Natural Resources Committee on Oct. 19th, 2006

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

I can see why that would be very different from a classic reservoir engineering situation.

Is there a major cost difference? You're looking at.... It varies all over the world. If you go to Saudi Arabia, the joke is always about you stick a straw in the ground and start sucking, versus a reservoir in Russia or Nigeria or so forth. What are the costs we're looking at here with in situ in comparison?

[Dr. Hassan Hamza]

The joke goes beyond that. You suck it and put it in your car and run the car.

Yes, the cost is more expensive.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

What are we looking at on a price per barrel? I'm trying to get a feel of how competitive this would be for development purposes.

[Howard Brown]

I'm referring to an excellent document from the National Energy Board, the 2006 updated energy market assessment. I'd be happy to provide you with the URL for it. Its estimate is that SAGD, the steam assisted gravity drainage, the supply cost, all-in cost, is $18 to $22 a barrel and $18 to $20 for mining. So it's essentially the same cost.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

I'm sorry, I didn't hear what you said. Was that $18 to $24?

[Howard Brown]

It's $18 to $22 for steam assisted gravity drainage and $18 to $20, so essentially the same, for mining.

That said, I have an assumed natural gas price of $7.50 U.S. per million BTUs, and as gas prices went above that, SAGD would become relatively more expensive because there would be more--

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

But if they could find something to replace natural gas, their big cost up there is energy cost, the same as it would be--

[Howard Brown]

The capital cost is not trivial. But on the operating side--

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

For the in situ the big cost is more energy cost. It's not as capital-intensive as it would be for open-pit mining. Okay.

That concludes where I'm going at this point. The only other question I have is if you could crystal-ball gaze--and the new technologies are way out there--if they began to get implemented, if we began to do this, would it have a significantly different impact when it came to the environment and economics and so forth, or would it have a very similar impact to the open-pit mining we have now? What different impacts would we have if we started a technology swing from merely open pit--and I know that's going to be going ahead--if we began to expand beyond open pit? Do some crystal-ball gazing. I realize you can't do too much, but do as much as you feel comfortable doing about how that would impact everything from economics to environment, etc., in the projects.

[Howard Brown]

I used to pretend to forecast economic numbers, and I wasn't very good at it, so I'm not going to pretend to be able to forecast technology either. But I will just refer to a couple of things that are here and tangible, and almost ready to go, and one of them is gasification.

The gasification of coal and the bottoms—the very sticky residue—involves essentially the same kind of problem, technologically. That technology has been around since the 19th century, but it's obviously getting better over time, and I think gasification is something that's very nearly ready for the marketplace. It could make a huge difference to the environmental footprint of energy use in North America, because when you gasify you have an opportunity to take out carbon dioxide—which will always have a cost, but you have the opportunity to do that—and take out some of the other air pollutants, the particulate matters, the NOx and the SOx, and so on. So gasification gives you an opportunity to dramatically reduce the footprint, both of coal and oil sands development.

The other piece in that is carbon dioxide capture and storage and the carbon dioxide pipeline. Again, I think this stuff is close.

Just to make a small correction, I never meant to say you can leave all of this to the market. I think there's a very important role for government in the regulation, but regulation can be done in a way that provides the market with the incentives it needs to do things it wouldn't otherwise do. With the right incentives, through the right kind of regulation, I think this could happen sooner rather than later.

[Dr. Hassan Hamza]

Actually, in moving from the surface to in situ, you avoid all the land disturbance, which is another advantage.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

I'm assuming my time's up, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Thank you. I'm glad we had that.

Now we'll conclude with Madame DeBellefeuille.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Mr. Brown, I'd like to go back a bit to what you told me earlier.

You told me that the growth, control and development of the oil sands are a provincial jurisdiction and that the federal government is not entitled to tell Alberta how to develop its natural resource. I entirely agree with you.

However, the emissions issue concerns all of Canada, the entire planet. And your responsibility, and that of the federal government, is environmental, and it can compel the oil companies, by regulation, to reduce their greenhouse gas emissions and, as a result, combat climate change.

I'd like you to comment on that because earlier you told me that quite briefly. We can't tell Alberta how to do things, but, since the government is concerned with sustainable development and wants to fight climate change, it is up to Environment Canada to compel the oil companies, through laws and regulations, to reduce their greenhouse gas emissions.

Is what I just said true, Mr. Brown?

[Howard Brown]

It is my belief that the clean air act tabled today, which gives Environment Canada the power to regulate not just greenhouse gases but also other air emissions, is on very firm constitutional footing. In other words, the federal government has the power to regulate the emission of greenhouse gases and other pollutants.

It's also the case that the federal government, I believe, is on very strong constitutional grounds in exercising its powers under the Fisheries Act, for example. I don't think the federal government has any role to say, well, we think you should only go to three oil sands plants over the next ten years, rather than five. It's a matter for the Province of Alberta.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

No, but...

[Howard Brown]

But it may be the case that in exercising those powers, under the protection of fisheries, for example, that has, as a side effect, a constraining influence on the development of the oil sands.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Mr. Chair, I have a brief question following those of Mr. Cullen and Ms. DeBellefeuille.

Mr. Brown, do you have a framework, directive or something similar that talks about federal or provincial areas of jurisdiction? At the department, do you have a guide that prevents you from touching what comes under provincial authority, but authorizes you to deal with what falls under provincial jurisdiction?

[Howard Brown]

Yes, absolutely. It's in my briefing book. And since it would be accessible under ATIP, I don't think I would have any problems in tabling it with the committee. It's not a....

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

That would help us a great deal, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Yes, it's called the Constitution.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Why yes, but they've decanted it.

[Howard Brown]

It's not a formal document, but I think if the department can tell me what our authorities and responsibilities are, I don't see any reason why we shouldn't inform Parliament as well.

[The Chair, Conservative, Lee Richardson]

Thank you for that, Mr. Brown. That was a very good explanation for Madame DeBellefeuille, in that yes, indirectly, of course, these matters could be restrained within the context of emissions. That certainly is one area that is not directly related to this department at this time. That's a good question.

I hope that satisfied you as well, Mr. Ouellet.

Mr. Cliffe, I did say a minute ago, before I was interrupted, that I appreciate your patience in sitting through. I know, as someone who has been on both sides of the table here and never got asked a question, I always had something I wanted to say, so I'm going to give you that opportunity, if there is something you think might be of benefit to the committee, before we adjourn.

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

Thank you, Mr. Chairman.

I'd like to follow up on Mr. Allen's question concerning the size of the oil sands deposits and the reserves we've talked about.

If you take a look at the 140,000 square kilometres they've got, the total reserve in place, as estimated by the Alberta Energy and Utilities Board, is about 1.6 trillion barrels. If you could recover everything out of that area, that's what you would get.

Coming down from that, there is a question of what is ultimately recoverable. There are estimates based on the application of the technologies, the accessibility of the technologies, given the structure applicable to those sites, and that comes down to about 315 billion barrels. The 174 billion or 175 billion that was referred to by Mr. Brown is really the reserves that can be accessed right now with available technologies and the economics.

When we talk about the size of the reserves for the oil sands, we're talking about the most conservative estimate. There is a very strong possibility that you'll be able to access and produce substantially more than the 174 billion we've referred to. The Alberta government and the Alberta Energy and Utilities Board are really looking more towards the 315 billion barrel level.