Natural Resources Committee on Dec. 7th, 2006

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

Thank you, Mr. Chair.

To build a context from my questions, I look at this committee's role as being, as you know, that we have to decide what the government can do and can't do. But we also have to know what the options are.

Forgive me, but my eyes are still blurry from an eye appointment that I just had, so I haven't been able to read all the notes that have been going back and forth here. If I ask something that's in the notes, you'll have to forgive me on that.

Mr. Henuset, when you get into this and you begin to look at it, there are other options, of course, and competitions. You're only looking to build one of maybe twenty-odd nuclear power plants, but what are the other options for the customers out there? They're looking at the same data as we are. They're looking at the energy costs of natural gas and they're thinking of different ways they could use it. Could you give us an overview of what their other options are? You have looked at building a plant up there and you've analyzed the competition, so what are the other options that are currently available for the oil sands, to produce the steam, electricity, water, etc., that they need and would get from nuclear power?

[Wayne Henuset]

Right now, most of them are using gas. The gas is highly volatile, so they're looking at using bitumen. They want to reburn the bitumen.

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

Is it Suncor that's doing that?

[Wayne Henuset]

Yes.

With burning the bitumen, there's the problem of the CO2 gases, because burning bitumen produces substantially higher amounts than does burning natural gas. But for them, natural gas is a scary commodity because of the price fluctuations. They're looking at their concerns with how much gas is going to be readily available. We're talking about gas and oil right now. The prices have changed and the cost of getting those products has changed substantially.

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

So there's bitumen, gas, and nuclear. Is there really anything else? I've heard presentations. I don't know how serious they are. Hydro's possible from the NWT. There are just a lot of ideas out there. Are there any other substantive serious ideas to compete with your proposal?

[Wayne Henuset]

I think there are about twenty, aren't there, David?

There are about twenty different processes that they're looking at. They're all looking at different ways right now.

[Dr. David Keith]

Coal is the major one. Hydro is not serious.

[Wayne Henuset]

Yes, they're looking at coal. Hydro is not enough.

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

The next question, then, is this. How serious has been the interest of the customers, and what is the role of the government from a regulatory perspective or whatever? From your perspective, what could we do to help move the decision process along, if that's necessary? Right now, as you've noted, with the price fluctuations, they're under a lot of pressure to make big decisions for the future.

I'm thinking, honestly, what can we do? Right now, they're highly motivated to make a major decision for various reasons. Is there something substantive that the government can do or should do, in your opinion, to move decisions along or to help to influence the policy in that neighbourhood?

[Wayne Henuset]

We would love a tax on CO2 so that we would get those credits. It would make our plant a lot more economical, because we'd get those tax credits back.

The nuclear power commission has made the licensing for this very complicated, so we would like to get the licensing a little more streamlined. Then it wouldn't take three or four years to get a licence to build a nuclear plant.

We need more clarity on the regulations. That would be the number one issue. As a federal government, you should have clarity just so other people can come into the business, because obviously it's a problem right now in terms of energy in the sense of how much CO2 has been in the emissions. Nuclear is basically part of the renaissance, and we, as a country, if we want to stay as an energy superpower, need to look at the alternative energy sources as well as the tar sands.

To get the oil out of the tar sands has, nationally, really helped the whole country. Nationally, you guys have to put that at the forefront to make sure those facilities up there are running at a feasibly economical price, so that we can get those products out to the rest of the world, because they're definitely helping our economy.

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

I saw some body language. Do the other witnesses want to comment on my question or not?

[Dr. David Keith]

I'd say the serious alternatives for producing heat and hydrogen in the oil sands now are what we're doing now: natural gas straight combustion; and other heavier fuels, meaning coal, asphaltenes, or residuals. If you don't care about climate, you just burn it. Indeed, part of the reason we have a natural gas issue is that, in a sense, everybody is assuming there is going to be a carbon price.

The cheapest way to make steam in the oil sands, if you want large amounts of steam, is the way to make steam that Angus told us about. We've been doing it since the 18th century, and that's to burn coal. The reason people aren't moving to open new coal burners now—I've been involved in a bunch of discussions with industry—is that they're assuming there will be a carbon price.

So the real competition is between nuclear, which provides heat without CO2 emissions, and other technologies that can provide heat without CO2 emissions. I would say the most serious competitor is CO2 capture and storage, using coal or asphaltenes or residuals as a fuel.

First of all, it's important to say that the oil sands are not the dominant CO2 emission source in Alberta. The coal-fired electric plants are. The oil sands get a lot of press, but if you wanted to manage the climate problem effectively, what you would do is focus on those coal-fired power plants, not on oil sands.

This speaks to my comment earlier about the fact that we need even-handed regulations. Government obviously tends to focus on particular things, but if you were to just put a carbon price on, what you'd see is much more action in the coal-fired power plants in Alberta, and maybe the ones in Ontario, than you would see immediately in oil sands.

In the long-run, for the oil sands, those are the options. I would say CO2 capture and storage is actually, in my view, more competitive against nuclear in the oil sands than is straight electricity to electricity. The reason is that CO2 capture and storage naturally makes hydrogen, which nuclear doesn't make so cost-effectively. If the competition is between a coal-fired power plant with CO2 capture and storage and a nuclear power plant for electricity production, in my view, they're pretty even competitors right now—and I take nuclear power very seriously.

For the oil sands, I wish Wayne well, and it would be great if he proves me wrong, but my guess is that nuclear in the oil sands is intrinsically less competitive because it doesn't make hydrogen so cheaply, and the oil sands need both. But on the other hand, because we're building so much capital, the reason Wayne actually might prove me wrong is the enormous rate of new capital construction in the oil sands.

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

To summarize, then, the recommendations on what could be done would include a carbon dioxide tax, from your perspective, and basically moving the regulatory framework in a more intelligent and efficient direction.

[Wayne Henuset]

Correct.

[Dr. David Keith]

And that's true for both. Just as there's a regulatory framework to get rid of nuclear waste, this regulatory framework would dispose of carbon dioxide. Both of those need to be clear in order for either technology to work.

[The Chair, Conservative, Lee Richardson]

Dr. Bruneau, do you want to make a comment?

[Dr. Angus Bruneau]

Yes, I'll make a very brief comment.

The talk around natural gas and the fear that we would run out of it as a fuel is associated with the fact that in a single molecule of natural gas, we move four hydrogen atoms. Nature connected them all up. What you want at the point of eventual use is the highest ratio of hydrogen atoms to carbon atoms in your fuel. And you can't get higher than four hydrogens to one carbon, which is methane.

So you should be using natural gas at final points of use rather than in big industrial processes, where everything is.... You can contain it, process it, and take out the carbon dioxide. When you have diverse uses, get the hydrogen as high as you can, hydrogen to carbon. That's the preferred use for natural gas.

You can make steam, you can make hydrogen, you can make all the heat you want with the coal in the tar sands. That was the whole point. We have a layer cake here, and we have to start thinking about looking at this in non-traditional ways. What is the best combination, and what are the technologies that allow us to do this?

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

Thank you very much.

[The Chair, Conservative, Lee Richardson]

We'll now go to five-minute rounds, if we can, and we'll start with the Liberals.

Mr. St. Amand.

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

Thank you, Mr. Chair.

Thank you, gentlemen, for your presentations today. We've heard over the last several weeks various presentations from experts like you. If I may, I'd like to summarize some of the highlights.

First, with some embarrassment or at least bemusement as a Canadian citizen, I learned that with respect to solar energy, the village of Gleisdorf in Austria, 35,000 strong, has as much solar capacity as all of Canada. We're way behind, it seems, with respect to solar.

I was also surprised at the amount of revenue generated for oil companies in Alberta. Billions and billions of dollars--a surprising amount.

Last, and I guess most relevant for our purposes today, I am concerned that seemingly nothing done or nothing proposed by government to date is seriously tackling the problem of greenhouse gas emissions.

I'm triggered to comment on that, Dr. Keith, by your presentation particularly. I'll just parse together snippets of what you said earlier:

Tools to manage CO₂ emission from the oil sands are available today....Canada had an early lead in CO₂ capture and storage technologies. In my judgment, we have now lost that lead, and without decisive action, we will soon lose any chance to regain it. Let us not repeat the mistakes of the U.S. wind power program.

Perhaps this has already been asked in a somewhat different fashion, but Mr. Henuset talked about a tax on carbon. Can I ask each of you, if there were one single decisive step the federal government should take as soon as possible, what would that significant step be?

[Dr. Angus Bruneau]

This is not a recommendation for policy, but you could have a form of carbon tax within the country, one that we manage, where we know that we're not simply transferring wealth out of the country to some organization that had to shut down their dirty old polluter ten years ago and has a credit. You can also meet, or essentially pay, your carbon tax by investing in science and technology.

The real issue is the creation of intellectual capital that is focused on unique Canadian opportunities and challenges.

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

Dr. Keith or Mr. Henuset.

[Dr. David Keith]

I completely agree. I think there is a lot of private money sitting there just about ready to commit to really pushing new energy innovations and putting new low emissions technologies in place, and they're waiting for a clear signal, like a tax.

I'd say something about solar. I think we have a range of things. We have a bunch of technologies we really could build today, like nuclear power, large-scale wind power, coal with capture, and then we have a bunch of things that might play enormous roles in our energy future thirty or more years out. I think we need to have different strategies for the two of them. In my view, say, for wind power, what you need is just incentives to do it.

The wind power industry is going flat out, and we just need to give them market incentives, and they'll drive the cost down. I think the same is basically true with CO2 capture and storage. There are a bunch of serious operations in the world where people are already doing this. We have failed to execute a single major one in Canada yet, but we certainly could, and you don't need research to get ready to do it.

Solar is very different. Right now the cost of solar is 10 times roughly the cost of the competition in electricity. I don't actually think it makes sense to invest in the current generation of solar, because I don't think we're going to get to cheap solar by going down the learning curve from the current generation of solar PV. But I actually think that solar is one of the potentially most important energy sources in the long run, and there is an abundant set of options that could, with advanced research, drive the cost of solar down by a full factor of 10, making it competitive.

Nobody can tell you when those will work, but my recommendation on, say, solar would be very different from a recommendation on nuclear, which is to try building it. My recommendation on solar would be don't push it into the market now, spend a lot of money on research that offers high-payoff long shots, and a lot of money on basic solid state physics that could potentially revolutionize the way we build solar cells to make them enormously cheaper. There are plenty of ideas out there.

[The Chair, Conservative, Lee Richardson]

Mr. St. Amand, we're at 3:35 on the second round. I'm sorry, we have to cut that out. Do you want to do a quick one to conclude?

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

I will summarize it this way, and you can agree with me or disagree with me. I'm not paranoid about the oil companies. Of course, the bottom line is critical to them, but I think there's a significant part of them that wants to be good corporate citizens and progressive. Having said that, is it now to the point where they've been talked to for a heck of a long time, and there have been ideas, but they need a tax imposed or some such thing in order to push them into doing it?