Natural Resources Committee on Nov. 29th, 2012

[The Chair, Conservative, Leon Benoit]

Mr. Gradek, can you answer the same question?

[Thomas Gradek]

Again, as Mr. Nelson mentioned, on the $1.4 billion, I don't know where it went.

The oil sands industry has an approach with side issues whereby, since they are not generating revenue, they are left on a schedule that is not very short. This is where government should come in and impose a timeline.

Luckily, in 2009 Alberta put through directive 074. If you look at the oil sands expansion and what they are deemed to be going for by 2030, there is not much space left to build tailings ponds. Suncor presently has an issue in where a plant can be set up on its lease, because tailings ponds take up so much area. The world's largest man-made dam is the Mildred Lake dam, which is holding back toxic waters. It's unfortunate that engineers conceive to go ahead and build structures as such rather than treat those wastes and eliminate them.

There is potential to go ahead and eliminate waste. The way to incite it, if the government wants to put a timeframe, would be to say, “Listen, you are going to clean up your image. You are going to be more efficient. You are not going to be producing waste. You are going to be generating a revenue stream and maximizing a resource out of that waste.”

That's the focus where government should go ahead and be involved. They should look very seriously at innovative technologies, assist them, and take a role whereby they would collaborate and coordinate all of the effort for the industry. The bottom line is that we can export low-carbon fuel, not dirty oil, into the United States. The way to do it is to recover the waste heat, increase our efficiency, eliminate waste, and demonstrate that we are socially responsible with our resources for future generations.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Nichols.

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

[Ryan Leef, Conservative, Yukon, YT]

Thank you, Mr. Chair, and to all of the witnesses for attending today. I'm going to build a bit on what we're talking about there.

We had some past presentations from the department. The department provided some information on the investment from the federal government in research and development. From the departmental perspective, Canada is ranking about third in R and D. Some of the numbers they provided were $102 million in energy efficiency, and a cleaner fossil fuel investment of $187 million, which made up about 29% of the total investment.

Have your companies accessed any of that to get where you are at this point? Is there potential that you see to continue to access those sorts of funding as you move forward? Are there plans to do that, and have you in the past?

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Nelson.

[Scott Nelson]

Yes, we look at all the programs. We have people and lawyers who advise us on what we should be applying for. Sometimes you're successful, sometimes you're not.

Our first program was in Alberta; it was an energy innovation fund whereby we got $3.5 million when we were at the R and D stage. We then moved to SDTC, which we thought was an ideal fund for pre-commercialization demonstration. Initially we got $5 million and recently another $1.5 million. We've got a small grant from something called IRAP, which is the National Research Council's industrial research fund.

We try to target these things, but they're not all that big. You need to get private financing along with it, which is a healthy thing. I think for every dollar we've brought in from government funding, we've put $5 of our own money on the table, so that's okay. It's not massive, but it's helpful. I'd be the last to say it isn't.

Is enough done? In the statistics I see Canada is not ranked all that high in R and D in the G-20 and so on in terms of either our investment or our spending or our outcomes.

I guess other countries are doing a somewhat better job than we are. When I travel around the world, they don't immediately see Canada as innovative and exporters of innovative things, unfortunately, but I think we can be. We've got the best universities in the world and some of the smartest and best-educated people; why can't we be a leader here? I think we can be.

[Ryan Leef, Conservative, Yukon, YT]

You're not familiar, then, with what the department talked about, the expenditures as a percentage of national GDP in 2010, with Canada being ranked third only to Denmark and Japan, ahead of Norway, Sweden, Switzerland, Hungary, Austria, Korea, the U.K., U.S.A., and Germany? We outspent them by a considerable percentage.

[Scott Nelson]

That's interesting. No, I haven't seen those statistics. I'd like to see them.

[Ryan Leef, Conservative, Yukon, YT]

Okay.

Mr. Gradek, I'll give you an opportunity to talk about whether you've been able to use some of those program funds and what your intentions are with them, and maybe what we can even do to make that a little bigger, as Mr. Nelson said, or a little more accessible to promote these innovations.

[Thomas Gradek]

We haven't been able to access very much in terms of government funding. Less than 5% of our funding is from government. However, the metrics with regard to policy and regulations for programs such as renewable or clean energy are not there.

I can pick a waste stream composed of wood chips, and burn it; I've got a biofuel. If I can remove bitumen from a tailings pond, which is a waste stream, and it will displace a conventional source of fossil fuel, it should be classified as an alternative fuel.

That's what we lack here in Canada. Metrics for the policies are not up to standard. They're not there, and it's inhibiting Canadian exports.

[Ryan Leef, Conservative, Yukon, YT]

You mentioned Suncor, I think it was. You said the tailings are growing to a point where they're limiting production.

In my mind, that would absolutely necessitate looking at this kind of thing. What's the alternative? As you said, sites are getting more limited, so they can't just go anywhere else. By virtue of that, it would seem to me they're going to have to look at some of these technologies.

Do you see that being the picture versus, as Mr. Nelson was saying, a reluctance to push a regulation? Do you not see they're almost going to get to a tipping point whereby they're going to have to move toward the technology you've got? Also, it might be timed nicely with your project proof of this, being ready to roll at that perfect timing stage.

[Thomas Gradek]

Suncor has been trying to make a go of CTT, consolidated tailings technology, which CANMET and the University of Alberta developed and promoted. They tried for 15 years and were never able to pass the 20% threshold—

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Leef.

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

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

I want to thank the witnesses for their contribution. My first question is for Mr. Gradeck.

You have answered Mr. Frost's questions but I would like you to comment on the criteria for accessing the scientific research and experimental development tax credit, and what the impact is for your own company.

[Thomas Gradek]

Would you like me to answer in French or in English?

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

As you wish.

[Thomas Gradek]

A major change was implemented in 2013, relating to the treatment of eligible expenditures in the SR&ED program. Since then, not all capital expenditures are eligible. This is a major change, especially in the case of a project where big expenditures are required, and especially at a stage when there is a jump in expenditures. When you go from a pilot project to a precommercialization plan, your expenditures increase by a factor of 20. Your capital requirements become extremely high and, if there is no system to facilitate this development, it will not happen. So, it is very important.

Look at what happened with the pharmaceutical industry. Companies are leaving Montréal by the hundreds because the program has been changed. They have no incentive anymore to develop new products.

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

Thank you.

This is a concern that we have heard from companies such as Rim as well as from the Canadian Association of Petroleum Producers and the Canadian Manufacturers and Exporters. It is a concern shared by many sectors of industry.

At our last meeting, we were supposed to have a presentation from Écotech Québec. Unfortunately, they were unable to appear before the committee but they sent us a brief in which they suggest creating a tax credit for the commercialization of products. What do you think of that suggestion?

Mr. Nelson can also answer if he so wishes.

[Scott Nelson]

I think that would be a good idea. That's where we fall down, commercializing.

One thing I should mention—and I think it's a good thing—is that in Alberta, once you have qualified for your SR and ED credits, particularly for companies like ours that don't have revenue yet, the Alberta government pays you those in cash. There is a maximum on it, but you can do this each year. That's certainly a great help to small companies that don't have a revenue stream and can't really use tax credits for some period of time. That is a good thing.

There is a gap, though, in this commercialization area, and I think that idea is a very good one.

Thank you.

[Thomas Gradek]

The U.S. has the Small Business Act, whereby the government will go ahead and guarantee, to the bank or the financial institution, 85% of the funds required to commercialize a technology, so we're not exactly on an equal footing with U.S. technologies or green technologies, and it's hurting Canadian industry enormously.

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

Thank you.

I would like to ask my last question.

I was wondering if you could comment on some propositions made by the president of Shell recently, who spoke about CCS, which we talked about earlier. She said that CCS would be viable only under a regulatory system, such as cap and trade, regarding carbon emissions.

What are your comments on her comments?

[The Chair, Conservative, Leon Benoit]

Mr. Gradek, go ahead.

[Thomas Gradek]

Ms. Liu, CCS, if you look at it from a holistic point of view.... The Society of Petroleum Engineers put out a paper in 2008. They disclosed in that paper that CCS is not a viable economical solution for reducing greenhouse gas emissions, the reason being that total volume of sequestered CO₂ that would be retained in a formation would be approximately 1% of the total volume of fluids that would have been recovered through EOR.

Presently we're using CO₂ injection for enhanced oil recovery. It's a benefit. By subsidizing CO₂ sequestration, you're subsidizing the production of an oil company.

Does the taxpayer benefit with reduced costs at the pump? I don't think so. That's an issue.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Gradek. We are out of time, and we have to go to our other business of the committee.

I'd like to thank all of the witnesses very much for their presentations today and for answering questions.

We have other business to go to. I will suspend for just a minute while the witnesses clear the table, and then we'll get back to the other business of the meeting.

[The Chair, Conservative, Leon Benoit]

We are reconvening the meeting. We are continuing the business of the last meeting.

Mr. Calkins, you had the floor. There is nobody else on the list.