Natural Resources Committee on Nov. 23rd, 2006

[Dennis Bevington, NDP, Western Arctic, NT]

Okay.

Mr. Allen, at this committee and the new special committee that is being struck on climate change, we're looking very seriously at the CO₂ emissions issue. Of course, within that, if we look at real emissions reductions in Canada, it's going to come down on the expansion of the oil sands. My sense is that in the operation you're conducting at a regional level right now, your economic opportunities are escaping, just by the magnitude of what you're dealing with.

Have you done studies to determine the expansion you need to maintain a certain level of growth and prosperity in your community? We went from 1990, at 300,000 barrels a day, to 2000, at 900,000 barrels a day. We're now talking about hitting 3.5 million barrels a day by 2015. Those were the figures given to us by the National Energy Board, CAPP, and a number of the others.

Have you done that work, to understand where the profitability of the region and the businesses and the economy would be best served by expansion in the industry?

[Mike Allen]

I don't believe there have been any studies done specifically on that--not that I'm aware of. I know that the Regional Infrastructure Working Group, RIWG, has the tools to do those types of studies. Perhaps that's something we could look at.

[Dennis Bevington, NDP, Western Arctic, NT]

Even if there were CO₂ limits imposed on the industry and you had to look at something like sequestration, with the expansion in the industry, the changing environmental standards you'd be required to accommodate would be substantial. The expansion of the industry seems to be the major problem to the region, not the long-term viability of the industry. Certainly I think we can safely say that it's going to be around for a while.

In 1990, when you were taking out 300,000 barrels a day, you had a 500-year supply. At 3.5 million barrels a day, you're down to a 170-year supply. That works out to about a billion barrels a year at 3.5 million barrels a day. And that's only by 2015. What are we looking at in the future as we continue to ramp up?

The long-term viability of the oil sands industry is strictly dependent on how many barrels per day you produce. At some point in time, somebody has to ask the question, how much should we produce? What is the reasonable limit for a resource like the tar sands? I don't know if that work has been done, but certainly I think this committee has to aim at understanding that.

[Mike Allen]

Yes, I think there certainly are some opportunities. As they capture CO₂ and come up with other byproducts--for example, what they're doing in fertilizer, with sulphur and that type of thing--there are opportunities. It's just a matter of setting those limits.

[Dennis Bevington, NDP, Western Arctic, NT]

Mr. Marcel, having travelled through there over the years, I've seen the ambient air conditions that sometimes come from the plants. I've seen the impact, the black particles in the snow and so on. Could you describe how you feel about the air quality conditions that come from expansion? We're going to see a steadily increasing expansion of those facilities, and I don't think this is something this committee has really come to grips with yet.

[Pat Marcel]

In terms of expansion and new projects coming on stream, we are part of the environmental group that does the assessment. We are also part of the committees that monitor these CO₂ emissions and so on.

The thing that strikes me the most about industry in Alberta is that it's still going flat out, saying, let's approve this stuff, when they have the technology to reduce the CO₂ from Syncrude and Suncor. Suncor has already gone from about 500,000 tonnes a day to about 120,000 tonnes. Syncrude is still one of the biggest polluters in Canada. Are all of these other projects that have been approved in the expansion going to be any better?

It's committees like this one that have to lay down the rules and say that if the technology exists, then use it. The technology has to be implemented when you say, you get the permit, go ahead and build. It has to be there. It's not there now. I don't see it. But my people have to live there after everybody else is gone.

They're talking about reclamation, but I don't see any money there, identified specifically to reclaim all that land. They talk about $90 million or some other figure that they will all put into a pool. When you look at projects like Uranium City, that's a federal responsibility. When there's a big outcry in the media, you'll see action come from the federal government. They put $2 billion into a cleanup. It hasn't even touched Eldorado. You have radioactive material blowing into Lake Athabasca, and this and that.

You're saying industry should be doing this, but what about the person who gives them the permit to do it? Eldorado and all those uranium mines were federal initiatives, because they needed the uranium. When they pulled out, they left homes and everything. Everybody was given $9,000: goodbye, and put the lights out.

Is it going to be any better at Fort McMurray? We have no certainty there. My people are saying they still have to live there, but is the land going to be sustainable 500 years from now? Look at the pollution that's there already from 60 years of mining the tar sands. After 60 years I can eat fish only once a week. Right now the moose are being tested for arsenic. They are showing 453 times the acceptable level of arsenic. My people at Fort Chip have freezers filled with their yearly supply, and a lot of them are not even eating that.

We need answers. We need responses from the federal government to do the study. A lot of times my elders say that we have treaty rights that need to be protected. Well, you have to protect my health. That's a guarantee.

[Dennis Bevington, NDP, Western Arctic, NT]

With the expansion of the tar sands, the 60 years of pollution that you've suffered so far will be replaced with about six years.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Bevington.

Mr. Trost.

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

Thank you, Mr. Chair.

Thank you to our guests for coming.

I'll start with Mr. Allen, Ms. Blake, and move to Mr. Marcel again.

When I listened to your presentations, you defined the challenge. Underlying this for our committee is how we solve some of the challenges and how we prevent the problems.

To get to those latter two points, I am curious. How did we get here? Was it poor infrastructure planning? Was it just, shucks, no one saw this boom coming, or did people see it and ignore it? Different people have different opinions. I'm curious, both of you individually, what you think it was. Eight percent growth in nine years--that's a doubling of the population, by the rule of 72.

Could you give me your opinions as to what has led to this infrastructure crunch? I've heard various other ones, but since you're both close to the ground there, it would be appreciated. What got us into this bottleneck?

[Mike Allen]

From my perspective, and from that of many people I know, we didn't know it was coming. We were unaware of this boom. The price of oil went up so dramatically so quickly that it brought a lot of investment.

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

Even with the timelines, this isn't like Shell and natural gas, where you know it's there and you just pop it in and pop it out. These are big infrastructures with long leads, looking for long timelines.

[Mike Allen]

At $60 a barrel, it became very viable for an operation to invest the money to go after that development. Only five years ago, the projection was $30 billion in investment over the next 15 years. It's now sitting at about $125 billion. And I believe $9 billion per year is being invested right now.

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

Do you share the opinion there was nothing anyone could have done to have foreseen it?

[Melissa Blake]

Mike started to touch on it. We struck a deal in 1996 that was intended to bring additional oil sands development. The regime was established to entice businesses into the marketplace. That gives us the royalty structure that currently exists. The projection at the time of the signing was $25 billion over 25 years. So $1 billion a year over that period is a heck of a nice pace of growth and development for any community.

The conservative approach was applied to articulating what that might mean in terms of population growth and impact. Oil companies were using $20 to $25 a barrel for the projected scenarios, and, granted, in 1998 we had oil at ten bucks a barrel.

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

I was a geophysicist in school at that time. I understand.

[Melissa Blake]

A conspiracy of events led to underprojections, and that's the data we've used. Our municipal development plan anticipated 52,000 people in Fort McMurray. That happened two years ago, so we had a 20-year plan that expired quite rapidly.

The series of events Mike described, where the price per barrel of oil became that much more of a catalyst for development in the region and the general free market that existed enticed an awful lot more activity in the oil sands.... Leases on behalf of the province starting going at a quicker pace than probably even I was aware of. Every time I look at the map, that many more leases have been let.

So our municipal council has said we need to get a holistic picture of what's happening, when it's happening, and what the mitigations are.

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

Okay. Fair enough.

As far as some practical things, you laid down $1.9 billion, and you said--my understanding, listening to testimony--I think it was, $800 million or $800-and-some-odd million the municipality is planning for, so it's roughly $1.1 billion. But looking at other things, other than direct cash infusions from the feds or the provinces, what other things can help unbundle the infrastructure bottleneck in broad ways? Is it a different targeting of human resource programs?

One example I hear anecdotally, and maybe this isn't true, is that teachers are selling out after having been there for a few years—and I've run into a few of them in Saskatoon—so it's hard to attract teachers and certain targeted occupations up there, not just for the industry but for the social well-being of the town. Are there any other, shall we say, creative ideas like that or suggestions you may have, other than more infrastructure cash?

[Melissa Blake]

One of the biggest challenges we face is housing. If you consider any teacher coming into the marketplace, the market for housing is inaccessible. We find that with our RCMP. We find that with our government service providers.

You really need an oil sands income to offset any other employment in the community. The turn of events has been such that companies are now proposing fly-in/fly-out operations. We have that shadow population that Mike referred to, this year 10,000 to 12,000 living in temporary dwellings, with a commute home. In 2008, that goes to 20,000 people. So if you consider that a solution.... We don't like it from a community perspective because it has all kinds of detrimental effects within the community.

But housing is the foremost issue we face in dealing with getting people into the community and producing the results we're looking for.

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

Could some of that be solved through the provincial government? There are problems with it. You don't want to do something where you lease a lot of land from the provincial government and then all of a sudden everyone has a mortgage. You'll be mortgaged to the hilt if you buy a house there and are newly out of university with a great job. Boy, I can see disasters with that too. But would that help? What can one do to unwind this tightly coiled spring?

[Melissa Blake]

Land is another thing that has not kept pace with development. The province is the majority landholder in our region, and the municipality has nothing to offer in the way of developments for people. I'm not sure if there's much federal ownership there, but part of the exacerbating factor.... For those of you who are able to fly over Fort McMurray, it's a beautiful area. We have river valleys, slopes, and plateaus. The challenge with each of those is access points, so we've developed as much land as we reasonably can up to this point. Any new access point is going to cost us even more in getting services out there and providing roads to do it.

At the minimum, we're looking at $60 million just to get into an area. Forget the infrastructure once you get there; it's just the access point. So if there are opportunities that might be useful in creating an environment where those folks you're talking about can come in.... We have established a housing development corporation with a wait list of 400 people on it, but they are the ones with not enough income to pay market rates.

On the next part of my concern, even if I had land and infrastructure, I don't know how we would get enough capacity to deliver the housing required for those folks. Mike talked about one of our companies utilizing foreign labour supply. Realistically, I don't know how much that's going to come into play in the future. I really get concerned about having the finances to be able to deliver the assets, but it's going to take people and human resources to actually create them. That's our next big hurdle, and we've yet to explore fully the impacts that will have.

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

I'd like to come back later, but before I run out of time, I have a few questions for Mr. Marcel.

I appreciated your presentation. The notes we have for today say your band has approximately 600 members. Is that the size of the community you represent?

[Pat Marcel]

No. Our band membership is about 853.

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

How many actually live in the community?

[Pat Marcel]

In the community of Fort Chip there are approximately 250, and maybe a little better than 300 in Fort McMurray. There are some in Fort Smith, some in Edmonton, Australia--you name it, they're all over the place.

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

I wouldn't mind being with the Australian ones come Christmas.