Environment Committee on June 16th, 2008

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

What does that mean?

[The Chair, Conservative, Bob Mills]

Mr. Scarpaleggia, your time is up.

We'll go to Mr. Bigras.

[Bernard Bigras, Bloc, Rosemont—La Petite-Patrie, QC]

Thank you very much, Mr. Chairman.

I would like to begin by thanking you for appearing before the Committee today. It is a brief, but at the same time, broad overview of the industry, and I want to thank you for that. However, there is one area that I would have liked to see you discuss further, and that is the tax system affecting the oil sands industry in Canada. You talk about—and I understand that—120,000 direct and indirect jobs that have been created, as well as 1,300 Aboriginal people directly employed by the industry.

However, I would like you to describe the Canadian tax system as it applies to the oil sands, how much that represents annually and how much it has represented for Canadians, in terms of various taxes, over the last 10 years? Can you give us some general indications in that regard?

[Kevin Stringer]

We can certainly provide the Committee with an accurate picture of the current situation.

What I can say, as well, is that the capital cost allowance was changed--I believe it was last year in the budget--to bring it in line with capital cost allowances elsewhere. The government has indicated since 1986 that it's out of the business of providing large support for megaprojects in the oil sands. There was some involvement in early days, but there hasn't been in recent years. Certainly, in terms of the fiscal situation, we can provide you with....

We can provide more information to the Committee on this.

[Bernard Bigras, Bloc, Rosemont—La Petite-Patrie, QC]

However, you do recognize that there are still tax incentives available to the industry.

[Kevin Stringer]

We can also answer that question.

[Bernard Bigras, Bloc, Rosemont—La Petite-Patrie, QC]

I have a second question for you. In the Speech from the Throne in October of 2007, the Prime Minister announced his intention to develop a new water strategy. I believe the Minister of the Environment has been suggesting there could be some details provided, including very specific standards, particularly with respect with wastewater.

That is all well and good, and I know that a great deal of effort is being made to develop the industrial sector. However, were you consulted to ensure that this development would abide by a certain number of environmental standards, in terms of water quality, as well as a principle called green taxation, and that the public data obviously serve to develop this sector, but also ensure that environmental standards, particularly those relating to water quality, are observed?

[Kevin Stringer]

I am going to ask my colleague, Dr. Hamza, to answer your question, but I can tell you that we are working very hard in our Department, and at the Department of the Environment, on a water strategy. We know that this is very important for Canada. I also believe that the water management framework the Department of Fisheries and Oceans has developed with the Alberta government is a very important link to a strategic framework on water use in the oil sands. We are currently working on that strategic framework with the province.

[Bernard Bigras, Bloc, Rosemont—La Petite-Patrie, QC]

I have one last question for you. Mention was made of technology and developing that technology. I would like to know if the federal government has made any effort in that regard. You told us earlier—rightly so—that the industry uses a great deal of natural gas in developing the oil sands.

Has the federal government made any financial effort to develop the nuclear option for future oil sands development? Can you confirm that public funds have been used to develop the nuclear option, as a way of increasing production?

[Kevin Stringer]

Research has been conducted on whether nuclear energy could be used to develop the oil sands. I believe that research indicates that the technology is not yet sufficiently advanced. Nuclear energy does not produce enough steam. But, we do believe that with more research, it will be a possibility in the future.

[Dr. Hassan Hamza]

Our department is working on two fronts. One is the technical front. We're trying to develop better technologies to clean the water, recycle the water, and generally use less water in the production of oil. On the coordination front, we have committees in NRCan from different areas within the department, and we are working with the Department of Environment on a number of these issues. We are also in touch with the provincial government. We sit on many committees with the federal and provincial governments, and these issues are discussed extensively.

[The Chair, Conservative, Bob Mills]

Have you done any research on the Northwest Territories and run-of-river hydro potential? I understand that it's huge. It could provide all of the energy required for the oil sands if you could get it from where it's generated to where you need it. The problem would be the transmission lines. Has any work been done on this?

[Kevin Cliffe, Director, Oil Division, Department of Natural Resources]

That's a very good question as well. The answer to that is no, we haven't really examined that directly. As you suggest, and as you point out, it is a question of the transmission. It is a fair distance. We haven't looked at it, as I said, directly. I think that is an area that perhaps the fisheries department might have been looking at, or perhaps even the province. I'm not sure. We can check that for you.

I just wanted to respond, if I could, to the nuclear question. We have just completed the first phase of a study with Petroleum Technology Alliance Canada, taking a look at various nuclear technologies that are available within Canada and other jurisdictions that might have the potential to be used in the oil sands area. The results of the study to date indicate that, as Mr. Stringer has pointed out, it's really becoming an issue of size, proximity of the nuclear facility to the actual load--the oil sands operation--and the amount of compression that is required in order to maintain the steam pressure and steam temperature to transport the steam produced at the nuclear facility to the actual site.

Petroleum Technology Alliance Canada, along with industry, is engaging in the second phase of this study right now, which will take a look at some of the technologies that could be applied and the economics of their application.

[Kevin Stringer]

Can I just add to that, Mr. Chair?

I think this goes back to the question of whether technology is moving along or the price of oil is driving this. It is, indeed, both. Technology has advanced enormously in the last twenty years, as has the amount of research being done. I did say, in response to the question of whether we have looked at nuclear, that we have looked at it. I should be clear that the research was not done by the federal government.

We have seen emission intensity levels come down. We have seen use of water come down. We've seen a decrease in the cost, which has made it more economical to proceed with some of this work. So technology is moving ahead, and there's an enormous amount of technological research, much of it being done in Devon by Dr. Hamza and his group, but also all over the world. The question is whether the research and technological improvements can keep up with the growth of this resource. That's the challenge we're facing.

[The Chair, Conservative, Bob Mills]

Did you have a quick question, Mr. Lussier?

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

I have three questions.

[The Chair, Conservative, Bob Mills]

The next two presenters will present much of the same material, so I think everybody will get a chance to ask questions. Of course, this is just our beginning.

Go ahead very quickly, and then we'll go to Mr. Jean.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Do the investments of $125 billion mentioned on slide 13 include costs related to nuclear power plants?

[Kevin Cliffe]

No. This is just for capital for the actual plants and for sustaining capital to maintain the operations at their levels.

One of the things with oil sands is that they do not decline as you produce them. There is a flat production rate for about 40 years. The material is fairly caustic, and it does require continued investment in the facilities in order to keep them operating effectively.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Mr. Stringer, on slide 15, you mention that the oil sands contribute 4% of greenhouse gases in Canada.

What year does that figure refer to? And, what is the projection for 2020?

[Kevin Stringer]

Okay.

I do not know exactly what the projection is for 2020. However, we did say that we are aiming for an overall reduction in emissions of about 20% for the industry as a whole.

We have projections for even more reductions for the oil sands. In terms of what percentage of the overall that would be, I can't tell you, but we can certainly get you that information. I'm sure there is a projection about that.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Mr. Stringer, you talked about open pit mining, as opposed to in situ methods. You said a number of times that in situ methods are less damaging to the environment than open pit mining.

On what basis did you make that statement, two or three times, during your presentation?

[Kevin Stringer]

That is a good question. I can ask my colleague, Dr. Hamza, to answer that.

Basically, it's that the open-pit mining takes a very large area, and the effect on the land certainly is more significant. The amount of water used is more significant. Only 70% of the water is recycled, whereas with in situ, 90% is recycled. The emissions are less substantial. So the overall footprint is generally less.

That is not to say there aren't issues with the in situ situation, the in situ facilities. There are issues there. There is seismic work done, there are roads, and there are other issues we need to deal with. There's a different set of issues, but the sense is that it's less grand on the scale of what you would have to deal with.

[Dr. Hassan Hamza]

I'd like to add one or two quick points.

With in situ, because there is no disturbance of the land, and so on, whatever emissions there are underground are not exposed to the surface. These are advantages.

But I'd like to at least warn you against believing that in situ produces, with the same unit of energy, as much as surface mining. In the surface mine, you can produce over 90% of the bitumen. With in situ, you are producing maybe 30% of the bitumen, because of the structure of the formation, and so on.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Dr. Hamza, is any data available on the effect of solvents on groundwater, or will these data only be available 20 or 30 years from now? I am referring here to contamination of the groundwater.