Evidence of meeting #66 for Natural Resources in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was innovation.
A recording is available from Parliament.
5:10 p.m.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
We were told there was a real opportunity for upgrading but not so much for refining. Would you say there may be an opportunity at the refining level as well?
5:10 p.m.
President and Chief Executive Officer, Canadian Energy Research Institute
The answer I can give you is the differential itself. If you go back a year ago, when we were talking about a differential of $20 plus, refining to product level doesn't make a lot of sense from simple economics. When that opens up to $40, it starts to make a lot of sense.
Access to other markets is just another part of the game you have to....
5:10 p.m.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
Mr. Dunn, you look like you might want to enter the discussion.
5:10 p.m.
Vice-President, Canadian Division, Regulatory and Government Relations, Encana Corporation
No. I think what he's saying is that when a Canadian product is severely discounted, the less we get for it the better the opportunity is to do something else, but that's not where we want to be.
5:10 p.m.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
No. The idea would be to access the world market price.
Can you talk a little bit more about abandonment innovation? You talked about technology in plugs and those kinds of things. I'm interested because we have lots of wells that have been drilled, lots that will be drilled, but tell us a little bit about innovation in abandonment technology.
February 12th, 2013 / 5:10 p.m.
Vice-President, Canadian Division, Regulatory and Government Relations, Encana Corporation
It's certainly an area that again I think we have good solid regulations for in terms of managing the liability. Currently, the focus is on addressing more of the problem sites, those defined as older sites that are proximal to residences and such. Again, the industry and the regulator are working together to make sure that those sites are well managed and the wells are put to bed in a very effective manner. There are regulations that way.
From a technology standpoint, as I mentioned, it's looking at innovation that will provide a greater level of assurance of sealing the well off for perpetuity.
5:10 p.m.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
Where do you think technology is going to go in the next 10 years? You talked about pad drilling, about horizontal technology. What do you see as the potentially big technological innovations in the next decade?
5:10 p.m.
Vice-President, Canadian Division, Regulatory and Government Relations, Encana Corporation
I think as we continue to push the horizontal legs out further, so you can access more reservoir from the same surface location, that's really the innovation. It's a combination of being able to drill out further, but it's also the innovation on the completion side of the technology, to be able to place the sand and fracturing fluids out further as well.
As well, I think going to the greener fluids will be quite innovative. I guess the final bit would be less reliance on surface water, by recycling non-freshwater sources.
5:10 p.m.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
Mr. Howard, you talked earlier about how the price may remain in that less-than-$3 range for a while. We've talked a bit here about financial innovations in terms of the industry and that. Do you have any suggestions or ideas about what types of financial innovations might be made in order to handle revenue like that?
Second, if other product is lower than we can produce it, why shouldn't we access it?
5:10 p.m.
President and Chief Executive Officer, Canadian Energy Research Institute
Sorry, I don't understand that.
5:10 p.m.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
If other product from other places is lower than we can produce it, why shouldn't we access it?
5:10 p.m.
President and Chief Executive Officer, Canadian Energy Research Institute
Again, I don't understand the question. Other products?
5:10 p.m.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
You're talking about how we may end up becoming uncompetitive because of our prices here, our costing here. My question is, if we are uncompetitive, why should we not be accessing the cheaper product?
5:10 p.m.
President and Chief Executive Officer, Canadian Energy Research Institute
That's a very good point. As a matter of fact, that's what's actually going on in Ontario, and potentially Quebec tomorrow. We're bringing Marcellus gas across through Niagara into that market. Our forecast suggests that within the next three to four years, western Canada gas is going to be backed out of Ontario. So in effect the market is looking after that situation right there.
I don't think, with my Alberta hat on, that's a good idea.
5:15 p.m.
Conservative
5:15 p.m.
President and Chief Executive Officer, Canadian Energy Research Institute
In dollars and cents, I can't tell you that, but what I can suggest is what I indicated in my testimony. The number of wells that we're going to drill on an annualized basis is just going to go down, down, down. That has a direct effect on employment, on steel in casing and stuff like that—
5:15 p.m.
Conservative
5:15 p.m.
President and Chief Executive Officer, Canadian Energy Research Institute
If you cannot get access to an LNG market or the U.S. market doesn't recover where it needs Canadian gas, as I indicated, I think it's a unique opportunity for Canada to start looking at changing out the long-haul trucking fleet into CNG fuels and LNG fuels, and the municipal trucks could be included in that too. The possibility exists that we could be running electric cars here, and the electricity is going to be coming from gas-fired power generation. All of that is out there.
5:15 p.m.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
But the foreign markets are the critical thing.
5:15 p.m.
President and Chief Executive Officer, Canadian Energy Research Institute
Yes.
5:15 p.m.
Conservative
The Chair Conservative Leon Benoit
Thank you, Mr. Anderson.
Ms. Liu, you have up to five minutes. Go ahead, please.
5:15 p.m.
NDP
Laurin Liu NDP Rivière-des-Mille-Îles, QC
Thanks, Mr. Chair.
My questions are directed once again towards Mr. Heintzman.
You mentioned in your observations that markets aren't currently present that are favourable to innovation. Could you just elaborate on what you meant by that?
5:15 p.m.
Co-founder and Director, Bullfrog Power
In my experience, markets tend to breed innovation because many companies are competing over the same space and being forced to provide new products that better meet their customers' needs. Where there's a monopoly, as is the case in most electrical and natural gas distribution or downstream in Canada, there's less of a market. There are effectively no competitors and less of a demand or a need to innovate. In addition, very frequently the return on the economic incentive is based on a return on capital or a return on assets, not on some measure that would incent innovation.
5:15 p.m.
NDP
Laurin Liu NDP Rivière-des-Mille-Îles, QC
Thanks.
Mr. Dunn, you mentioned the SR and ED tax credit. Have you looked into the impact that changes to SR and ED in the last budget will have on your R and D activities?
5:15 p.m.
Vice-President, Canadian Division, Regulatory and Government Relations, Encana Corporation
Certainly we looked at the impact of the changes, but we felt they were manageable, by and large, and wouldn't have too great an impact.