Thank you, Mr. Chairman, honourable members, ladies and gentlemen.
I think maybe half of what I'm doing today is representing the Coal Association. There'll be a big dollop of Sherritt International here as well. I haven't passed out notes, because I'm speaking from speaking notes. I really wanted to take the time to talk to the committee and follow up on some of the discussion we heard from the previous people.
I'm not as old as I look. I think it's a lot like some of the members of this committee. None of us are as old as we look. I've been in the coal industry for 25 years. I've been working in power plants and in that part of the business for a long time. I think there is a lot to be said about how we have proceeded.
I would like to talk to you a little about clean coal. Clean coal today is not the same as clean coal was 10 years ago. I'd also like to follow up with a bit of the conventional technology, to talk to you about what's taking place using the kind of technology that we still use today. Then I want to talk about some very exciting things that Sherritt International has in place as far as the use of coal and the business strategy behind the use of coal for gasification go.
There's no doubt in my mind that we will make the transition to gasification. I think the leadership will come from industry. It will be guided, directed, and steered by regulators and governments, but the leadership will come from the industry, because there's a business case to do it. Hopefully I can go through that with you.
The kind of technology we use today to make electricity in Canada is not new. It's been around for a long time, but it's improved as time has gone on. The original concept of clean coal was coal that we could burn via combustion in a typical power plant, which didn't produce any acid gases, or reduced the amount of acid gases. Many of us can remember when sulphur dioxide and NOx and those kinds of things were real issues and something had to be done about them. Twenty years ago we started putting technology in, but not all of that technology has been implemented, so we still have acid gases. When provinces like Ontario started talking about clean coal, even in the last three or four years, the original issue was around asthma, and asthma is caused by the acid gases.
Now we've got another issue that's facing us in the industry, and that is the fact that we're also producing CO2. The solutions for the acid gases could be the same as the ones for the CO2. Had the problems been reversed, probably we would have a solution by now because we would have chosen a different course. The solution for the carbon dioxide is much more difficult than the one for acid gases.
The acid gases problem presented itself first, and as a result we built retro technologies on existing plants that were capable of doing a lot to improve the acid gas situation. We were able to take the existing problem, develop technology that was basically add-on--so we didn't have to build new plants or make a transition to a brand new technology--and get some success. That happened in the last 20 years, and there has been a lot of success.
Witness the fact that the people who make these power plants in North America have built very few power plants in the last 20 years, and yet most of these companies are still viable and successful. The reason for that is they've been building back-end technology for the old plants that they built a number of years ago. This could be done in Ontario, but they decided not to do it, and there are reasons for that. Nevertheless, when we looked at clean coal 20 years ago, we were looking at acid gases. When we look at clean coal today, we're looking at all the emissions from coal-fired power plants, and because there's so much carbon in coal, the big issue is carbon dioxide.
When I started in the industry, my own personal thought was that it didn't make sense to me that we should clean up the problem at the end of the process. It always seemed reasonable to me that it would be easier to work on a tonne of coal than three or four tonnes of emissions. A tonne of coal is something you can put in front of you and see; the emissions are somewhat more nebulous and difficult to deal with. When we come to the gasification process, that's really what we're talking about. We're talking about dealing with the emission problems before we use the fuel, by creating a new fuel.
We have been building the conventional plants in Canada--and there are lots of them--since 1950, as far as I know. The old Hearn station in Ontario was built in 1950. It's now shut down. Many of the less efficient plants in Canada have been shut down and have been superceded by newer plants.
Every subsequent plant that's ever been built in Canada with conventional technology has been more efficient than the previous one built. I think it goes without saying that the technology has evolved. However, there are some thermodynamic principles associated with this type of technology that make it very difficult to improve, and continue to improve, that technology over a long period of time so that we could get conventional technology to a point where it was actually 100% efficient, for example. That cannot happen, theoretically, because of losses and the thermodynamics of the situation.
I'm sure Dave Lewin will talk to you about conventional plants that have been built in Canada recently, which are 19% to 20% more efficient than the existing fleet. By seeding these new plants into the existing fleet, eventually we could get to the point where we are 20% better, if that's all we wanted to do, and just build brand new conventional plants that are ever more efficient. By doing that, we could probably get between 20% and 25% greater efficiency over the next, say, 25 years, and that would result in 25% less carbon dioxide being produced for the same amount of power. That's one strategy you could use to reduce the carbon dioxide emissions by, let's say, up to 25%.
In Ontario, it appears there are a lot of reasons why we shouldn't just attack the acid gases. So Ontario has decided not to put scrubbers on existing power plants, for example, and has decided to go the nuclear route. But another option would be to build brand new coal-fired power plants that are more efficient than the ones that are there. You'll get as much reduction in acid gases as the technology will allow—which is extensive nowadays—and up to 20% to 25% reduction in CO2 for the same amount of power produced. That's a strategy that could be developed in Ontario. It's been decided not to do that.
One other point in Ontario is that the mix of existing technologies is very important. A system that is all nuclear is not going to be very easy to operate. A system that is all hydro is not possible because we've used up so many of our hydro sources. So a power or electricity system is very much like a portfolio of stocks and bonds: you don't want to have all your money in one basket. And it's important to maintain that, from the point of view of responsibility for security of supply, and even emissions, over a long period of time.
So that's what I think we can do with conventional plants.
If you look to Europe to see what the Europeans are doing, you'll find that they're not building integrated gasification, combined-cycle-type plants, but they're building conventional power plants, which are more efficient than most of the plants in their fleets and are located in the centres of cities, with lots of acid gas emission reduction. They're improving the efficiency of the plants not just by producing electricity; they're also producing hot water, for example, and they use it for heating and cooling, depending on what time of the year it is.
Now, you also have to remember that in Denmark and Germany and these places, where these things are being done, power rates sometimes are four or five times higher than they are here. So if you want to spend the money on electricity, there's a lot that can be done as far as the technology is concerned.
In Alberta, we have a confluence of circumstances that is really special in the world; there is no place in the world that has the potential for integration of the energy systems that exist in Alberta. We have heavy oil, which requires hydrogen to be upgraded into light oil. We have coal, which we use to make electricity today, but we can also take the coal and gasify it and make hydrogen. We have depleted oil wells that could use carbon dioxide to improve the output of those depleted oil wells. The gasification process and the hydrogen production process produce carbon dioxide as a byproduct, and that byproduct would go into the ground and become a commercially viable byproduct from the whole process.
I mentioned earlier that there is a business case for doing this. The technology associated with gasification is extremely important to our company and to our shareholders. We believe that if you go back and take a look at the oil business in 1910, there was lots of oil in the world, a much greater amount than what was required. As a result, oil in the ground had very little value. So shareholders didn't value companies on the basis of the oil they had in the ground; they based it on the value of the oil that was being produced and sold.
Nowadays, you have to pay $35,000, $65,000 a barrel for oil in the ground, on a yearly basis. So the value of the oil that's in the ground today is recognized by the investment community. The same is true for natural gas. And the same is true for bitumen nowadays. Bitumen in place costs a lot of money. It's not true for coal yet.
But when we demonstrate the technology to gasify coal to turn it into hydrogen, that coal that's in the ground will have value. That is the business strategy for developing gasification within these companies. If you talk to Peabody Energy in the United States—I was talking to one of their vice-presidents a couple of weeks ago—that's what their plan is. They want to make liquids.
They have to make liquids because they don't have an opportunity to make hydrogen the same way we do. We can make hydrogen and we can sell the hydrogen to the heavy oil companies. In the process, we have a business case to perfect the gasification process. By perfecting the gasification process, we can open that process up to the power business, to the electricity business, taking away the risk by working in an integrated fashion with these various different industries. All of this exists in Alberta, and it's my prediction that over the next few years you're going to see this.
Our company, Sherritt International, has taken Alberta coal, we have sent it to Europe, we have put it in a gasification process that exists in Europe, and we've demonstrated that this coal can be gasified. Right now we have a team of about 15 people working on a feasibility study that will be completed by the middle of this year, whereby we will decide whether we're going to go ahead with a commercial gasification project to produce hydrogen in Alberta. We have partners who we're talking to about that process. There are synergies between that process and not just the heavy oil business and the enhanced oil recovery business, or the coal-bed methane business, but also the electricity business.
So that's our story. That business strategy is there. There's a reason for us doing all of this. I think the message I'd like you to take back, more important than anything else, is that the leadership will come from industry. The guidance and the steering, the regulations, will come from the regulators and from government.
Thank you.