Natural Resources Committee on Dec. 12th, 2006

[The Chair, Conservative, Lee Richardson]

Sorry, we're a little late getting started because of the vote in the House. We have some technical and logistical matters to assume as well.

Let me just first of all suggest to the committee that it now appears likely that we will not be meeting on Thursday. With the proposed adjournment of the House tomorrow afternoon, I'd like to beg the indulgence of the committee to perhaps wrap up hearings today at 5:10, and then we could take 20 minutes to talk about a draft that we have prepared. I've asked the clerk to make copies. This is a brief outline of where we might go with the committee report. I'd like to have it in your hands. I'm sorry we don't have a whole lot of time to look at it, but I really just want to have everybody take a look at it, and if you think this is the right direction, then we'll turn the clerk and our research assistant loose over the break to prepare a more detailed draft for us.

So if we're in agreement, then we'll hear the witnesses and ask questions until 5:10 and then perhaps even go in camera at 5:10 and deal with that draft.

Mr. Tonks, you have a motion as well.

[Alan Tonks, Liberal, York South—Weston, ON]

Yes.

[The Chair, Conservative, Lee Richardson]

Then I think we had better try to wrap it up by five o'clock, because we're going to have to deal with your motion on BIOCAP.

[Alan Tonks, Liberal, York South—Weston, ON]

Thank you.

[The Chair, Conservative, Lee Richardson]

D'accord?

Very good. Thank you.

We will now proceed with our witnesses today and our further study of our oil sands and the federal government's responsibility in that regard.

Did you like that, Mike?

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

I did like that.

[The Chair, Conservative, Lee Richardson]

Our witnesses today are the ICON Group. Stephen Kaufman will be speaking on behalf of ICON, and then we'll also hear from BIOCAP. I presume Dr. Layzell will speak on behalf of BIOCAP. We also have Wishart Robson here, who is going to help with responding to questions, I presume, and I thank you for that.

If you haven't a preference, I'd ask Mr. Kaufman to begin.

[Stephen Kaufman, Suncor, ICON Group]

Thank you very much, Mr. Chairman and honourable members, for the opportunity to speak to your committee on behalf of our ICON group.

Given that this issue is complex and that I am not bilingual, my comments and my replies to your questions will be in English.

I apologize for that.

The ICON group consists of twelve companies in the oil sands, electricity generation, industrial, and chemical sectors. Their logos are on the front of your package, but just as a reminder, they include Suncor Energy, TransAlta, Sherritt, Agrium, Air Products, Nexen, Shell Canada, Husky Energy, Canadian Natural Resources, ConocoPhillips, Syncrude, and Imperial Oil.

This group has a strong interest in carbon capture and storage, and we've been working toward creating a long-term, integrated carbon dioxide network that can handle large volumes of carbon dioxide. We've been working with both levels of government, provincial and federal, on this concept for about eighteen months, and we now believe we need to jointly, with governments, accelerate that effort.

It's important to understand that ICON is not a single project. It's a set of policies, regulations, and ultimately private- and public-sector investments to make large-scale carbon capture and storage a reality. CCS has tremendous opportunity for Canada, and Mr. Robson of Nexen and I are here today to highlight some of the considerations with respect to CCS as the government develops its national environmental strategy and Clean Air Act.

Before I go any further, I'll just briefly provide an overview of carbon capture and storage, or CCS, for those of you who may not be familiar with it. carbon dioxide is available at very large volumes from industrial sources—typically combustion sources or process emissions. That carbon dioxide can be captured, separated from other contaminants, purified, and compressed, and then it can be transported by high-pressure pipelines for hundreds of kilometres and ultimately be injected into rock formations that are typically two to three kilometres below the surface of the earth, well below groundwater level. In addition, that carbon dioxide can be used, if you choose, as an injection agent into oil fields to help promote oil recovery. That's a technique we call enhanced oil recovery.

There is extensive international recognition of this technology as part of the solution to climate change challenges that we're facing. The U.K., Australia, and even the U.S. are moving forward on CCS. The international panel on climate change has said that it's a safe long-term way to reduce carbon dioxide emissions.

If you look at page 2 in your package, the National Round Table on the Environment and the Economy has made some extensive comment on CCS in their most recent report. They are indicating—and we believe this—that CCS is potentially one of the most substantive and cost-effective ways for Canada to reduce its greenhouse gas emissions over the next five to ten years.

In addition, the endorsement of CCS was provided by the NRCan technology roadmap, which was prepared in the spring of this year.

On page 3, we talk about why CCS is so important to Canada. In short, it's a made in Canada solution. The investments will occur here in our country, the carbon dioxide reductions will occur here, and the technology development can occur here. Canada is in a somewhat unique position in terms of being able to embrace CCS, because it has large carbon dioxide sources that are located near suitable geologic sequestration sites where the carbon dioxide can be stored permanently underground. We also believe CCS is a technology that is to a large degree proven, but one that will advance over time. Canada could become a world leader in advancing this technology and employing it in our country.

Page 4 details some of the findings of the work we've done over the last year. We estimate that up to 20 megatons per year of carbon dioxide could be captured and stored by the year 2015. Just as a context, that would be the equivalent of removing 4 million cars off the road, or some 25% of the Canadian light vehicle fleet.

There are also real, substantial, Canada-wide benefits. We believe CCS may have application in Ontario, the Maritimes, and western Canada. Alberta is probably the location where our ICON concept could be started. The ICON that we refer to stands for “Integrated Carbon Dioxide Network”.

The Alberta map on page 4 gives you an indication of what a network for carbon dioxide capture would look like, collecting that carbon dioxide from the large emission sources that are in Fort McMurray, the Edmonton area, and down in the Red Deer area at the chemical facilities, and moving that product to the western side of the province for permanent storage in deep reservoirs.

The ICON Group believes that an infrastructure network like this will be key to the success of a CCS system. Such a network approach allows us to have economies of scale from a large system. It optimizes the efficiency over time, and it will minimize the environmental impact by only building the system once and to large scale.

Our study work also concluded that it's very beneficial to develop this large-scale system from the start rather than starting small and working our way up to a larger scale. In order to do that, as we describe on page 5, we really need a common vision and an approach that involves multiple industry sectors, plus coordinated input from both the federal and provincial governments involved.

We don't really believe that we need to pursue demonstrations or R and D. We want to focus our efforts on deployment of this technology now, but encouragement of carbon capture and storage has to be balanced as well with the Canadian competitiveness of our industries to ensure that investments can be ongoing. This is particularly true with respect to the oil sands upgrader activity, which needs to be competitive with U.S. refineries and other locations where this upgrading activity could take place.

Slide 6 talks about our conclusions with respect to the market influences on this type of activity. Really, we believe that if this is left to market forces, very little carbon capture and storage will proceed even if there's a tightening of carbon dioxide emission constraints. The risk profile of these investments and the economics of large-scale CCS are simply unfavourable. There is, as a result, a transitional role for governments in helping to enable large scale CCS. A true three-way public–private partnership, with two levels of government participating with industry, is essential.

Any integrated system will have to encompass three elements. It will involve the large scale capture that would be installed at multiple facilities where the emission points are, with investments in the hundreds of millions of dollars. It would involve an open access pipeline system that anyone could use to transport the carbon dioxide. And it would involve the storage infrastructure, including, in the near term, the use of enhanced oil recovery as a revenue source. EOR is quite important, in our view, to help to get the system started, and the revenues from that sale of carbon dioxide can help to offset the cost of the system. Ultimately, though, what we call direct storage or injection into underground reservoirs without a revenue source coming back to you is going to be where most of the carbon dioxide ends up.

Slide 7 shows the policy principles that we think are going to be important to help to develop carbon capture and storage. One of the first is that companies should be able to retain the option to undertake CCS, along with other compliance strategies that they might like to choose. We don't believe CCS is the only strategy that Canada needs to reduce its GHG emissions over time. As a result, for companies, it needs to be one of a portfolio of choices that they can make. We also believe that companies that choose to embrace CCS and install those facilities should have no greater compliance burden for carbon dioxide reductions than other companies who choose not to do CCS.

We also want to make the point that our companies do believe that we are going to be exposed to costs in doing this. We're not going to undertake carbon capture and storage with a view to making money from it. It's not a profitable investment, but it is something we are willing to pay a share of.

The point about how these companies will move forward on projects relates to scale to a large degree. It may be quite likely that companies that elect to use carbon capture and storage may be able to have emission reductions that are actually greater than their reasonable share of national targets. We therefore need to ensure that there's a mechanism in place so that this behaviour can be incented by funds or the sale of credits or some similar mechanism. This will lessen the burden on these companies for this environmental investment.

In closing, I would like to emphasize that we believe that the ICON Group, with our broad multi-industry representation, is the important group to engage with in developing the policy around a carbon capture and storage network for Canada. Our group has done a substantial amount of analysis on how such a system could function. We would be happy later on in the afternoon to answer any questions you might have about that.

We encourage the federal government to confirm that carbon capture and storage is a key part of Canada's environmental strategy, and that the ICON concept is a priority.

Developing an integrated carbon dioxide network will be a transformative environmental step, one that can be most effectively taken as a private-public partnership. Collectively we have the opportunity to begin on the largest CCS deployment in the world. We need the federal government to work with us to develop the scope, the size, and the policy options that will enable ICON. Collaboration is essential, and the ICON companies are ready to engage this government in substantive discussions.

Thank you for your attention. I look forward to your questions.

[The Chair, Conservative, Lee Richardson]

Thanks very much, Mr. Kaufman. I'm sure you'll have lots of questions, but I think we'll hear from Dr. Layzell first. Then you can take joint questions.

David, please begin.

[Dr. David Layzell, Chief Executive Officer and Research Director, BIOCAP Canada Foundation]

Thank you very much. I appreciate the opportunity to present to this committee.

I don't think you need any introduction to the tremendous opportunity that the oil sands offers to Alberta and Canada. Nor do I think the committee needs to be told about some of the environmental challenges facing oil sands development. It's clear that innovative technologies and management strategies are needed to significantly reduce the environmental impacts of oil sands development, and they will then result in realizing the full benefits of this opportunity.

Canada has a major green advantage in addressing some of these environmental challenges, and that is the vast biological capital we have, in particular our forestry and agricultural resources. If we were to look over the next 45 to 50 years and think about shifting more of our economic system toward what we call a bio-based economy, I think we could realize some of the potential for Canada to realize environmental, economic, and social benefits. We have the potential within Canada, in the sustainable use of our biological resources, to achieve as much as 240 million tonnes of carbon dioxide emissions reductions by mid-century, or the equivalent of almost ten times the carbon dioxide emissions from current oil sands processing.

The sustainable bio-economy involves a number of things. One is sequestering atmospheric carbon into forests and agricultural soils. This is important not only in taking carbon out of the atmosphere, but it's a key stage in helping these ecosystems adapt to the changes and impacts of climate change they're already experiencing, for example, the mountain pine beetle issues in British Columbia.

Second is to reduce biologically based greenhouse gas emissions that are associated with our existing activity, whether that's agricultural greenhouse gas emissions from cropping systems, from animal manure management and animal production systems, or from landfill sites across the country.

Third is to complement our fossil energy resources with renewable biomass energy and biofuels. Certainly the movement to a sustainable bio-economy involving the things I've just talked about will be a major stimulus to the rural economy in Canada. It will help create healthier communities, improve energy security issues, and result in more productive and internationally competitive industries across the country.

In the main part of my presentation I'd like to talk in more detail about the movement toward a sustainable bio-economy, and the potential that each of these areas offers for Canada to reduce the environmental footprint, not only of the oil sands development, but overall.

First is the issue of biological offsets for greenhouse gas emissions from the oil sands and other human activities. This really comes in three types. The first two of these are biological equivalents, if you like, to the important geological sequestration we just heard about. Forest management for carbon and for addressing greenhouse gas issues is a very major opportunity, especially when taken in perspective across many decades. It's not much use when we're trying to look at the next five to ten years, because trees grow slowly and it takes time to have an impact.

In Canada we have about 400 million hectares of forest land, about 240 million hectares of which are timber productive. We harvest every year about one million hectares of forests in this country. The forest companies, through sustainable forest management, are essentially managing at the present time about 230 million tonnes of carbon dioxide emissions that they are actually stimulating the growth of through their sustainable forest management. So 230 million tonnes of carbon dioxide are going into our forests, and that represents about one-third of all the greenhouse gas emissions currently in Canada. Of course, we harvest those 230 million tonnes of carbon dioxide emissions as biomass and use it as forest products. Some of it is left on the ground as forest residue, or left in mill operations. A significant portion of it is already being converted into energy by the forestry companies.

However, if the forestry industry were to alter the way they manage a portion of our forest lands, and improve the management technologies, it is clearly possible to increase the productivity of that land base over the next 50 years by 50% to 100% or more. If that were done, for example, on 50% of the land area we harvest each year between now and 2050, forest carbon stocks in Canada could sequester anywhere from 70 million to 100 million tonnes of carbon dioxide per year by 2050. Moreover, when the trees finally mature, the biomass would be available for wood products or as a renewable energy source.

It's really important to recognize that we are probably going to have to do this, anyhow. With impacts such as the mountain pine beetle infestation and other climate impacts, we're going to have to change the way we manage our forest ecosystems. What this offers is a way of getting a jump on it and starting to do the management now, in recognition of the fact that we could actually get the greenhouse gas benefits out of it in addition to helping to preserve these ecosystems for the future.

The second area relates to the role of agriculture, especially agricultural soils, in holding carbon and storing carbon. Over the last 15 to 16 years, some of the top-quality science that's been done in Canada has shown that movement to low tillage agriculture has already increased carbon levels in Canada's croplands by 10 million to 20 million tonnes of carbon dioxide. However, there's potential for the soils to hold a lot more carbon while benefiting from the added fertility that this carbon provides.

A number of technologies—some of them have been around for centuries and some of them are very recent technologies--can be incorporated that will actually stimulate the amount of carbon that's stored in the 30 million hectares of agricultural cropland in Canada and in the tens of millions of hectares of pasture land across the country. The estimate here is that at least 30 million tonnes of carbon dioxide equivalents per year could be achieved by 2050. There have been some very interesting papers published recently suggesting that this may be an underestimate, depending on the technologies that are being incorporated.

Reducing agriculture and landfill emissions is a third area, and this is actually a real emission reduction rather than a sequestration. So this is a long-term—what we call grade A—emission reduction. Certainly we have significant—about 88 million tonnes, approximately—carbon dioxide equivalents being produced from agriculture, from landfill sites, from animal production systems, and from our cropping systems. Improved management practices, many of which we already know about, can significantly reduce these emissions. There are serious technologies, which, if implemented on a very wide scale with the appropriate incentives—economic incentives—for farmers, landfill operators, municipalities, and so on, should be able to reduce these emissions by half, or by 40 million tonnes per year by 2050.

Clearly, with these sorts of appropriate strategies, investment strategies, and policies, our biological resources have the potential to provide offsets for fossil fuel emissions.

There's also a very important role that biological systems can play in providing an energy resource. In recent years there has been a great deal of interest in biomass energy, especially with the recent rise in oil and gas prices. In fact, today the wellhead prices for oil and gas are two to three times the farm gate or forest road price for biomass. If oil and gas prices continue to rise, the spread between the farm gate and forest road prices for biomass will increase.

It is true, certainly, that the cost—the economic cost—of converting biomass into a form of energy that is usable to compete directly with oil and gas easily makes up for the benefit of the farm gate and forest road price. However, with new technology and infrastructure investment, there's a very significant opportunity for biomass to play a major role.

Certainly other countries around the world have recognized the potential for biomass and are using it as a key part of their strategies, be it for climate change, as in the European Union, or for energy security, as in the United States.

I just have a comment here. The U.S.A., in the last year, has established a bioenergy commitment for the next 20 years that's equivalent to more than 1.5 times—1.4 times to 1.5 times—all the energy we use in Canada from all sources. The European Union has identified a bioenergy target that is approximately equal to all the energy use of Canada.

If we looked specifically at the oil sands—and the opportunity is specifically for the oil sands to address there—there is a possibility of looking at biomass as a potential for an alternative energy source for natural gas. It could play a significant role in oil sands production.

If we consider a natural gas demand of 800 cubic feet per barrel of oil, producing a million barrels of oil per day with biomass would require about 15 million tonnes of dried biomass per year. This is a very large amount of biomass, a very significant biomass resource. There certainly is the capacity to sustainably produce this amount of biomass in western Canada.

In working with the British Columbia government, BIOCAP has estimated that B.C. itself has the potential to provide over 32 million tonnes of biomass per year, about 11 million tonnes of which would come over the next 20 years from mountain pine beetle wood.

Alberta and Saskatchewan also have very formidable potential for the sustainable production of biomass for energy. Indeed, we've estimated that Canada has the potential for more than 300 million tonnes per year of sustainable biomass energy production for everything from transportation fuels, heat, power production, etc. That estimate of 300 million tonnes may sound like a lot—it's about one-quarter of what we estimate the Americans have already produced from the U.S. Departments of Energy and Agriculture—but it is less than half of estimates that were done for Canada about 20 years ago, when they looked at the bioenergy potential of Canada. It is indeed a conservative estimate.

One of the biggest challenges with biomass as an energy resource is the issue of its low energy density and the fact that it's distributed. It's a transportation challenge. While we have yet to find a resolution to this challenge, there are some very exciting and interesting studies under way demonstrating the fact that technology, if brought to bear with good management strategies and planning, can help to address some of these issues.

For example, an entrepreneur we've been working with in British Columbia has developed a wood pellet technology, where the pellets do not absorb water. Essentially they can be put in water and maintain their thermal energy value, once they're taken out of the water at the end and allowed to air dry.

A university research team we've been working with is exploring the feasibility of incorporating these kinds of pellets into a water-based slurry, essentially using the coal slurry technology that is well known and well developed around the world, and allowing us to pump large amounts of biomass over a long distance through pipelines. This could allow cost-effective transport to the oil sands of excess mountain pine beetle wood or forest residues from B.C., or even biomass crops grown in the prairies.

The side benefits of this bioenergy strategy would include millions of tonnes per year of greenhouse gas emission reductions, as well as the potential delivery to the oil sands, especially if you're looking at a B.C. source, of millions of cubic metres of water per year, helping to reduce demand on local supplies.

I would certainly argue that we're not in the position now to recommend large-scale biomass use for the oil sands. The studies are in the very early stages. But this demonstrates the important role of research and development in finding biological solutions to some of the challenges we're facing in energy and the environment. In many ways, I would argue that the biomass energy field today is where the oil sand technology was 30 years ago. We need to invest now in the R and D to create a valuable resource for the future.

The transformation to this sustainable bio-economy represents a very significant opportunity for Canada. It can reduce Canada’s environmental footprint, not only with oil sands development but for other energy uses. It can also provide a major stimulus to the rural economy, both in the beleaguered forest economy, in terms of the pulp and paper challenges we're having, and in the agricultural economy.

We need three things to move forward. We need arm's-length credible science that will support the policy investment decisions required for a domestic trading system, which will help support the rapid implementation of known and proven technologies.

We need to enlist the role of the research community—university and government researchers, and those in other innovative industries—to develop the skilled workforce, innovative technologies, and management strategies that will increase the environmental, economic, and social sustainability of a wide range of bio-economy solutions, from emission reductions, carbon sinks, and new energy conversion in transportation technologies.

We also need the efficient and effective transfer of the existing and new knowledge among industry, government, non-governmental organizations, and the research communities.

Indeed, this is what the BIOCAP Canada Foundation has been doing. We have a proven track record in this area, and we've brought together the necessary disciplines and sectors to find effective solutions. Certainly we would be very happy working with the federal government to be able to continue our work in this area.

Thank you very much.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Layzell.

Thank you for those presentations. I think it's fitting that presentations today seem to very much complement much of what we have been hearing for the past number of months in this study with regard to the optimum use of resources, of sustainable development, particularly reduction of greenhouse gas emissions, and use of technology innovation.

We're going to begin our questions. I'm going to ask the questioners to keep it more brief today so that we can get in as many questioners as possible. But I'm going to ask a question myself, for the first time today, because as I said, much of your presentations did seem to bring together much of what we had heard.

It seems to me, with regard to greenhouse gas emissions, particularly carbon dioxide sequestration, we've heard essentially three options bouncing around out there. We've heard that there are industry people who are going on their own, or through just good corporate citizenship or environmental concerns proceeding on their own, or with shared programs in dealing with these matters, in spite of the cost. That, of course, would be difficult if they're the only people going that route. The second was government subsidies for capture, as you suggested, or for pipelines, that we have government money involved in that. The third one seemed to be government regulations or emission controls.

Those are three somewhat different ways of dealing with this: one, companies do it on their own out of moral suasion or environmental concern; two, that the government subsidize the capture or the pipelines; and three, that we just make regulations forcing the companies to do it.

I'd like to ask both groups, just to start it off, what would your considered opinion be of the best option, if we were to proceed by that route?

[Wishart Robson, Nexen Inc., ICON Group]

I'll answer on behalf of ICON.

Most of the companies involved in the oil sands have been active in terms of emission reductions on a voluntary basis. A lot of them have signed on to the Canadian Association of Petroleum Producers' voluntary program that was run by NRCan, and have been and probably still continue to either make reductions or make plans for reductions. Some of the companies have made significant emission reductions in their operations since they started on that program in 1997.

When we talk about a project on the scale of the ICON project—a 20-megatonne carbon dioxide pipeline—we're talking about an infrastructure, a system that surpasses the ability of a single project, or perhaps even of a group of projects and companies, to bring all of that together. We are looking at appropriate ways for that risk to be shared amongst the participants, both the federal and provincial government. I would note that the creator of the wedge concept, which the national round table used in part of their analysis, was a Harvard professor named Dr. Sokolow, and he did indicate with respect to carbon capture and storage that subsidies may be applied at the early stages to get over the initial economic hurdles.

On regulations and controls, we've understood for a number of years now that regulations will be forthcoming in this area. We anticipated those when Kyoto was signed. We've been looking for the regulatory process to be refined and defined in Canada, so that the investments we make are not stranded or otherwise disadvantaged in the future. We have seen some of that in the past, for companies that have taken early action, whether it was on a voluntary basis or not, and those actions have proved that they have not given or will not give the anticipated results. We would like not to see that happen in the future.

But we believe all three of those are going to be means by which we can effect real and verifiable long-term emission reductions in our sector.

[The Chair, Conservative, Lee Richardson]

Thank you.

David, go ahead, please.

[Dr. David Layzell]

As a representative of an organization that involves about ten different industry sectors, four provinces, the federal government in multiple departments, non-governmental organizations, and 35 universities across Canada, I'm not sure there's one opinion on this. Personally, I think—and many of the board members who are intimately involved would identify as well—that all three are needed. We do need some level of regulation and controls. We need to provide the right policies and instruments to do that. We do need industry engagement and perhaps voluntary initiatives, but we also need government support, especially in the early stages, to move this forward.

I think if you look at the diagram on the back, it's essentially a Canadian equivalent of a Sokolow analysis. We are going to have a very big challenge in this country for the next 45 years if we're going to meet what the government has talked about as a 45% to 65% reduction in emissions, and we're going to need all the tools we can get. It's not a matter of one or the other. It's going to be all of the above.

[The Chair, Conservative, Lee Richardson]

We'll now go to the committee. We'll try five-minute rounds, with Roy to start it off.

Mr. Cullen.

[Roy Cullen, Liberal, Etobicoke North, ON]

Thank you, Mr. Chairman.

Thank you to the presenters.

Your question, Mr. Chairman, is an interesting segue into what I wanted to ask. I'll go first to the ICON Group.

Mr. Kaufman, in your presentation you say that substantial carbon dioxide capture and sequestration won't get off the ground if left to the market alone, and that there is a transitional role for government. Then in your next slide, number seven, you say that carbon capture and sequestration should not be mandated. You touched on this briefly, but I wonder if you could expand, because the estimates I recall were that to do this carbon capture and sequestration you could be looking at upwards of $20 a barrel. I don't know if you have any costs associated with what it would take to capture and sequester the carbon, but while I can see there's a transition if you're left with that kind of a cost on a variable-cost basis—and maybe that's not a variable-cost basis—how can that gap be bridged to the market alone even with some transitional government help?

[Stephen Kaufman]

Thank you for the question.

I believe the important thing to note is that the market will not respond today, and it isn't responding. You see now there are no projects being built other than some very small-scale ones. That's because fundamentally the costs are dramatically higher than what people in industry believe they would be for their other alternatives. They would be looking at the purchase of credits or offsets, or at working on other energy conservation initiatives, all of which are laudable and appropriate, but which are only going to get at a portion of the reduction that's possible.

Our view is that if the governments participate in the early stages, there will be cost improvements in the technology over time--not necessarily over five years, but certainly over ten and twenty years. As there's a natural cycle of turnover of large facilities like power plants and oil sands upgraders, you can rebuild them with newer technology later on, which should be less expensive and may allow the industry alone to bear the costs later on in the life of a program like ICON.

[Roy Cullen, Liberal, Etobicoke North, ON]

I think you're right. What we've heard pretty consistently is that it's not going to happen naturally, and it won't because of the significant cost.

That $20 a barrel figure I threw out there--is that anywhere close to reality?

[Stephen Kaufman]

Yes, but I hesitate to provide numbers on a per-barrel basis, because it's highly dependent on how much of the carbon dioxide you choose to capture. If you choose to make a reduction of 10% in your carbon dioxide emissions, does that mean you only divide it over 10% of your barrels, or do you divide it over all of your barrels?

Also, a fair number of the companies that are involved in our initiative aren't even oil producers. They are in the chemical sector, the industrial sector, or the power generation sector, where the numbers aren't as meaningful on a per-barrel basis. Certainly there have been studies done by external consultants, which have shown a wide range of impacts on a per-barrel basis.

[Roy Cullen, Liberal, Etobicoke North, ON]

Whatever it is that's significant, I think you probably agree with the cost factor. Thank you.

I have one quick question for Mr. Layzell.

Mr. Layzell, I've spent a lot of time in the forest industry, and I was particularly interested in your comments about forestry biomass. For the forest industry in Canada today, one of their big issues is energy costs. They've been looking at biomass as an alternative. I got involved fairly extensively with respect to cogeneration with the hydro companies. Although they talked a good story, actually getting these sorts of projects like cogeneration into effect was a bit of a challenge.

When you talk about increasing the productivity of forest land, there's biomass at the plant level or mill level, and biomass at the harvesting level. Maybe you could expand on the wood residues. Are you better optimizing the wood residues at the mill level or at the harvesting stands? They do need a bit of that nutrient to reforest properly.

I'll leave it at that for now.

[Dr. David Layzell]

I think those are very good questions.

Our analysis, in terms of the inventory analysis, is based on the assumption that most of the residues at the mill are already being used, and indeed the forestry sector has had a strong incentive to use those as a source of energy because of the higher energy prices, particularly gas prices. As a result, our focus has been on two things. One is to look at some of the forest residues, taking only the larger forest residues, leaving essentially 30% of the residues behind in order to make sure they have the nutrients and the carbon stocks for the soils, for the environmental values. What we would do is take some of the remaining residues.

But the real focus in terms of the carbon sink that I talked about and also for the long-term bioenergy is to increase, through forest management practices such as replanting after sowing with species or genotypes that are better adapted, especially to future climate in those areas; using a low-level fertilizer occasionally; pre-commercial thinning—some of the more intensive forest management practices that will result in a much faster growth and a higher-value product in a shorter period of time. This also generates a bioenergy byproduct during the process, for example through the pre-commercial thinning.

Now, these are more expensive than our current forest management practices in Canada, but certainly you've talked to some of the forest companies. Many of the provinces and forest companies are interested in moving in this direction, but trying to get the economics to work has been a challenge.

The carbon benefits and the bioenergy benefits are being seen as a potential way of meeting and helping with the economics to make it happen.

[Roy Cullen, Liberal, Etobicoke North, ON]

So the focus then is more in terms of the creation of more carbon sinks.

[Dr. David Layzell]

Both of them have to be done. I think in the short term, it's use of the residual biomass resources, which in some jurisdictions in Canada are brought to the side of the road and burned. This happens a lot in Ontario. So in some jurisdictions there are problems with that. It's an energy resource that's even brought to the edge of the road, but it's not being utilized. Accessing that is a key part of an early-stage bioenergy opportunity in provinces and regions.

Longer term, I think it's really an issue of moving in, especially after major disturbances like the mountain pine beetle, getting in and looking at planting trees that are going perhaps to be able to last longer, that have a better chance of being around forty years from now, and also, instead of using natural regeneration, use planting after harvest and other forest management strategies that are well known to be able to increase the productivity per hectare and speed up the rate at which the trees regrow. That would be a carbon sink relative to a business-as-usual strategy.

[Roy Cullen, Liberal, Etobicoke North, ON]

I have one quick last question.

What do you think the potential is for biomass in the forest industry's dealing with some of their huge challenges with respect to energy costs? We've heard from the forest industry, and they're saying it's very much part of the solution that they see. We met with the electricity generators the other day, and they said it's really a marginal kind of issue, a marginal benefit that's achievable with that solution.

[Dr. David Layzell]

I think there are some challenges. The forest sector certainly has a challenge with the high cost of energy. They also have a challenge, I think, with their infrastructure, especially in some regions where the infrastructure is very old and it's not terribly even, so they have inefficiencies in the energy conversion efficiencies on that infrastructure. So I think using biomass as an energy source doesn't get around to some of the infrastructure problems that are inherent within some of the operations.

I think that one of the things, certainly in our discussions with some of the companies in the forest sector, is that they're very interested in seeing their plants being used as a bio-refinery, getting energy as well as the higher-value chemicals and materials out of these biomass feedstocks, and indeed, trying to have that help in the economics and in their viability to move forward.

So I think it does play a role, but I think we shouldn't be looking at only energy. We should be looking at a suite of biomass products, the foundation of which is probably energy. We need to get more value out of this resource. I think that's a key part of the strategy moving forward.