Natural Resources Committee on Dec. 11th, 2012

[Scott Andrews, Liberal, Avalon, NL]

Okay.

[Shannon Joseph]

To apply, communities will submit what they think their performance will be, and it's evaluated by a committee of experts who peer review the project before it's approved. We have some confidence going in, we have some verification at the end, and then we share those lessons.

As I mentioned earlier, we've found $1.1 billion in savings in energy and hundreds of thousands in savings in GHGs. That's hundreds of thousands because we are a small fund, but we've also looked at what challenges communities face.

Within the context of the GMF, we run the partners for climate protection program, which leads a lot of communities to take on energy projects because it's related to climate. We ask them what the barriers are for them in going from zero—which is basically joining the program—to actually putting in place measures and implementing projects that save energy, etc. They've said that their biggest challenge is around having in-house expertise—people who can direct a consultant, people who understand where to take the community—and then having the resources to do it in terms of financing for different projects.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Andrews.

We'll start the five-minute rounds. We have Mr. Allen followed by Mr. Leef.

Go ahead please, Mr. Allen, for up to five minutes.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you to our witnesses for being here today. You've made some very interesting comments.

Mr. Scott, I'd like to start with you. I want to ask about your Kearl facility as well as Cold Lake. I want to ask you to expand on that a little bit, because we are talking about innovation. Did I hear you correctly? Did you say that the Kearl facility is at half a million barrels a day?

[Glenn Scott]

Ultimately, Kearl is permitted to reach up to 345,000 barrels per day.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Okay.

Do you want to talk about your froth treatment process? How long has that been in the development and testing phases? Have you worked with any other academic partners on developing this?

[Glenn Scott]

We definitely have been working on the paraffinic froth treatment technology for more than a decade, and we reach out to academia. We have a partnership with the University of Alberta.

We're really excited about the application of the paraffinic froth treatment. It is designed to remove the solids, the clay particles, out of the bitumen to allow us to blend that with a condensate and put it straight into a pipeline without having to heat it up in an on-site upgrader. An on-site upgrader will raise the temperature of bitumen up to over 500 degrees Celsius to help remove those clay particles out of the bitumen. The products are separated out, blended back together, put down a pipeline in a typical upgrader, and then sent to a second refinery that has to heat it up yet again.

Kearl is going to avoid that first stage of heating up to 500 degrees Celsius. It can go to any number of refineries in North America. By heating it once instead of twice, you dramatically reduce the greenhouse gas emissions from the bitumen that Kearl will produce.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

That takes me to my Cold Lake question then. You commented in your notes, saying this is in a pilot phase right now in the in situ process that you have. How long was that process in development? How long do you think it will take you to get to commercial on that process?

[Glenn Scott]

At Cold Lake we're trying what we call our cyclic solvent pilot. It's a $100-million pilot project that will start producing in 2013. We've actually already drilled the wells and we're installing the facilities now. We'll inject a hydrocarbon-based solvent into the reservoir, rather than steam. It will melt the bitumen and produce it. We can recover the solvent and recycle that in the process.

The cyclic solvent process would eliminate the use of fresh water, and avoid the need to burn natural gas to generate steam. Because we're so far into the pilot phase, we already have the wells drilled, we'll be pursuing the actual pilot results and producing actual wells using the solvent technology in 2013. We could start applying this technology commercially by around the end of the decade, but again this has been more than a decade in the making today.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you very much. That's very helpful.

I'd like to go to Mr. Letellier just for a minute. You commented in your presentation about one of the challenges being the construction cost of renewable technologies, and there's no question that especially hydro plants are tremendously expensive to build.

One of the other challenges, of course, you have from an intermittent standpoint, especially with wind, is the capacity factor. Can you talk a little bit about the improvements you've made in capacity factor in the past number of years to make that more economic? Can you also comment a little bit about managing the grid from an intermittent technology standpoint? I know from New Brunswick we are responsible for basically managing a grid that includes a lot of wind power in P.E.I. Whenever it's intermittent, New Brunswick has to pay the cost to balance it. I wonder what kinds of challenges there have been and what kinds of improvements you've made with respect to managing the grid, as well as capacity factors, to drive your costs down.

[Michel Letellier]

That's a complex question, but I'll answer it in terms of the experience we have with wind in Hydro-Québec. We have now close to 600 megawatts of wind in operation in Quebec, mainly in the Gaspé Peninsula. We have been working with Hydro-Québec to try to predict the amount of wind power that will be produced in any given day. Hydro-Québec has gathered all of the information that belongs to the station in our own part, and we're giving all the information to Hydro-Québec. They have created a software that is very accurate to predict the amount of energy that the Gaspé Peninsula will produce on any given day. They have that at least three days in advance, and it's accurate up to probably 85% or 90%.

It's true that throughout the season the power might not be as predictable, but certainly now they have a three-day window where they can dispatch for the capacity that they need. It's not as reliable as a co-gen facility or something like that, but at least it gives the grid enough time to be able to start up other facilities for the demand.

In Quebec, it works very easily. We have those big reservoirs, obviously. The big reservoirs are on standby when the wind is producing, and as the wind fades, the big reservoirs are just starting their operations. That works very well for Quebec, and I'm sure Hydro-Québec would be pleased to supply some kind of capacity to the east, but that's another discussion.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Allen.

Mr. Leef, five minutes, please.

[Ryan Leef, Conservative, Yukon, YT]

Thank you to all the witnesses. I found everybody's presentations today great and informative.

We had a witness last week who was interesting as well, because he talked about not necessarily new, innovative things but about just doing what we do a little bit better. Representing the Yukon, I've seen some things greatly improve up there on the energy front and especially in terms of green energy and clean energy.

My question will be to the Federation of Canadian Municipalities.

I will give a couple of examples about Yukon's Mayo B hydroelectric project, which the Government of Canada invests in through the green infrastructure plan. That was a $71-million investment from the Government of Canada. Through Canada's economic action plan, Dawson City got a new waste water treatment facility. We have invested in a waste-to-energy program up in Old Crow that's pretty exciting. Haines Junction is looking at biomass in its waste management strategy and at turning waste management into energy. That's through feasibility planning, funded through CanNor.

Of course we've just entered into a new resource revenue-sharing agreement with industry and the Government of Canada and the territory to see more of our resource revenue share come right back into the municipalities to allow them to look at innovative things.

You mentioned the gas tax fund and its permanency, and the Building Canada fund. How helpful have all of these things been, in your experience, in getting Canadian municipalities to the point we're at now? When I look at where we were six or seven years ago and at where we are today in the Yukon, we've made leaps and bounds in our municipalities.

Do you have any other stories like that from other municipalities across Canada where these sorts of programs and services have led to innovation that would be helpful for the committee to know about and that maybe could be modelled and shared in other jurisdictions in Canada?

[Shannon Joseph]

I think those programs have been very successful in enabling innovation in communities.

The first one that comes to mind is Cambridge, Ontario, which used its gas tax funding for capacity building work to try to manage its water system better. It was spending a lot on chemical use and energy use in its treatment systems. It used that capacity funding from gas tax funds to identify the problem, which was a lot of infiltration into their system, and then it used a lot of capital funding to repair that system, bring down the infiltration, bring down those costs, and justify to its citizens why it was pricing water in this way and putting itself on a better footing over the long term in terms of financing. I think that's an important example.

Markham has used infrastructure funding in the development of a district energy system. Just having those pipes in the ground is beneficial, because you can start off with one fuel type and then switch to waste as your fuel and to solar as your fuel. You lay a foundation for future innovation in terms of your types of energy.

Those are a couple of examples, but there are examples across the country.

[Ryan Leef, Conservative, Yukon, YT]

Great. Thank you.

Mr. Letellier, in your presentation you talked about the 22 run-of-river projects, the five wind farms, and the one solar farm for a total net installed capacity of 577 megawatts.

Can you just give us an idea of what percentage each one of those projects represents to the total of 577 and which one, in your opinion or your experience, generates the best bang for your buck so to speak?

[The Chair, Conservative, Leon Benoit]

Mr. Letellier, could you give us just a brief answer, please?

[Michel Letellier]

I guess that hydro is probably where we can get the best energy for the money. The problem with hydro obviously now is that the best sites have been developed so if the prices of the turbines are still going to be lower and lower, I think that wind has very good potential to be a very good energy for the cost.

As an example, right now wind energy can be produced on the basis of 7.5¢ to 8¢ per kilowatt hour. For hydro, you still have a couple of places where you can get that type of pricing. Those prices are for 40 years, with slight inflation. That gives you certainty on the price of electricity going forward.

I think this is still very competitive compared to combined cycle. Even with the price of natural gas being so low these days, you're in the 5¢ to 6¢ to 7¢ range.

[The Chair, Conservative, Leon Benoit]

Thank you, and thank you, Mr. Leef.

Go ahead, Mr. Nicholls, for up to five minutes.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

My question goes to Ms. Joseph, from the Federation of Canadian Municipalities.

The Green Municipal Fund energy program has two components: feasibility studies and field tests as well as funding for projects and pilot projects. Is that correct?

[Shannon Joseph]

Yes.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

In Alberta, $5.1 million were spent on the energy program and half of the money went to two projects.

The first was a water treatment facility in Northern Sunrise County and its partners. It uses geothermal energy and is an example of energy efficiency. The total funding came to $300 million.

The second project was really interesting. It is a district heating system using solar energy and stored heat. It is located in the municipality of Okotoks. The funding amount was $2.5 million. I should point out that it is in the riding of the Minister of State for Finance and that Mr. Leef and Mr. Andrews have described the effect the program is having. On October 5, 2012…

Natural Resources Canada said that this solar community has set a new world record for energy efficiency and innovation. They got the ENERGY GLOBE World Award for sustainability last year. They've got numerous awards. I would say congratulations on supporting that project. Unfortunately, the government doesn't mention your contribution to it.

Of those projects mentioned before, there were two that went towards projects and 26 were towards studies.

My question is simple: in your view, how can innovative ideas be included in the studies so that they end up as concrete projects? What challenges are involved?

[Shannon Joseph]

In my view, one challenge is the political will of some councils. Sometimes, we start a project, we conduct studies, then an election comes along. The council changes, the new council members decide not to pursue the project. We also sometimes find that there are other priorities.

Giving the studies more visibility is a challenge as well. In a lot of cases, they tell us a lot of interesting things that most communities are not aware of. We do a lot of work from our end, through our conferences and our website, to give the ideas more visibility. But more effort could be put into sharing the ideas with a view to having other people get the projects going.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Just to let you know, in terms of the result of your work, Minister Menzies says this world record demonstrates the results this community is achieving by setting new milestones in renewable energy technology. I really have to congratulate you on your part in that project.

I'd also like to table with the committee the website address of that press release by the government, just to reflect the record that the FCM did contribute to that project of the Drake Landing Solar Community. I'll pass the rest of my time to Mr. Gravelle who has a few questions to ask as well.

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Gravelle.

[Claude Gravelle, NDP, Nickel Belt, ON]

First of all, thank you to the witnesses for being here.

Mr. Scott, in the literature that you gave us, you indicate here that the oil sands industry will pay an average of $12.4 billion annually. In order to pay $12.4 billion annually, you would have to make a lot of money, probably $150 billion a year, $200 billion a year? I'm not sure but it's a lot of money. Correct?