanding of subsurface operations such as oil and gas operations. In many other jurisdictions, however, there is a degree of public fear and distrust about this technology. For example, the Netherlands has recently seen public opposition result in the cancellation of several industrial CCS projects.

[The Chair, Conservative, Leon Benoit]

Excuse me, Mr. Lakeman.

Mr. Lakeman, your 10 minutes are up. You're passed that time. If you could wrap up in 30 seconds or so, it would be very much appreciated.