Natural Resources Committee on Oct. 31st, 2006

[Dr. Harvey Mead]

It's mid-term, but I think solar is going to be the most useful area. Wind power right now is mature and it simply needs those incentives. In Quebec, we've proposed that 15,000 megawatts could be developed over the next 10 years. The government has decided to limit it to four. It's a policy decision rather than one that's based on economics, as far as I can tell. Biofuels are clearly interesting. There's a risk there. Ethanol from corn, whether it's positive or negative--it depends on which study you read--but I think the honest way to come out of reading the studies is it's ultimately neutral. There's no gain, probably, or not much gain with ethanol from corn. But other kinds of ethanol are interesting. The government in Quebec is planning to do research, but it's not ready yet.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Thank you.

Mr. St. Amand.

[Lloyd St. Amand, Liberal, Brant, ON]

Thank you, Mr. Chair.

Thank you, Madame Dussault and gentlemen, for your presentations.

I have a question for you, Mr. Peeling, and then one for either you, Dr. Mead, or Madame Dussault.

You indicated, Mr. Peeling, that we as a committee would have the benefit of hearing from others who, by your own admission, perhaps are more knowledgeable about certain aspects of the oil sands. For what it's worth, at the risk of sounding as if I'm correcting you, on page 16 of your deck you talk about total federal government revenue over the period of 20 years being estimated at $79 billion. We heard last week from an acknowledged expert who indicated the actual revenue generated to the federal government would be about $124 billion. That's neither here nor there and has nothing to do with my question, but just for your own edification.

[Gordon Peeling]

Over the same period?

[Lloyd St. Amand, Liberal, Brant, ON]

I believe so. I think it was $124 billion. It was $138 billion total; $14 billion for Alberta and $124 billion for the federal government.

In any event, Mr. Peeling, you indicated on page 4 of your deck that mining is the largest private sector employer--and growing--of aboriginal Canadians. You'll know that the unemployment rate among Canada's first nations, Inuit, and Métis is disproportionately high compared to the non-aboriginal community. That's beyond dispute.

I have two questions then. In which province or provinces, principally, do you see the potential for more involvement by first nations, Inuit, and Métis? On page 9 of your deck you make reference to a respect for the “unique role, contribution and concerns of first nations, Inuit and Métis”. I'm wondering if you could focus on what potential there is Canada-wide to involve more of our aboriginal brothers and sisters. Secondly, what concerns particularly are felt by aboriginals vis-à-vis this type of development?

[Gordon Peeling]

Let me make a quick comment on that. At least I can give you the provenance of the number I have in there, which comes from the attached fact sheet, which comes from the Athabasca Regional Issues Working Group in Alberta, on oil sands. Your number may be 20-50, but it may be the 20-25 too. I'm only using that number, and your number indicates these are large returns we're talking about.

With respect to aboriginal employment, you may know there is going to be a skills shortage, and it's one of the issues I raised with this committee in the first presentation I made quite some time ago. The fastest-growing part of the Canadian population is our aboriginal population. In terms of skills gaps in the future being filled, we have to look to our aboriginal colleagues and Canadians to be a primary source of skilled labour and labour crews for our business, because we tend to be operating in remoter parts of Canada where they are resident. We have to do a much better job of engagement.

The provinces where we already have good involvement and where we clearly want to build on that.... Alberta is one. We're seeing tremendous engagement with the diamond mine opportunities in the Northwest Territories. I'm going to include the territories because we just opened the first diamond mine in Nunavut. Nunavut has seen more closures than new operations in the mining side in recent years, but nonetheless they see mining as a cornerstone to their future in terms of economic development and employment. A number of projects are in the environmental assessment process in Nunavut. They see that as part of their economic future. It's going to deliver jobs for them; they're going to be a partner in the development, so we see, clearly, a growth opportunity there.

In northern Ontario there is the De Beers Victor diamond mine.

In Quebec, I would say the Paix des Brave agreement has been a good platform for improving the engagement between the industry and clarifying ownership and partnership issues for industry in terms of investment and development. It provides a bit more clarity and certainty, so there are opportunities in the future there.

In Saskatchewan, I think a company like Cameco is doing a very good job with respect to engagement on their side, and they also are a PAR gold-level company.

That's spotty, I guess. We're trying to take those best practices and learnings. We, as an association, have worked with the federal government, both the Department of Indian and Northern Affairs and Natural Resources Canada, with the Canadian Aboriginal Minerals Association and with the Prospectors and Developers Association to prepare a community tool kit to explain mining to aboriginal communities, to put aboriginal communities in a better position of knowledge and negotiation with respect to how to engage with the industry. If they have development opportunities in their area, how can they engage to ensure there's a use of traditional knowledge, to ensure their communities' development aspirations are met by the development?

It's a challenge--there's no doubt it is a challenge--and we, as well as governments at both the provincial and federal level, need to work together to take these best practices, but also to invest more generally in aboriginal education. We can provide the jobs, and it's having that ability to have a job that is an important platform and element of convincing young aboriginal Canadians to stay in school.

[Lloyd St. Amand, Liberal, Brant, ON]

Thank you, Mr. Peeling.

Just very quickly to you, Dr. Mead, in response to a question, you indicated it's a matter of policy, in your view, rather than economics that has impeded or retarded the growth of renewable sources of energy. I'm paraphrasing a little bit, but that was the thrust of it.

We heard a fairly compelling presentation recently that indicated in so many words that it's all well and fine to have a wind energy program, a solar energy program, but the practicalities of wind energy, for instance--and the expert talked about how we could line up turbines across Lake Ontario or Lake Huron to our hearts' content, but transferring that wind energy to Toronto, etc., is another task entirely. I'm wondering if you have a comment about that.

[Dr. Harvey Mead]

My comment was on wind energy. Generally speaking, the subsidies to the other sectors have been much larger, both in Canada and in the United States, for the last 20 or 30 years. Generally speaking, I wouldn't say it's policy; it's economics and the lack of incentives.

Quebec is in an absolutely special situation with 30,000 megawatts, with reservoirs. The proposal for 15,000 megawatts that I mentioned was on territory where wind has been mapped by Environment Canada and some other private companies in the areas right around the reservoirs. What Quebec has as an advantage over lots of other places is that we have a grid and we have reservoirs that can take the wind when it blows and take the water when it's not blowing, so it is complementary. If you just leave it at that, it doesn't add to the total power, but that's the second step in the process. It's only in Quebec that it's policy rather than economics. The economics aspect is there right now.

I'll just add that Marylène Dussault can speak about the question of the environmental impact of the tar sands; she just can't talk about this particular study.

[The Chair, Conservative, Lee Richardson]

Thank you.

Mr. Ouellet is next.

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

Mr. Peeling, it seems to me that you do very good lobby work. Clearly, your aim is to give oil production in the west a good image.

Your document and your remarks seem to be wishful thinking. One would expect that from a government, but one would have hoped for greater precision from you.

Are your companies prepared to do what it takes to obtain ISO 14001 certification? Are they ready to indicate what concrete measures they have taken or will take? What improvements do they intend to make over the next few years? Have they conducted studies on the life cycle? What externalities are they prepared to absorb? Are they preparing for the depletion of oil resources, the depletion of water, and so on?

This seems to be an exercise in public relations, but with very little precision. That was my remarks concerning the companies' intentions.

Getting back to sustainable development, which is much more important, I completely agree with the use of the French term “développement durable”. That is generally the term I use. I have been saying it for years. When we know that a resource is being depleted, why not save some of it for things that will be difficult to convert? Perhaps I am somewhat of an idealist.

I often cite the example of aluminum. We know that aluminum production will end within a few years. However, it is an irreplaceable metal in certain products. At present, we are still building bridges in aluminum with large structures. We are wasting our aluminum. Why could we not save it for things that absolutely require aluminum and do the same with oil?

At this time, 88,000 products are manufactured with oil. Those products would disappear overnight if there were no more oil. Could we not, in an ideal world, gradually reduce usage in order to make this resource, which will be difficult to replace, last as long as possible?

Do you agree with me?

[Dr. Harvey Mead]

Yes, we talked about this before coming here. The problem is finding a politician who will impose such a reduction, but the fact remains that—

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

The Conservatives want to impose certain things. We completely agree with them.

[Dr. Harvey Mead]

That will take too long.

I believe the petrochemical industry currently uses 5% of the oil produced. It has been clear to me for years that this is the best way to use oil.

As for a reduction, I believe that this will come from a boost in the economy, if that goes too quickly, through the water problems that we are going to have if we exceed our capacities. If production capacity is doubled, the volume of water will be doubled. Some want to triple, if not quadruple, current production. This area of development functions in a private market context. The best way to impose a reduction is probably through management of economic interests. There will also be social interests, because the Kyoto protocol and greenhouse gases will be factors in political decisions.

Thus, in my opinion, a number of factors will slow development, which is fine, because we will need oil for hundreds of years to come. It will always be very useful. Proponents are thinking of their investments. Their amortization must extend over a certain period of time. How can this be managed? I would say that these costs must be integrated into their economic and strategic planning. Some are in the process of doing this. Companies are currently integrating these costs and it seems clear to me that this is already slowing down future projects.

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

Mr. Chair, I would like to ask one last quick question.

You said two or three times that Ms. Dussault could talk to us about the water situation.

Could you please talk to us about that?

[Marylène Dussault]

In fact, there are several problems.

I would first like to talk about the availability of drinking water, surface water that is recovered. We have not yet discussed it, but there are two types of recovery. One is in situ recovery and the other is open-pit mining. The latter requires a lot more water than in situ recovery, but in situ recovery uses a lot more natural gas. There are availability problems in both cases.

I would now like to discuss surface water. Consider the Athabasca River, for example. Only 90% of the water is recycled and 10% of the water is returned to the river. To produce one barrel of oil, two to five barrels of water are needed, which would all come from the river. That is a lot. In fact, I read that, in one year, they pumped in twice as much water as the population of Calgary needs to live in the same timeframe. Considering the fact that this is going to increase, double even, in the coming years, we must ask ourselves some serious questions.

Indeed, we have seen the water level of the Athabasca River go down and droughts have already occurred on the delta. I know that they are supposed to conduct studies on the minimum level to maintain a viable ecosystem. It might already be too late.

There is also the question of the glaciers. The river is fed by the glaciers, which are in the process of melting. How much longer can we maintain this rate? These are serious questions that we must ask ourselves.

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

Gas is needed to melt the glaciers.

[Dr. Harvey Mead]

There is also groundwater to consider.

[Marylène Dussault]

Yes. In the case of in situ recovery, groundwater is more often used. If we extract groundwater, that could change the pressure, which could change how aquifers are fed. Few studies have been conducted on this problem. Once again, these are questions that must be addressed.

[The Chair, Conservative, Lee Richardson]

Thank you.

To wrap up this round, we'll have Mr. Harris.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Thank you, Mr. Chairman.

I have just a couple of short questions.

First of all, Dr. Mead, Madame Dussault, and Mr. Peeling, I really appreciate your presentations today.

Dr. Mead, I believe earlier in your presentation you made a comment, and correct me if I'm wrong, but I think I heard it this way, that the government should take away the incentives they offer to the oil and gas industry and—I don't know what your exact words were—give them to those seeking alternative energy sources.

I'm not exactly clear what incentives you mean, and I wonder if you could elaborate on that. There may be some incentives I don't know about, and I'd sure like to know about them if there are some.

[Dr. Harvey Mead]

I haven't had time in preparing for this meeting to check out where the situation is right now. They were estimated at $8 billion over 20 years back, in 1995 or 1996. I'll be glad to do some checking of this and respond.

Mr. Peeling says he's not aware of them. I was talking of incentives, which are an indirect subsidy, but I can't answer you on the specific matter.

The position I was proposing is that there be no net increase in costs for the government, rather than trying to propose that the renewables get new funding or new incentives, leaving the existing ones in place. I was specifically addressing the tar sands rather than the overall sector.

On the radio yesterday, Hugh Segal was commenting that he thinks they should stay and that we should add the incentives for the renewables.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Okay. I'm still not clear on what incentives exist.

[Dr. Harvey Mead]

I'll check.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Maybe in a moment Mr. Peeling can address that, but it's my understanding that the oil sands for a number of years sat rather dormant with nothing happening. The reason for that was primarily and almost exclusively the market price of oil; it simply wasn't cost-effective or efficient in any way to try to extract the oil out of the oil sands. So I rather think the biggest incentive that keeps the oil sands going might be the market price of oil.

But Mr. Peeling, I'm not aware of—and if I'm missing something, I'd like to know—what incentives specifically are driving the activity in the oil sands. Are there some I'm not aware of?