Environment Committee on Oct. 27th, 2009

[The Chair, Conservative, James Bezan]

Thank you.

We'll start our five-minute round.

Mr. Scarpaleggia.

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

Thank you, Mr. Chair.

Mr. Turk, you made an interesting point about what technology is and what it isn't. In terms of carbon capture and storage technology, it's unproven. So you would call it at this point, I guess, a prototype.

[Eli Turk]

Well, they're definitely proving out the technology. For example, the TransAlta project is looking at one that's being developed by Alstom, a chilled ammonia process. There's no doubt that it's a leading-edge project in the world. We have also the situation at Weyburn, Saskatchewan, where the project is a bit more on the commercial scale.

In terms of CCS, we're making a lot of progress in understanding it, and I think this project will prove out a lot of the technology. But yes, you're right, it's a nascent technology.

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

Dr. Hyndman, if I were the government, I'd be getting impatient with myself at this point, after 46 months of dialogue with industry, which came upon the previous three years of dialogue, which was leading somewhere...and which is going on with the dialogue with the Obama administration.

I would invite you into my office, if I were the government. If I were a minister, I'd say, okay, you're an economist and you have your econometric models, so what target can you live with? In which case you'd say, well, it all depends on what the other sectors would have as targets and what the U.S. would have as a target and what Europe would have as a target.

The picture I'm getting is that you say you'd like some certainty, but certainty appears very elusive. It's almost like nailing mercury to a wall. There will never be certainty in a world of 160-odd nations each driven by their own politics.

So I guess what's frustrating to me is that after all this talk, no one is coming to say to us, okay, this is a target we can live with. You're even saying that the government's 20% target by 2020 is too stringent.

What are we to make of all this? How can we progress on this bill when people aren't telling us what they want?

[Dr. Rick Hyndman]

Well, actually, we did agree to take on a target ahead of our competitors. As the oil and gas industry, we supported the famous “15 and 15” back in 2002, which Minister Dhaliwal committed to; and we subsequently worked on the policy with Mr. Dion, when he was minister; and it turns out that when the government changed in Alberta, they implemented Minister Dion's policy, and we have carbon pricing there that's ahead of our competitors. It's been there since the middle of 2007, and we've been supportive of that.

We think the same kind of policy could be implemented across Canada. We think it's important.

Just a snapshot of what that policy is—

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

May I interrupt? Do I understand that you're advocating for a carbon tax?

[Dr. Rick Hyndman]

Well, as I said before, the language in this debate is confusing. In my opinion, if you have a cap and trade system and you auction the permits, from an emitter's point of view, that's a carbon tax.

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

Exactly.

[Dr. Rick Hyndman]

So whether the price is set by a limit or whether it bounces up and down is a second order issue to the emitter. To the latter it's about how much you have to pay and the real issue is our competitiveness with other countries and our competitors.

So the Alberta policy set stretch targets, such as performance that's better than industry is expected to do, and then they said you can pay up, at $15 a tonne, into a technology fund and we'll use that money to advance technology. That's the essence of that policy.

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

In other words, we'll give it back to the industry, basically.

[Dr. Rick Hyndman]

Well, it's not really giving it back to the industry; it's providing support for projects that wouldn't go ahead otherwise. We're going to see a bunch of those come out in the next eight months.

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

I guess what I'm getting at is that when it comes to carbon capture and storage, the impact on greenhouse gas emissions will be minimal. If you read Jeffrey Simpson last week, he said that with all the investments that have been announced, and if everything works and we go from prototype to provable technology, you will see a reduction of 2.1 million tonnes per year. Canada emits about 720 million tonnes. So I don't know if carbon capture and storage technology is the answer.

My question is would your industry have invested in carbon capture and storage technology anyway? It requires government money.

[Dr. Rick Hyndman]

No, it's very expensive. The technologies for doing it are all known. It's just that putting them together hasn't been done very often, and the cost is exorbitant at this stage.

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

Here's an idea. I take your point about why we have to have similar prices of carbon or else there would be massive capital flows with Canadian companies buying credits and so on. But would there be capital outflows if the government said, look, we're going to have a target on the oil industry, a hard cap; you meet it, and if you want to do it through carbon capture and storage, you pay for it?

[Dr. Rick Hyndman]

Well, you could pick a low enough price of carbon, as we see in Quebec, at $3.30 a tonne, and $3 a tonne in the cap and trade system in the northeast electric sector, and then the cost might not be much. But the structure of the policy makes no sense. To say that we want you to support the economic growth of the country and to provide growing supplies for energy security for North America, but you can't emit, and there's no economic technology at this stage to produce the oil without emitting, it's a contradictory policy.

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

It wouldn't say you couldn't emit.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Woodworth, the floor is yours.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Thank you very much, Mr. Chair.

The place I'd like to start is back with Mr. McGuinty. He first suggested to you the false proposition that the government has no plan. The chair ruled that in order.

You pointed out that you had in your possession the “Turning the Corner” plan and that you were aware of certain enhancements to it.

Mr. McGuinty then suggested to you the false proposition that there's been no costing of the government's proposal, and I think your response may have been that you hadn't heard of it.

The National Round Table on the Environment and the Economy, in the person of Dr. Robert Page, testified before this committee that in fact that agency has done economic analysis. In fact, his evidence was to the following effect:

Our reports demonstrate the massive scale of the energy and technology transformation needed to meet the government's current targets of cutting greenhouse gas levels by 20% from 2006 levels by the year 2020. The NRTEE has shown that meeting this target will be quite challenging in itself for Canada.

So as my first question, do each of you agree with those conclusions or not?

[Dr. Rick Hyndman]

Thank you for that question.

I actually participate in a lot of discussions about the NRTEE report. I think it's a good piece of work to illustrate the nature of the challenge. Economic models are economic models, so you can get more or less with them, but I think that it provides a very good indication of the extent of the challenge and the kinds of costs that would be faced to achieve that target in 2020.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

You do agree with those conclusions, then?

[Dr. Rick Hyndman]

Yes.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

And Mr. Turk, do you?

[Eli Turk]

Well, the whole question of costing and developing the models and so forth, of course, depends on what your assumptions are in terms of input costs and other variables. I am familiar with the national round table's work. Again, it was interesting work that was illustrative of some costing. Whether those ultimately are what the costs will be, we'll see.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

The report, in fact, has been downloaded over 18,000 times since its publication in April. I highly recommend it to Mr. McGuinty and anyone else who's interested in costing of the government's plan.

I'm not sure, quite frankly, what the relevance is of asking you whether you're aware of the costing of the government's plan, but I would like to ask you something that you may be a little more aware of. I wonder if there has been any analysis by you or your industry of the cost of complying with the government's plan, that is, the 20% target by 2020. By that I mean costs to your industry in terms of the effect on employment, effect on consumers, and effect on your operations.

I'll start with Mr. Hyndman.

[Dr. Rick Hyndman]

Thank you.

I wish I were...had lots of the members here.

I mean, we've looked at them. I've tended to look at the policies in a fairly simple way. For instance, what kind of target, or allocation, for the industry is anticipated? What kind of price of carbon do we have? What's the gap between our emissions and the allocation? If you multiply that by the price, that gives you the dollar per barrel. When you multiply it up, you get the tens of millions of dollars of costs. Obviously, depending on the circumstances of the industry in terms of the prices for its commodity in the marketplace, the cost can be significant and affect investment in a big way. It can be less significant if we have high prices, as we had a year or two ago.

I don't have actual numbers for you here, but there are alternative places to invest in the world. One of our advantages in Canada is that we're a good place to invest. We have a huge investment in the oil sands in Alberta in particular, but also in gas supplies.

In particular, though, where we're most exposed on the competitiveness issue is on the upgrading of bitumen and on the production of natural gas. In both of those cases, we have to be comparable to the U.S. in terms of the costs we put on those activities if we don't want to divert the investment into the U.S. to do that upgrading or to produce the natural gas. The gas industry, as you know, is under some pressure right now from U.S. supplies.