International Trade Committee on Oct. 18th, 2012

[The Chair, Conservative, Rob Merrifield]

Before the committee gets out of hand, I'd like to call it to order.

I want to thank our witnesses for coming forward.

During the first hour we're dealing with the comprehensive study on a high-level economic partnership agreement with Japan. We'd like to thank our witnesses for coming forward.

We have Sustainable Development Technology Canada, represented by Vicky Sharpe, president and CEO. Thank you for coming. You have a guest with you, and I'll let you introduce him as well.

By video conference from Calgary, Alberta, we have the Canadian Association of Petroleum Producers, represented by Greg Stringham, vice-president of oil sands and markets.

Greg, can you hear us all right?

[Greg Stringham, Vice-President, Oil Sands and Markets, Canadian Association of Petroleum Producers]

I can hear you fine. Can you hear me okay?

[The Chair, Conservative, Rob Merrifield]

You're coming through loud and clear, so we're all set to go. Very good.

We'll start with Miss Sharpe. The floor is yours.

[Dr. Vicky Sharpe, President and Chief Executive Officer, Sustainable Development Technology Canada]

Thank you very much, Mr. Chairman.

I'd like to introduce my colleague, Sailesh Thaker. He's vice-president of industry and stakeholder relations at SDTC.

Thank you for the opportunity to join you today to talk about what we believe is a very important part of Canada's being able to diversify its economy.

You have in your first couple of slides some references to SDTC. We are essentially a commercialization machine for clean energy and clean technology. We work with the primary industries in this country to provide sources of technology solutions and innovation so that we can be more competitive and more profitable both domestically and internationally.

I'd like to draw your attention to slide 4, which talks about the opportunities globally in clean technology. As you can see here, we have currently defined in 2010 a trillion-dollar market, which brings about $9 billion in revenue and 44,000 jobs, but you can see that we only have just under 1% of this clean technology market. Clean technology is very broadly defined, but it does include clean energy and things that are critical to this country.

If we look at the projections for where this market is going, in 2020 we have in the order of a $3 trillion market. There are larger numbers than that. You can see that if we are able to seize just twice the current share that Canada has, then we will be able to translate that into $60 billion in revenues and 126,000 jobs, numbers that are absolutely as significant as some of our better-recognized sectors. I point that out as a very important stepping-off point for our observations.

If I move to slide 5, what we're saying is that the companies that we are building to try to capture more of Canada's share of this global market—these clean technology companies—are different from the average SME in that 80% of them are export-oriented, whereas about 10% of the average SMEs are oriented towards export markets. Of this number, some 55% of them are exporting to non-U.S. markets, and atypically, their revenues, some 50% plus, are derived from export sales, so you can see that the work that's being done to undertake various trade arrangements is really important to the clean energy and clean technology sector.

If I move to slide 6, the important point being made here is that while Japan is clearly a hi-tech, knowledgeable, and sophisticated country, I think there are opportunities that perhaps we have missed. You can see a declaration from the Prime Minister of Japan here that they very much intend to be able to solve their technology problems and challenges, and that energy efficiency and renewable energy are an important part of that.

In the wake of the 2011 earthquake, you have a complete repositioning of Japan in the way that it will approach its supply of energy, and also an increased emphasis on using less energy and obtaining it from different sources.

We've also perhaps missed the point in the past, but Canada, in fact, is a global leader in clean technology. From this chart that you can see here—the source is the Cleantech Group—that Canada lies number seven globally in this assessment of the competitiveness of our economy and our ability to provide clean technology solutions globally, and Japan sits at the number 20 position, so we have not only a great capacity here in Canada but a very willing and receptive market in Japan.

If I then move you to the next slide with some more specifics, I'd like to indicate the two areas of clean energy technologies and how we have specific companies inside the SDTC portfolio that are examples of how we might move into this marketplace.

There is a company called Morgan Solar Inc. It is a solar technology that does not fall into the traps of some of the prior investments. It is able to deliver a very cost-effective solar response to Japan's explicit statement that it will bring in feed-in tariffs as a means of stimulating renewable energy supplies into that country. This technology is an example of one that could respond.

We have very innovative clean technologies—cleaner coal and carbon capture and storage—in the form of a company that is working with the Petroleum Technology Research Centre in Saskatchewan. It's a project called Aquastore. Again, Japan has stated quite clearly that it intends to resource more coal, and it would like to use these technologies. This one hits in the bull's eye of what they are looking for.

There are a number of other examples there. There is a tidal power opportunity in Clean Current Power Systems Inc. In the area of liquefied natural gas, we have a play with a company that is improving the ability to ensure safe delivery of gas in pipelines. It's called Synodon Inc. It is highly relevant to that market.

On the energy efficiency side—another declared interest for Japan—I can talk about Fifth Light Technology, a company that has advanced lighting technologies and software controls for commercial buildings. I could also refer to SWITCH Materials Inc., which is a building technology that essentially improves the efficiency of windows.

I also wanted to highlight Sunwell Technologies Inc. It's a company that we have an investment in. It has been working in Japan for 15 years. It provides technology that allows cooling in a more efficient manner, both at the building level and for retail buildings. It makes ice, but it also helps manage the load profile for the companies that use this technology. It's in the Ritz-Carleton in Osaka, if you have ever been there. I haven't.

We have a real foot on the ground there for what is a very broad-spectrum technology opportunity. I think we can demonstrate that we have things relevant to Japan and that we can actually deliver some competitive technologies to them.

Japanese companies are also investing in Canadian clean technology. We have partnered with Export Development Canada; we have entered into a relationship with them to be able to tackle this marketplace. We have had investments from Japan in Canadian companies. You are going to hear from the Canadian Association of Petroleum Producers that Japan was one of the early partners in the oil sands and making the extraction of that resource more economical. It's a long-standing and valuable relationship in a number of sectors critical to our economy. We currently have in our portfolio over $100 million worth of projects in which we have Japanese partners.

Japan is a market for us. It is an investor in Canada. It is also a partner that we can work with to reach out into larger global markets. They have their infrastructure and connectivity, and it's important that we be able to take advantage of those relationships. There is a company called BioAmber Inc. It is one that is in our portfolio into which Mitsui has put about $15 million. The technology is being proven out and built in Sarnia. However, they have entered into an exclusive arrangement so that if this all proves to work well—and we have every belief that it will—you will see a second plant constructed in Thailand and a third plant in Brazil or somewhere in North America. This synergistic relationship with Japan is enabling our companies to move out into broader markets, not just into Japan.

It fits very nicely with what we believe is a very important country for which we should see a bilateral trade arrangement and more partnerships, which will enable ones like BioAmber and Mitsui to be able to progress.

In conclusion, what we are saying is that Canada has a clean technology sector that leads in global innovation. Japan is in need of new clean energy and energy-efficient technologies that meet their particular energy and efficiency needs. We have great companies in Canada that can address Japan's needs and help them to meet those goals. A trade agreement would allow us to increase these opportunities for the Canadian clean technology sector, and because the clean technology sector is so significant globally, that will help Canada broaden its ability to seize a greater share of the global economy, which will obviously have a stimulus response back into our own domestic economy. We consider that to be very important.

Thank you very much.

[The Chair, Conservative, Rob Merrifield]

Thank you for your presentation. I'm sure it stimulated lots of thought and questions.

Before we get to that, we'll hear from Greg Stringham, from the Canadian Association of Petroleum Producers. Greg, the floor is yours.

[Greg Stringham]

Very good. Thank you, Mr. Chairman.

Thank you very much for this opportunity not only to appear before your committee but also to do it by video conference. It helps facilitate the technology, as was just referred to by Ms. Sharpe.

I am really appreciative of the clerk of your committee as well as the staff for distributing the materials we sent out, and hopefully you have them in front of you.

Do you have them already, Mr. Chairman?

[The Chair, Conservative, Rob Merrifield]

Yes, we do.

[Greg Stringham]

Perfect.

I won't go into this in a lot of detail. I'd like to explain what we see in the opportunities, on behalf of the oil and gas industry, to strengthen what is already a very strong relationship with Japan.

As you and I and also some of your colleagues know, Mr. Chairman, our association represents just over 100 oil and gas companies from the east coast to the west coast to the north of Canada. About 90% of all the oil and gas produced in Canada is represented by our association. When I make these comments, it's really on behalf of the large, the mid-sized, and even the small companies that are looking for the strength of relationship that they have seen over the long period of time with Japan.

Quite interestingly, we've talked about the Asian investments we've seen recently in our sector and also the trading relationship with other countries. Actually, with Japan we have a very long-standing relationship. As Ms. Sharpe mentioned, just to remind some of your committee members, Japan Canada Oil Sands Limited actually commenced back in 1978. To put that in oil and gas terms, that's when we had our first major oil sands project after Suncor. We went into Syncrude in that year, so you can see that they have been here involved in our sector for a long time.

The other thing that is quite interesting to note is that Japan was actually there as some of the formation companies, along with the government research associations that predate the SDTC, but again in the development of this new drilling technology that we call steam-assisted gravity drainage. They were one of the first partners in that project back in 1992, so there has been this long-standing relationship that began on the oil side.

On the natural gas side of things, there were other countries, but they were one of the primary funders and participants in the major gas hydrate research project that the federal government, some provincial governments, and others were directly involved in with industry to try to tap into this new resource up in the Northwest Territories. That pilot project went on for a period of almost nine years, from 1999 to 2008. Again, hundreds of scientists from many countries around the world used that to get not only a look at Canada's resources but at how we can develop technology here and use that in other countries around the world.

That's some interesting background to the Canada-Japan relationship that not many people are aware of when they start looking at that as an opportunity not only for resources but as a partner in developing our resources here in Canada.

Equally, even in this building where I sit right now, there are many Japanese companies that have come to Canada to provide goods and services to our sector. In this building, we have Sumitomo, which provides steel, pipelines, and other things as well. We have Mitsui and others, and they have really tried to integrate into the economy to bring their expertise, their supplies, and other things to help enable the development of Canada's resources.

That's the background. I wanted to give your committee a flavour of what we see as the biggest opportunity to build on a strong base of trading relationship with Japan right now, and that's clearly in the area of natural gas. As Ms. Sharpe mentioned, due to the 2011 incident at Fukushima, the Japanese are clearly interested in generating more electricity for their country through the use of natural gas.

What follows in the subsequent slides—and I will not walk through every one of them—is really a background that sets the case for both why they are interested in that and how we as Canada can capitalize on this opportunity to try to make sure that the Japanese see us as a major supplier of this product.

First off, the technology that's been developed in cooperation with governments and agencies like SDTC has enabled the amount of natural gas accessible in Canada to more than double over the last few years. This technology is tapped into resources that we always knew were there but that we required technology to enable. That technology is providing not only Canada but all of North America with a very strong surplus of natural gas such that we are now looking at the opportunity to export it around the world. Clearly our industry is already on the global stage, and this is just an enhancement.

In the slides provided to you, I have shown the economic drivers. There's clearly a difference in the LNG, or liquefied natural gas market, in the world that Japan is paying for. It's priced in oil prices. The prices of natural gas here in Canada right now are priced in natural gas prices. It's the big difference between the two that provides this economic driver behind it.

I've also provided some information on the costs of achieving that opportunity. We can answer questions on the details, but it outlines what we need to do in terms of infrastructure, liquefaction, and manufacturing facilities to do that, and a number of other things. It's not simply a question of moving that natural gas as we do across Canada through a pipeline today; it does require significant technology and investment to allow that to happen.

The other slide is important in that what I've given to you is the demand growth that we see happening across all of Asia. While Japan, as you can see from one of the slides I've provided, provides a very strong base load for liquefied natural gas in that region right now, it's only one of several countries that are growing in the use of natural gas as all of those countries look to expand their electric generation facilities and are moving off resources like coal and looking at natural gas as one of those key bridging fuels for them. Japan is really a foundation there, but others are growing, and we could bridge off the relationship they have with Japan to move into those other countries eventually.

The last slide has a map associated with it that discusses the proposed west coast liquefied natural gas terminals that are in place.

Without going into the detail of all of the proposals that are there, it shows a map from northeastern British Columbia and the distance it takes to travel to Asia, in particular to Japan. Not many people recognize that we are actually strategically advantaged by the distance between ourselves and Japan when it comes to shipping routes. That gives us a competitive advantage over other regions, such as the Middle East and even Australia, which is competing in this market right now. It provides a good reason for us and for Japan to look at capitalizing on that opportunity, simply because, even though we often think how long the flights are from here to Japan, it really is close in commodity shipping terms, which many people don't recognize.

We see that as being a major opportunity to develop a strong relationship and maybe even deepen it with a trade agreement between Canada and Japan. We don't see any current tariff barriers that restrict that from happening, providing there's certainty of agreement between countries, as we've seen in other countries where we've done trade agreements, so that the commercial business can then take place on an even greater scale than it has in the past.

I'll now turn the time back to you and I'll be happy to answer any questions.

Thank you, Mr. Chairman.

[The Chair, Conservative, Rob Merrifield]

Thank you very much. I appreciate both of our witnesses' interventions.

We'll now turn to questions and answers. Mr. Sandhu, you have seven minutes.

[Jasbir Sandhu, NDP, Surrey North, BC]

Thank you very much, Mr. Chair. Thank you, witnesses, for being here today.

My first question is to Ms. Sharpe. The federal advisory body, the national round table on the environment and the economy, lost their funding of $5.2 million last year, and today they released their final report because they're not going to be existing after March.

The final report basically issued a clear warning to Canada that we are falling terribly behind when it comes to making the transition to a low-carbon economy and that the economic costs of this inaction are way too big to ignore. Do you share the concerns with the lack of progress Canada is making while economies the world over are transitioning to low-carbon economies?

[Dr. Vicky Sharpe]

I would say that we have to recognize what we have as an economy, which is that we are blessed with a great deal of natural resources and that some of those are high-carbon sources. We are the envy of many economies because we are fortunate enough to have that.

What I think we are saying that it's good, it's important for us, it helps cheap energy, and all these other things are enabling our products and resources to be utilized in a cost-efficient way. What we're doing is overlaying this with what we call clean energy and clean technology so that the technology solutions that are being added into these traditional resource industries are providing increased efficiency, a reduced environmental footprint, and by definition, quite often reducing, if you like, the carbon content relative to the output.

As you've seen in slide 6, in fact, Canada is recognized for being a leader in that arena. You've tackled a very big question—

[Jasbir Sandhu, NDP, Surrey North, BC]

I'm going to get to that, but I have to get to other questions.

[Dr. Vicky Sharpe]

Okay, but I feel we have actually.... We have about 240-odd companies in our portfolio. There's $2.2 billion worth of projects under management. As far as we are aware, we are the largest clean tech fund globally, so I have to say I think we're doing some valuable things.

[Jasbir Sandhu, NDP, Surrey North, BC]

Okay. Let me ask you a question.

In your organization, the sustainable development tech fund has not been recapitalized. Is that true?

[Dr. Vicky Sharpe]

We were given some money in budget 2011 to keep us moving with the kind of momentum that we've been used to, and we are talking with our colleagues about recapitalization in budget 2013, so obviously we have no idea where that's going.

[Jasbir Sandhu, NDP, Surrey North, BC]

The information I have is that the $550 million grant that you got from the Government of Canada is going to expire at the end of December 2012. In pre-budget consultations for 2012 you've also asked for a new $550 million in the Canadian Cleantech Accelerator Fund, which I'm assuming would be in place of the tech fund that you're losing at the end of this year, but that's also been denied. Is that correct?

[Dr. Vicky Sharpe]

It hasn't been denied. I think there was a considerable effort on deficit reduction in the last budget, and as we were able to continue, it was decided that was not a good time to reach those decisions. We've been talking about that ever since.

[Jasbir Sandhu, NDP, Surrey North, BC]

So you haven't got the—

[Dr. Vicky Sharpe]

We haven't been denied. We've done a number of things that we think will enable us to do more with less. There's a new model coming forward that won't be exactly the same as the SD tech fund, but—

[Jasbir Sandhu, NDP, Surrey North, BC]

As of right now—

[Dr. Vicky Sharpe]

Our current fund will be fully allocated at the end of this year.

[Jasbir Sandhu, NDP, Surrey North, BC]

Right. The government hasn't promised you any new funds in the new year.

[Dr. Vicky Sharpe]

I don't think they promised anybody anything in the budget for next year, so....

[Jasbir Sandhu, NDP, Surrey North, BC]

You just pointed out that there's rapid growth for low-carbon goods and services in the global market, and I saw your slide number 6. As you said, the overall green sustainable energy sector is estimated to be $3 trillion by 2020. Right now, Canada has less than 1% of that market. We know that in 2011, in one quarter, in the U.S. there were 600 patents for sustainable energy innovation, yet in Canada we only had 10.

It seems to me as if the government is making decisions that will damage the expansion of made-in-Canada technologies for green jobs here and for exports to countries like Japan. Would you agree with that assessment?

[Dr. Vicky Sharpe]

I'm not sure that I follow the linkage in your question. On the issue around patents, I don't have the numbers at my fingertips, but I believe that on a per capita basis Canada produces as many patents as the U.S. does, so that sounds like a strange number, but I really am not familiar with it.

The play that we have is around commercializing that, because the patents in themselves don't produce revenues and don't feed back into the economy, so it's taking companies that have intellectual property that's of value and getting them to be sustainable businesses operating in the global market. We are seeing that happening. Our results show that the compound annual growth in revenues of the companies that are inside the SDTC portfolio versus those that are not in it is twice as fast as the global CAGR, or compound annual growth and revenues. We believe we are building competitive Canadian companies and that they're competitive globally.

On the patent bit, I'm afraid I'm not able to answer.