Natural Resources Committee on Nov. 21st, 2006

[The Chair, Conservative, Lee Richardson]

The meeting will come to order.

Welcome back to Ottawa all the visitors to Fort McMurray.

Today, we're going to hear witnesses in a normal exchange. I want to welcome Jim Carter from Syncrude; Mark Shaw from Suncor Energy Inc.; Rob Seeley from Albian Sands Energy Inc.; and Tony Clarke—of a different ship than the three companies—from the Polaris Institute.

We'll get right to it. We don't have any business today other than hearing witnesses. What our practice has been over the past while is to allow the witnesses ten to fifteen minutes to present an opening case, and then we'll just simply ask questions.

It's really an information session. Nobody's on trial here. We're just trying to get a better understanding of the oil sands, the development, and what is happening.

We had a very good day yesterday in Fort McMurray, but I'm sure that day raised a lot of questions too.

So without further ado, have you decided on an order or how you're going to make the presentations?

Jim, are you going to start?

[Jim Carter, President and Chief Operating Officer, Syncrude]

Yes.

[The Chair, Conservative, Lee Richardson]

All right. I'll let you go ahead for ten minutes, and if there's a brief supplementary from Mark or Rob, you could add it at that time. Then we'll go right to Tony before we go to questions. That works for everybody.

I'd like to begin with Jim Carter, who is the president and chief operating officer of Syncrude.

[Jim Carter]

Good afternoon, Mr. Chairman and members of the committee. I'm certainly pleased to speak with you today on behalf of Alberta's oil sands industry.

I would like to introduce two industry colleagues who have joined us for this meeting. Mark Shaw is the vice-president of oil sands sustainability for Suncor Energy, and Rob Seeley is vice-president of sustainable development and regulatory affairs for Albian Sands Energy.

As you know, the economic, environmental, and social impacts of oil sands development has become a topic of much public discussion lately.

We were pleased to have your committee in Fort McMurray yesterday, so you could see firsthand what exactly is going on in the oil sands. I hope you enjoyed your visit to Alberta's vast oil sands resource, and indeed your visit to Syncrude Canada.

I understand you have also heard from the Canadian Association of Petroleum Producers and the Mining Association of Canada on these topics. I am pleased to complement those presentations by offering the direct view of oil sands operators to you today.

As you witnessed in Fort McMurray, while there is indeed a tremendous amount of activity under way, which is bringing many pressures to bear, it is our view that the positive outcome generated by our industry far outweighs the challenges we face. In the interest of time, I will focus my remarks today on economic contributions and environmental stewardship.

Let's deal with the economics first. As you know, the oil sands are a unique resource. They are quite unlike conventional oil and gas deposits, both in formation, recovery, and in the extraction methods as well. Because of this, a generic royalty regime was proposed by the National Oil Sands Task Force to recognize the special circumstances presented by oil sands investment and the operating environment we operate in.

Some key differences include the fact that higher capital expenditures are required to establish or expand oil sands projects than are needed to drill an oil well. This is especially true for oil sands surface mines and upgraders that tend to require capital in the order of many billions of dollars. I'm sure you had the sense of that on your tour yesterday.

Once built, the unit operating costs are also significantly higher than conventional oil and gas. Likewise, sustaining capital costs to maintain these complex facilities, which have a typical lifespan of about 50 years, are also higher. Because of the longevity of our projects and the significant commodity price fluctuations that can occur, we are exposed to a higher variance in economic performance over the life of an oil sands project.

Compounding this issue is the fact that once built, an oil sands plant operates on a continuous basis and cannot be shut down during times of low crude oil prices. In fact, if anything, the opposite is true. When crude oil prices go down, we try to maximize our volumes so we can get a lower unit cost and try to maintain positive cashflow. As a result, oil sands developers must take a long-term view to resource development.

The generic royalty regime was established to recognize these unique aspects of oil sands development and provide a fair and equitable balance between risk and reward. In fact, this regime was established to encourage the development of the oil sands and overcome the barriers presented by high capital costs in the face of an uncertain long-term fiscal regime. It has taken nearly ten years to begin to attract this large-scale capital investment. I believe we must maintain this stable fiscal regime or investor confidence will most certainly be shaken.

We recognize that there are many challenges in developing these deposits. Labour and material supply are probably two of the most pressing challenges at this particular point in time. Importantly, these challenges speak to how the industry will pace development in an appropriate manner. If project operators are unable to secure the people, supplies, and the services they need, then they will voluntarily take appropriate action to manage that situation. In fact, this has already been demonstrated to be the case. That is why we believe the market economy should prevail.

Just to elaborate on that a little bit, as the supply of labour becomes shorter, the costs of that labour go up, and the costs of materials go up. All of that gets fed into the economic evaluation of the projects. As those prices go up, people tend to take longer to make their decisions. We've already seen some of the projects move out to the right in time, so the marketplace is really prevailing there, and if crude oil prices fell and those costs continued to go up, then those decisions would be made based on the merits of the economic evaluation at the time.

The Alberta government receives royalties according to a pre-payout and post-payout formula. Currently, more than 50% of the oil sands projects that are in production are at the higher rate of early payout, so there are more than half that are now at the full rate. In 2005, the Alberta government collected about $827 million in royalties from oil sands development. This number will more than double to a projected $1.8 billion in 2006. Several major projects, including Syncrude's UE1 expansion, which you saw yesterday, and Suncor's Millennium Cogeneration Project came into full payout.

The industry's royalty contribution to the people of Alberta will continue to climb dramatically over the next several years as more oil sands projects come online.

In addition to royalties, governments receive corporate and personal taxes from oil sands companies and their employees. If we look ahead to 2008, if we assume a crude oil price of U.S. $50 a barrel, royalties for that period could be projected at $2 billion. There will be almost an additional $1 billion collected in an Alberta corporate tax, so it's about $3 billion for the province between royalties and corporate tax. As well, the federal government will benefit handsomely, with a take that is even greater than that of the Province of Alberta.

In the longer range, we project that the provincial government will take in between $5 billion and $7 billion per year in tax and royalty payments by about 2015. Therefore, we submit that any comparison of royalty regimes with other jurisdictions needs to consider both the unique aspects of oil sands development and the total financial benefit to governments over the life of these projects. The significant direct and indirect economic activity and job growth created by the oil sands should also be considered. In 2005, for example, the $8 billion that was invested in the oil sands created jobs and worked for stability and increased economic activity from one end of the country to the other.

Our industry forecasts that capital expenditures over the next five years will annually range between $8 billion and $12 billion, for a total of about $54 billion. Importantly, this figure does not include the billions more that will be spent on sustaining capital and operating expenses on these facilities after they go into operation, post the construction period.

About 40¢ of every dollar spent by an oil sands developer goes beyond Alberta's borders, and this constitutes a significant contributor to the Canadian economy. It ensures that all Canadians ultimately benefit from oil sands development through job creation and manufacturing opportunities. This flow-through effect has been verified by the Canadian Energy Research Institute as well as by external independent studies.

These days, it is clear to pretty well every Canadian that the oil sands generate thousands of jobs, everything from trades to professional and technical positions, and while fabrication and manufacturing opportunities are being felt primarily in the Edmonton region, other areas across Canada benefit as well through subcontracting. One need only consider the number of direct flights that have been added between Fort McMurray and other parts of Canada over the past few years to gauge the economic impact of oil sands across the entire country.

We anticipate that the $54 billion on capital investment projected over the next five years will create 26,000 direct jobs by 2011. For each of these, studies indicate a further three jobs are created in the service and support sectors, resulting in a total of 100,000 jobs created.

Our industry does a very thorough job in generating projections for both spending and job creation. Oil sands companies participate in surveys so that we can produce activity forecasts and provide highly detailed information that is then shared with local and provincial stakeholders to facilitate their planning for development. Nowhere else in Canada is there such a comprehensive projection done, along with the analysis of potential socio-economic impacts and the benefits to the region, the province, and to the country as a whole.

Having provided you with some background and facts about oil sands development, let me now turn to our industry's vision for the future. We see a tremendous wealth of resource and opportunity at our doorstep that can be and should be responsibly developed for the benefit of all Canadians. This requires a collaborative effort between government, industry, and community stakeholders if it is to be accomplished in a manner that manages and respects the environment, while generating a positive legacy of opportunity for future generations.

We envision a secure economic future for Canada, with oil sands development as one of the pillars of that future. We also see a country that is a centre of excellence for innovation, for technological advancement, and for environmental stewardship. Through investment and research and development, industry and government can continue to lead the way with a sustainable oil sands industry, one that continuously improves in its environmental mitigation and conservation efforts.

These innovations will no doubt assist in developing the oil sands resource, but they will also foster further projects of a broader social good. On this, I would like to point to the work of the Alberta Chamber of Resources, which has really done an excellent job of laying out a technology vision in its oil sands technology road map. The road map describes many of the internal and external challenges that must be addressed to achieve the industry's growth vision in a manner that is economically, environmentally, and socially responsible. It notes that investments in technology development for the industry must be dedicated and sustained, and that governments and industry need to develop a collaborative, long-term strategy. Importantly, while many gains have been made in organized research and development, and indeed in operational practices, we still need fresh approaches and a diligent focus on this task.

I could give you a litany of examples of environmental process improvements that have been enabled by research and development, but that's not why we're here today. We're here to discuss how we can move the oil sands forward in a responsible manner, one that protects the environment while also protecting the very significant economic benefits that come from the development of this resource.

Now all of this is to say that we know what our environmental challenges are and we are committed to dealing with them, and we have been dealing with them, whether it pertains to water use, to energy use, to tailings management, to land reclamation, air quality, greenhouse gas emissions, or other issues. In fact, just as technology development has been a driving force in achieving improved economics for the oil sands industry over its first 40 years of commercial operation, cooperative technology development will be the key that helps us to meet our increasing environmental challenges as well.

Over the last decade or so, there has been a significant amount of R and D coordination and work taking place in organizations like the Canadian Oil Sands Network for Research and Development, the Petroleum Technology Alliance Canada, the CANMET Energy Technology Centre, near Edmonton, the Alberta Energy Research Institute, the Alberta Research Council, the National Research Council, here in Ottawa, and any number of universities. This indicates that the need for a renewed approach to a technology development plan does not start from zero. There is already a significant knowledge base.

In fact, there's an excellent research base to build on if industry takes a leading role in funding and encouraging further research and development, with the support of our governments and the research institutes. Collaboration will facilitate long-term funding and it will help produce more all-encompassing and more effective outcomes. Admittedly, some of this is relatively uncharted territory, but I do believe we have more to go on than just a wing and a prayer on this. We have significant bodies of scientific knowledge that did not exist, for example, when Syncrude first commenced operation.

So because crude oil will continue to be a primary energy source well into the foreseeable future and because we have this vast resource right in our own backyard, we should use oil sands development as the bridge between the hydrocarbon era and future energy forums--and we should reap the benefits while we can; otherwise the opportunity will be lost forever.

In conclusion, let me reiterate the opportunity for industry, governments, and various R and D providers to reinforce our current R and D efforts, to coordinate a wider technology development agenda, and to generate the outcomes that we all want to see. We currently do much good, but we could do better, and we recognize that our licence to operate comes from society. So let's recognize the great distance that we've already travelled on that road towards a more sustainable oil sands industry. Let's build on all the work that we've already done and the cooperative R and D structures that are already in place by dedicating adequate resources to meeting these very compelling challenges. Obviously, this will be a joint venture among industry, governments, and society, and it will certainly require substantial commitment on all of our parts. Where there is the will, there is also, most certainly, the way.

For these reasons, Mr. Chairman, we believe oil sands development can proceed in a manner that is compatible with the public interest. We feel strongly that this resource can create significant and sustained value for all citizens of Canada and that our issues can be responsibly and appropriately managed if there is the will among all stakeholders to do so.

With that, I thank you for hearing from us today. We would be pleased to entertain your questions.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Carter.

I think we'll proceed right away with Mr. Clarke's comments. Then we'll move to questions.

Mr. Clarke.

[Tony Clarke, Director, Polaris Institute]

I will speak very briefly today. I won't take a great deal of time.

My name is Tony Clarke, and I am from the Polaris Institute. Together with the Parkland Institute in Alberta and the Canadian Centre for Policy Alternatives, we have been engaged in monitoring and watching the developments that have been taking place in the Alberta tar sands or oil sands.

We recently conducted a review and study of what was happening and produced a report called Fuelling Fortress America, looking at the Athabasca tar sands and its implications for Canada's energy policies. This work we carried out was done through a series of little teams moving in and having conversations with various people in the industry, various people who were working in various parts of what was happening, and also with aboriginal peoples, first nations peoples, plus environmentalists and a number of groups in society at large.

Through this process we were able to come up with a series of observations, part of which I'll briefly share with you today, along with some recommendations and proposals for where we might go in the future.

I want to concentrate my comments--in spite of the fine remarks we've just heard from the industry itself--on the deep concerns that exist on just how haphazard the model of development is that's occurring. To a large extent, permits are being granted all over the place without any reference to a clear set of criteria or a clear model of development itself. Certainly the whole question of coherence with regard to both criteria and model of development is really of deep concern. This is a form of haphazard resource extraction that does need to be brought under some measure of control. So that's one thing.

The second thing is that I think we need to recognize the extent to which we are dealing with the dirtiest form of petroleum production. We therefore have to take real care in terms of the environmental implications and understand what the environmental or ecological costs are in the long run.

In that regard, we felt it necessary to go into a number of topics, although I'll only cover a few here today. The first of those topics has to do with greenhouse gas emissions.

I think everybody realizes that when we're talking about the oil sands or tar sands, we're talking about the production of carbon and the production of greenhouse gas emissions, which are three times those from conventional oil and gas production. Under any circumstances, but especially in the current climate, this is something we need to give very serious consideration to.

The whole role of Canada internationally on this is very much at stake. The fact that we are unable to maintain our Kyoto commitments--or even come close to measuring up to our Kyoto commitments--is of deep concern, I think, to many people in the country in terms of the implications of the tar sands and the oil sands development that have taken place thus far.

We're dealing with a situation where, according to the National Energy Board, for every barrel of synthetic oil that is produced from the tar sands, an estimated 125 kilograms of carbon dioxide are released into the atmosphere. The Athabasca tar sands will be making the single largest contribution to Canada's greenhouse gas emissions by 2010. According to a report by the Natural Resources Defence Council and the Sierra Club of Canada in 2002, the greenhouse gas emissions in Canada will grow to 827 million tonnes in 2010. That's 44% beyond what Canada is permitted under the Kyoto Protocol.

All of these are I think dimensions of the issue that need to be looked at very seriously. The fact that there are no clear-cut targets with regard to greenhouse gas emissions from the tar sands themselves and the fact that we still have not developed the kinds of technologies that are going to help us substantially reduce those greenhouse gas emissions from the tar sands do raise some profound questions. I think this committee in particular and the federal government as a whole need to take full responsibility for addressing these issues.

The second point has to do with water depletion and contamination. Once again, I think the extent to which the oil sands production does require a great deal of fresh water to produce the oil and the in situ process of getting the petroleum separated from the bitumen are things that have been largely overlooked. I think you probably saw examples of how this is done during your visit to Fort McMurray.

It's important to keep in mind I think that according to our studies and estimates and investigations of this in a variety of different ways, between 4.5 and seven barrels of water are required for the production of every barrel of crude oil out of the tar sands. When we look at that, I think that it is of profound disproportion, especially in an area that is somewhat fragile with regard to future water sources. If we look at Alberta as a whole, 37% of all the fresh water sources in Alberta have been allocated for oil and gas production. If you take the Athabasca River itself, up to 66% has been allocated for the tar sands production alone.

I think we have to put this over and against the kinds of predictions that water scientists have been putting forward about just how serious things are getting in the prairies these days with regard to sources of water. Dr. David Schindler has been showing how the drop in the levels of the Saskatchewan, the Athabasca, the Bow, and other rivers throughout the 20th century has been very serious. They've been going down and down. When you look at the melting of the Arctic glaciers that affect, for example, the water flows into the Bow River, you can see that there are some serious warning signs on the horizon with regard to water use and water demands.

I think in this case we need to take a hard look at this and understand what is happening. Again, the technologies do not seem to be there, unless new ways of fueling and processing the oil sands are in play and are going to overcome the major problems of water depletion and contamination that are in front of us. With regard to contamination, the tailing ponds that have been produced--over up to I think something like 15 square kilometres--are becoming huge lakes made up of liquid that is not really usable again or is not being transformed and cleansed so that it can be used as water in the long run. I know there are different things that are being done by the companies on this, but I want to point out the fact that there are some serious challenges in dealing with the contamination of the waters that are already used.

The third point I want to draw your attention to is the fact that we are at a point of transition, I believe, with regard to energy and energy futures. With the tar sands and the oil sands, it's more than just dealing with the question of what kinds of oil and gas reserves we have for the future; we also need to take a hard look at what is on the horizon with regard to matters dealing with things like peak oil itself.

I think many parts of the world are waking up to this. They realize that a major transition needs to take place. If you go to Sweden and other parts of Europe, you see very clear strategies being pursued for energy alternatives. Not to play around with puns or anything, but we will be sticking our heads further in the sand if we do not use this moment and this time to start to make a transition to energy alternatives.

By that I simply mean that we need a new energy strategy that looks forward and starts to plan for the fact that even though the oil sands provide a great white hope for the United States at this time, it is not a great white hope that will last forever. Unless we start to make some serious transitions, we will be in some serious trouble ourselves, not the least of which is because we are exporting so much of the oil being produced from the oil sands and tar sands to the United States itself.

We are below the 10% mark in conventional oil reserves and natural gas reserves. If the natural gas that's used to fuel the tar sands continues apace, we will find ourselves in even more dire straits with our natural gas reserves. We need to recognize that and understand that we need to plan much more for the next 20 to 25 years and the kind of transition that needs to take place toward renewable energy alternatives.

We also need to take a hard look at things that continue to propel us in this direction. We have dropped the policy we once had where it was essential that we maintained 25% of our oil and gas reserves intact. We have gone well below that now--and that's for conventional reserves. Furthermore, there is a proportional sharing clause built into the North American Free Trade Agreement, and if we were to put a quota or a ban on the export of either oil or gas because of our own energy security needs, there would be a serious economic and legal retaliation.

As a result of this, I think we need to take a hard look at where we are right now, what kinds of changes we need to make in existing policy instruments, and what it means to actually take the step forward to develop a made-in-Canada energy strategy and policy.

As noted in our report, we feel it is essential at this time to look at what it means to create the space to develop these kinds of strategies for the future. In order to do so, a moratorium should be put on future development of the tar sands--not on existing projects, but on future permits and expansion of tar sands development--in order to provide the necessary time to make the kinds of reasonable and thoughtful decisions about this valuable resource and its implications for the environment and society at large.

So we call for a moratorium, and in that context, that means providing the time and space to actually develop a made-in-Canada energy strategy and policy that we so desperately need.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Clarke.

We'll move to questions and begin with Mr. St. Amand.

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

Thank you very much, Mr. Chairman.

Thank you, gentlemen, for your presentations.

Allow me to say to you, Mr. Carter, how hospitable your employees were to us yesterday. Let me just mention Don Thompson, who was very thorough in his presentation; our guide, Laura Gallant; and Charles. Similarly, at Suncor we were briefed by Steve Williams, who served you well; and Janet, from Shell. It was warm and hospitable for sure.

Mr. Clarke, I understand from your presentation that by 2010 the oil sands will be the largest emitter of greenhouse gases in Canada. What is the largest emitter now, if you know?

[Tony Clarke]

I don't exactly know, except that Alberta has been surpassing Ontario as the largest greenhouse gas emitter. Within that context, the tar sands are becoming number one.

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

All right. With respect to carbon sequestration, I'm no scientist or engineer. My background was law, so I'm waiting to be persuaded by your obvious expertise.

The concern I have is that I presume the advent of land claims throughout Alberta would surely have an effect on, if not impede, the construction of sequestration pipelines. That is clearly on the horizon now. The issue of cost proportion has yet to be resolved, and the issue of the science involved and even the methodology of capturing the carbon and putting it into the ground is a little murky—no pun intended.

Is it a bit of a false hope to say in so many words to the public that, yes, the emissions are on the rise, there's more and more carbon being spewed into the atmosphere, but don't worry, in the not too distant future we'll be capturing a lot of it, putting it into the earth, and there will be no more worries about it? Is it unrealistic to think that carbon sequestration is very close to us?

[Jim Carter]

Let me begin by saying a couple of things.

First of all, our industry has worked very diligently at trying to reduce our emissions per barrel of production. It's something we've all done over the years that we've been working in this industry. It's actually one of the steps that has helped to make it competitive, because it costs money to consume energy to make oil, drive your car, or whatever.

We've been reducing the energy consumed per barrel. In fact, if you look at what the industry has accomplished since 1990, we reduced it by about 17% on a basis of per unit of production. We think when going forward we'll see another 17% by 2010-2012. We'll be at about a 30% reduction per unit of production.

We've done it by implementing new technology. You witnessed some of the technology yesterday, where we actually mix the oil sand with water and pipeline it into the extraction plant. We've been able to reduce the transportation costs of moving the oil sands to the extraction facility.

We've also been able to lower the temperature of the process. We've gone from 80 degrees Celsius down to about 40 degrees. As a consequence, we've reduced the energy input for extracting a barrel of bitumen out of the sand by about 40%.

That's one thing we're doing. We continue to strive to try to find ways to reduce the energy consumed.

In terms of the opportunity for sequestration, we see it as something that has some promise. The industry has been working with the provincial Government of Alberta, through the Alberta Chamber of Resources, for some time now on a process that would enable us to take the almost pure CO₂ that we make in the oil sands.

It primarily comes from our hydrogen plants, because essentially what we're doing is taking natural gas, CH4, or methane, and converting it into hydrogen, which we then add to the oil. We sell it at a much higher price, by the way, than the value of natural gas. This is secondary and I would even argue it's tertiary manufacturing that we're doing.

When we do it, we make a lot of carbon dioxide. The carbon dioxide is amenable to then be used for enhanced oil recovery. The dilemma is the transportation costs to get it from Fort McMurray to the conventional fields in Swan Hills, or wherever in the southern part of Alberta, where the enhanced oil recovery techniques are being used.

We see it as a promising opportunity. We need to somehow get the economics to line up. If there was an old pipeline that had been used for some other purpose and could be converted into this, and if the royalty arrangement on conventional crude oil required for enhancing for recovery could be revisited, we think there's a really good chance this could be done.

[Mark Shaw, Vice-President, Oil Sands Sustainability, Suncor Energy Inc.]

If I could add to that, sir, you asked about the technology. We believe the technology is already proven, and it can capture carbon dioxide and sequester it.

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

With respect to the economics, and I'll phrase this respectfully, you've made the valid point that some billions of dollars are returned to government via taxes and royalties--billions of dollars--but there are tens of billions of dollars, surely, that are going to companies. This is a real revenue generator for companies, billions and billions of dollars of profit. So on a licence to operate, should and must a level of government get involved in funding the sequestration pipelines if in fact there are tens of billions of dollars being made by the companies? Is there not an obligation on the companies to do it on their own without the government kicking in? That's a matter of policy, but just—

[Jim Carter]

I think you need to consider and think about the cashflows that come out of the oil sands. As I was pointing out earlier on, the province is a big recipient of cash, and the federal government is, in the form of corporate taxes, payroll taxes, and that sort of thing. So everybody has a stake in this whole thing being successful and being a good economic locomotive for the Canadian economy.

I don't see it as being any different from any other thing the government might decide to get involved in when it's kick-starting a new process that might have a lot of benefit further down the road. Being a participant in that, from both the federal and the provincial government's point of view, would be a good thing, actually, to ensure the ongoing development. It would enable it to get started.

Once it gets started, it's like any other form of technology. Once you get the ball rolling, it starts to get legs of its own and it gets traction. But it needs that initial support and boost to get it going.

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

I have one last question, if I may, Mr. Chair.

I appreciate that this is perhaps doing something against your own interests, but with respect to what Mr. Clarke has said, on solar, wind, alternative sources of energy, renewable sources of energy, what, if anything, is done by way of research and development by your companies?

[Jim Carter]

Let me speak first. I know Rob will want to say something about what Shell and Albian have done, and I'm sure Mark will as well.

What we have done at Syncrude is really focus on the processes that we have internally. We've spent $50 million a year on R and D since the inception of our operation back in 1978. It was us who actually invented the hydrotransport technology, and we sold it to others. We sold it to Shell, we sold it to Suncor, we sold it to CNRL. We've put a lot of effort into R and D into those processes. We have energy-efficient furnaces now. We have cogeneration on all of our steam generation and our power generation, so we're looking at the most efficient ways we can, from an energy consumption point of view, make a barrel.

That's where we've had our focus as a company. Others have gone beyond that, and maybe I'll let them speak to that.

[Rob Seeley, Vice-President, Sustainability and Regulatory Affairs, Albian Sands Energy Inc.]

Thank you, committee.

Just as a general comment about energy futures, Mr. Clarke made comments around the need for diversification, and I think we would all agree that it is a valid point; however, we would like to state that the demand for energy in the world continues to grow, and hydrocarbons are going to be a continued significant part of the energy portfolio going forward to at least 2050. So the production of crude oil from the Canadian oil sands is replacing our declining conventional oil here in Canada and in North America. It is also displacing imported crudes into North America, and they're our direct competition. We need to be able to do that efficiently and economically, and as Mr. Carter has mentioned, a lot of resources are going into the efficiency of our business.

Shell is also investing in renewable energies. We have about $1 billion invested over the last five years in renewable energies through our Royal Dutch/Shell group, and this of course is solar, wind, and alternative fuels. This will be a diversification of the energy portfolio, but it does not displace the transport fuels component, which is predominately met by hydrocarbons. Looking forward into the future, we'll continue to be met by hydrocarbons.

So it is a different energy mix that alternatives bring. It's about electricity and off-grid applications, but it doesn't displace transport fuels.

[Mark Shaw]

I would just build on that. Each company chooses its own markets to participate in, and as Mr. Carter had indicated, research and development of new technologies is extremely important to all of us.

Suncor has been investing over $100 million a year in wind energy, and we anticipate doing that going forward. We also invest in biofuels. So we would agree with Mr. Clarke that the world is going through an energy transition, but that's many decades out.

[The Chair, Conservative, Lee Richardson]

Thank you.

We did go a little over time there.

I'll move now to Madame DeBellefeuille.

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

Thank you, Mr. Chairman.

Thank you very much for your presentation.

I enjoyed the visit to Syncrude, in Fort McMurray. I learned a great deal, but I came away from the visit with several questions in my mind.

Every day the newspapers tell us that today's planetary challenge, namely climate change and its effects on the entire planet, is important. As parliamentarians, and as elected representatives, it behooves us, in the context of our study on the oil sands, to adopt not a short-term approach, but one that looks out onto the next thirty years. We must, given all of the development activity going on at present in Alberta, ask ourselves what is going to happen in Quebec, in the other provinces and in Canada.

Alberta can choose to risk seeing its groundwater polluted or choose to cut its trees: these are areas that fall under its jurisdiction. However, what is having an effect on everyone, throughout Canada and all across the planet, are the greenhouse gases that are spewed out into the atmosphere.

A Shell Canada representative, by the name of Janet, I believe, told us that CO2 captation and sequestration technology already exists, but that it is not being applied because it is not economical. This same representative stated that, in her view, this technology might become operational around the year 2012.

I would obviously like you to explain to me exactly what this woman was implying when she stated that this technology is not economical. Given the profits that are flowing to the oil companies that are active in the oil sands, as taxpayers, we are somewhat shocked to hear say that technology that would allow for a considerable reduction in greenhouse gas emissions is not being used because it is not economical.

Mr. Seeley might be able to answer my question.

[Rob Seeley]

Thank you. If you allow me, I will answer in English.

With respect to carbon capture technology, Mr. Shaw has made some reference to this already, but there is technology existing for the capture of carbon dioxide from our upgrading components, which Mr. Carter has also referred to. With oil sands production we're talking about mining operations, producing raw bitumen, and then we have a secondary component called upgrading, where we add hydrogen, crack the materials, and make light synthetic crude oil that is sent to the markets in Canada and the U.S.

It's in those upgraders where we have the opportunity to capture the carbon dioxide in our hydrogen complex. Different operators have different models. I know Suncor and Syncrude both have their upgraders attached to their mines in Fort McMurray. In fact, Shell has its upgrader near Edmonton in Fort Saskatchewan. So we've actually separated the mine from the upgrader. Our upgrader is in Fort Saskatchewan just outside of Edmonton. If we capture the CO₂ at our upgrader in Edmonton, it is in fact very close to sequestration points in central Alberta, the Pembina and Swan Hills oil fields, which are aging oil fields. There's an opportunity to capture the CO₂, pipe it out, and inject it. However, the capture of the CO₂ is very expensive. We would have to spend hundreds of millions of dollars for the infrastructure to capture it, and then hundreds of more millions of dollars for the pipelines to the fields where it could either be injected or sold to third parties for use in enhanced oil recovery. Clearly, although the technology exists, Shell is not going to implement this technology and put itself at a significant disadvantage to its competitors that have chosen not to, for example, for whatever good reasons.

With respect to this technology and the need for infrastructure, there are two solutions. One is to enable the technology through some partnership for the investment in the infrastructure--the pipelines from these upgrading hubs, whether it's Fort McMurray or Fort Saskatchewan, to the fields. So partnering on infrastructure is one.

Two, as the government goes forward and makes regulation with respect to greenhouse gases, it should consider what we would call market mechanisms in these regulations. The regulations need to be appropriate, but at the end, I think industry is preferable to what we call market mechanisms that would have emissions trading, and therefore reductions in CO₂ could be considered as offsets. It's another way of funding or financing these kinds of investments.

We would look for a stable fiscal regime around greenhouse gases that would allow major investments. These are major investments as well. Without some incentive or regulation that's fair to all, industry won't take these on a voluntary basis. It will put us at a competitive disadvantage to our competition, which happens to be the imported crude to North America, as I mentioned. We're displacing imported crude, so we would be at a disadvantage to our competitors.

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

Thank you very much.

We read in the newspaper that Russia is planning on filing a complaint before the Stockholm Court of International Arbitration because of the environmental damage brought about by an oil and gas project. You say that Canada and Alberta are benefiting from economic spinoffs, in brief that everyone is getting richer thanks to oil sands development.

However, the people I represent often ask me the following question. How can you assure Quebeckers and Canadians that once these resources have been completely depleted, you will not simply move on, leaving behind you an abandoned mine? How can you assure taxpayers that you will not simply leave, after having taken what was there, leaving them, as is the case of the Russians, to deal with and to pay for the environmental damage left behind?

[Rob Seeley]

Perhaps there are two questions to answer. One is with respect to Shell in Russia, which is meant by your reference to the newspaper articles on the Russian Sakhalin Island project. That is a joint venture between Shell and Japanese companies.

Essentially, there are very complex nuances underneath all of those newspaper articles. Essentially, they are about the Russian government leveraging for ownership in that development. Really, the charges and things they're talking about in the press are, I believe, untrue and unfounded. They are a leverage by the Russian government to attain, in their negotiations with Shell and the Japanese companies, ownership of those resources. So that's a separate issue.

Let me get back to oil sands, with respect to your question on what assurance the oil sands developers can give that these oil sands sites will be reclaimed and will not be legacy environmental issues of the future. I stand here with all my colleagues to say that our approvals for these oil sands mines—both from the Alberta government and from the federal government through the Department of Fisheries and Oceans and other agencies—require us to fully reclaim these sites.

It is our intention and full commitment to reclaim the oil sands sites. There is a significant amount of research going into the reclamation programs for all of our businesses, and essentially we're looking at reclaiming these sites to fully sustainable ecosystems. I can't say that they will be exactly the same as they were before. Of course, peatlands are being removed. But what will be replaced is...a diverse landscape that will have wetlands—we will call them marshes—that will have uplands, that will have forested areas. All of these things are part of the reclamation programs that are under way today, and part of the research that goes with them. These sites will not be left as a legacy for Canadians in terms of environmental liability.

I would also say that oil sands developments are for deep pockets. These are for big developers who have the financial strength to commit to these kinds of reclamation programs, along with the technology, the people, and the operating experience to go with them.

[Jim Carter]

I'd just like to add to that, just to elaborate a bit on Mr. Seeley's response.

In Alberta, to get a permit application approval to have a surface mine in the oil sands, you have to submit a development and reclamation plan that describes the final land closure even before you're allowed to start mining. Those requirements are very much a part of the approval process, and they require the operator to return the land to a productive state greater than it had when we arrived. Therefore, you see things like the trees you probably witnessed yesterday that had been planted, the bison ranching that we're doing, and those kinds of things. They are done on a biomass basis that makes for a more productive landscape than was there before we arrived.

[Mark Shaw]

I would add to that.

Suncor was the first in this business, working cooperatively with Syncrude over a period of about 25 years. We have invested in technology to enable us to turn our tailings ponds into these solid landscapes that would then reach equivalent capability as we reclaim them. Suncor is very committed to returning the landscape to its natural, pre-disturbance-equivalent capability. All of us have significant reserves that will last many decades.

We live in this community, so we fully intend to deliver on that. It's actually also my personal responsibility within Suncor to achieve that. We were the first in this business, and we're very close to reclaiming our first pond. Being the first in the industry, we'll be the first to achieve that, and within the next few years you'll be able to walk on what is currently a lake. It's not very deep now because it's almost filled in and it's almost turned into a solid landscape. Within a few years we'll be able to show that.

As one of our tests, we ask local aboriginal elders who grew up in this land to walk through our reclaimed landscapes and tell us if they can tell if it's a created landscape or a natural forest. That's one of our tests. They can't tell that it's landscape that we've created. So we're very committed to this, and we're very close to being able to do it.

To touch on one of the points that Mr. Clarke made, we do have a fair amount of water that is currently tied up in tailings ponds. As we turn these into a solid landscape, the technology to make that water—water that we currently recycle through our process, thus enabling us to reduce our footprint from the Athabasca River—capable of release to the natural environment is technology well used today, and we'll continue to do that.