Natural Resources Committee on Dec. 12th, 2006

[Roy Cullen, Liberal, Etobicoke North, ON]

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Cullen.

Madame DeBellefeuille.

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

Thank you very much for your presentation. This is a rather complex issue to which we have devoted very little time.

Let me summarize what I have understood. You mentioned that the technology is ready and that it is now mature. What is missing so that we may deploy it on a large scale is support or cooperation from both levels of government, provincial and federal, to help the companies set up a viable capture and storage network. Have I properly summed up the gist of your document?

Since you are putting forward this assumption, you must have put figures on it. When you mention cooperation and support, I assume that we are talking about money from federal and provincial governments. Have you put a figure on the federal government support you would need to set up a network capable of capturing and storing CO₂? Do you have any figures? If the government were to say yes tomorrow, what do you think would be the amount on the check?

[Stephen Kaufman]

Thank you for the question.

The reality is as you described it: the technology is not what I would quite call mature. There is ready technology available today that can be used and deployed in carbon capture and storage and in the pipelines, but it is not as mature or as well understood or as reliable and as inexpensive as it will be over time. The early stages of the project will use more expensive technology than the later stages probably will.

We have not put a formal ask in front of the federal government in terms of dollar amount. That's because we really believe we need to understand the policy framework that's in front of us in terms of the levels of emission reductions that are going to be put onto the various participants in the economy.

We don't have a specific ask in mind at this stage. We do know that working with the province and the federal government and industry, we can try to identify the size of reductions that we would like to achieve together through carbon capture and storage. Then we can determine what the costs of that will be, and then we can determine an appropriate sharing formula.

But it's more than just the financial aspect. It's also sharing the risk, really, in terms of the large-scale investments that would take place in what is right now an absence of a specific policy.

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

You know that I represent a riding from Québec and you are going to tell me, Mr. Kaufman, what I could tell a voter from Québec. Will I tell him that the federal government will give money to oil companies to help them find a technology to emit less greenhouse gas? Will I tell him that taxpayers will give money to polluters to help them pay for their technology? What am I supposed to tell a voter from Québec? What would you tell him if you were a member of Parliament?

[Stephen Kaufman]

I think the important thing to remember is that Canada, in the current situation, is emitting 700 million tonnes of carbon dioxide per year. As indicated by Dr. Layzell, in our industry, in the upstream oil sands production industry, it's in the order of magnitude of 25 million to 30 million tonnes a year of carbon dioxide emissions. So it's about 5% of Canada's emissions.

Now, it is growing at a substantial rate. However, the vast majority of emissions are from a multitude of industries across all provinces—from the home heating sector, from vehicle use, from all kinds of energy sources. Our view is that the reduction of emissions should take place in a fair way across the entire economy. We're more than willing to make reductions in our sector under the assumption that other sectors are going to correspondingly make reductions.

It may be the case that we have an opportunity in our sector to actually make greater reductions in other areas of the economy through the use of carbon capture and storage. That's why we feel it's appropriate to consider allocation of funds into that from the government.

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

Mme Claude DeBellefeuille: I have read carefully the document you submitted to us. You haven’t spoken about the supplementary information to the document or to the slides. When mentioning the new federal Clean Air Act and climatic change policy, you state in your document that CO₂ capture and storage, or CSC, requires an enabling legislation. What do you mean by that?

[Stephen Kaufman]

The comment we made regarding legislation is that the policy for carbon dioxide reductions has to be put in place with respect to the targets for emission reductions in the economy in general. Also, we need to understand how the regulation for the potential for trading of carbon dioxide credits may apply, because that may be a way to generate revenues into a system like the ICON. We need to understand what other options for carbon dioxide compliance are going to be available to companies, so they can make a fair comparison of the use of high capital investments early on in a system like this, versus ongoing mechanisms that might be available to them. It's those types of legislation we believe need to be put in place to ensure CCS can go forward.

[The Chair, Conservative, Lee Richardson]

Wishart, did you have any other specific examples?

[Wishart Robson]

I can comment on two other areas. One is that nowhere else in the world has a carbon capture and storage project of this scale been anticipated or even conducted. The largest projects in the North Sea or at the Weyburn project in Saskatchewan are in the range of one million tonnes a year. We're applying technology at a much different scale, we're deploying technology at a much larger scale.

We also need to look at some of the other aspects of this whole network. It's not just the capture side. We have the pipeline, we have the storage, and we have issues around creating a market in the enhanced oil recovery. How do you establish a price for carbon dioxide when you're producing more than the consumer needs? Enabling legislation will help a number of things in terms of putting the whole network in place, not just the capture facilities.

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

Do I have any time left? I have a brief question.

From what I gather, Mr. Kaufman, the industry is currently experiencing some uncertainty. Given that the conservative government has not yet set the targets or the rules of the game, the development and implementation of the technologies, namely for the capture and storage, among others, are somewhat hampered.

[Stephen Kaufman]

Yes, and it's not just the targets, the entire set of rules and regulations is needed, including emission reduction targets, availability of credits, availability of rules around storage, monitoring for the storage, and the transactional activity that would take place around carbon dioxide.

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

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you.

I understand Mr. Bevington is going to speak first on behalf of the NDP.

[Dennis Bevington, NDP, Western Arctic, NT]

Thank you, Mr. Chairman.

Thank you for coming today. I certainly enjoyed both your very good presentations.

I want to speak briefly to biomass. It seems we're going to go into a period where we're going to have short-term emissions reductions from all sectors. Biomass is an excellent fuel, it can fit into many parts of society. I reference our correctional facility in the city of Yellowknife that was just converted to wood pellets by an independent operator at a price lower than the existing fuel oil price. This suggests industry is ready to move on this. In fact, the pellet industry is in short supply right now because much of the biomass that can be moved is being moved down to the United States.

We have an issue. We need to increase the supply in the biomass industry and we also have many customers who could fit in with much less technology development, much less cost up front, and we could move the biomass much more quickly into emissions reductions right across the spectrum.

I remember having a presentation from the Dutch coal companies that produce electricity. They add pellets into their stream to effect carbon dioxide reduction and produce green electricity. They don't really need any technological development. In fact, they were buying the pellets from Nova Scotia at the time.

I think you hear where I'm going. Why should we put such an effort into biomass technology for these other uses when quite obviously sectorally we're going to have use for biomass? The technology is there.

[Dr. David Layzell]

I certainly would agree that a lot of technology exists. The co-firing of biomass with coal is certainly a proven technology in Europe and the United States. Ontario Power Generation, one of our sponsors, has just gone through environmental hearings in Ontario for up to 480,000 tonnes a year of biomass to co-fire at Nanticoke within the next two years. They've just asked for environmental permission to move in that direction. That would be the upper limit, but it's certainly a very major.... They're talking up to 20% co-firing on three of the eight 500-megawatt power generation facilities.

So we see this happening. I'm getting calls every week or two from Europe, trying to find sources, people looking for wood pellets. They're paying $250 a tonne now, or more--$250 to $253 a tonne in Europe--for wood pellets.

The biomass market in Canada is quite profitable now. There are 500,000 tonnes of biomass pellets a year moved from Vancouver, shipped all the way to Europe for power generation. There are major movements in Ontario for large-scale biomass power.

One of our challenges as a country is this. The Europeans see Canadian biomass as a source of how they are going to deal with their environmental and greenhouse gas problems. I think the real question is whether we're going to put in the right incentives and policies to encourage the use of Canadian biomass in Canada to address the climate change issue.

[Dennis Bevington, NDP, Western Arctic, NT]

Now I'll go to sequestration and the importance of that. Once again, we set short-term targets and regulations in the future for the production of carbon dioxide. You've set dollar limits of $20 a barrel. We've heard $100 a tonne here in these committee hearings for the cost of sequestration. How do those compare with many of the other types of technologies that are available now?

We use 1,400 petajoules of energy heating our homes. We use a similar amount in commercial establishments. If you even look at something like solar thermal energy, where you can install at a much lower cost than $100 a displaced tonne of carbon dioxide, where does this all fit in? Why would we jump to support this particular industry, which is well financed and well developed, in its pursuit of reduction of carbon dioxide through its own large efforts rather than...? We're going to set up a whole sectoral approach where there are many opportunities for the Canadian government to invest in particular fields and particular areas to produce the results. Why would you be at the front of the queue rather than the residential, the commercial, the institutional, or the transportation industry?

[Stephen Kaufman]

That's a very valid question, and I appreciate it.

I think the key thing to remember is that it's a question of scale. If Canada wants to make significant reductions in its emission levels, many of those alternatives that you talk about are going to be very valid ones. The whole concept of the wedges that was put forward by the National Round Table on the Environment and the Economy was that we need to take action on all fronts. We need to be doing energy conservation. We need to be switching to lower-carbon fuels. We need to be doing renewables. Those projects have merit, and we believe should be supported.

However, we haven't done a discrete analysis to compare our costs per tonne with some of these other sources. From some of the public media we've been tracking, some of the ideas such as ethanol and wind power, for example, have very small incremental impacts on carbon dioxide emission reductions, because those projects are close to being commercial and are being done anyway, in some cases.

We think it's really important to focus on all technologies in taking an approach on all the means we have at our disposal.

[Dennis Bevington, NDP, Western Arctic, NT]

That's valid, and I think that's correct.

I want to refer back to something. The development of this technology would put all the companies involved in this at an advantage worldwide as we move towards the Kyoto era, which we are moving into. So once again, how to invest, who to invest in, and who should pay the piper for the cost of making these things happen are elements that I think have to come into this equation. It's more complex than simply saying okay, you're going to reduce by 20 megatonnes if we invest in you for these purposes.

Many of the other technologies have already had their time in investment and now are are looking for a chance to recoup that investment they've made on their own. If you take the solar thermal industry in Canada, for instance, I know the comparable numbers. They're looking pretty good on their side rather than on your side.

I'll be happy to see you present these numbers, because you're in a competitive business, to stand up to the other company, the other ideas, and the other technologies in what you're proposing. That's why I guess this committee would have to look at that in that regard.

[Wishart Robson]

I will perhaps make two points. The first one is that carbon capture and storage is associated with a transformation in Canada's energy system. When you look at the energy system, you're going to look at the exploration production as being the very front end, the refining, marketing, and distribution as the middle piece, and then you're going to look at the end use.

Carbon capture and storage is the transformational piece that takes us from where we are today with our energy supply of that three-pronged fork, if you will, to some other lower carbon energy future on the supply side. Then, when we start to look at some of the other technologies you're talking about--the consumption end, the user end--we have to have technologies that work there and also in the middle portion as well. Carbon capture and storage is the single largest opportunity on the supply side to make significant long-term reductions as we move to that lower carbon future.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Bevington.

We're going to hear from Mr. Trost.

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

Thank you, Mr. Chair.

Some of this has already been covered, but this question is especially to BIOCAP.

I'm a geophysicist by training, so I like all the neat science stuff, but one of the real frustrations you get as a legislator is that whenever I see a presentation—and I get a lot of them on neat scientific stuff, new technologies, etc.—we often wonder what is reality and what is speculation. It's like watching an infomercial on inventions on TV.

I know you're going to have certain elements you want to sales pitch. I don't fault you at all for that. But give me an idea about the real technologies. We think we know roughly where carbon sequestering is. What are the real technologies that have real potential right now? Give me some real timelines. If we're talking about using technology to deal with carbon dioxide emissions, methane, etc., I'd really like some way I could honestly know what is possible and what is a smokescreen. Give me an idea about what you see realistically, when you see it coming down, and what sort of impact it will have.

I know I'm asking an impossible question.

[Dr. David Layzell]

There are so many different technologies we're talking about in this portfolio; it's not a single technology.

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

But how close are some of them to use? How many are theory?

[Dr. David Layzell]

A lot of them are very close.