Natural Resources Committee on Nov. 25th, 2010

[The Chair, Conservative, Leon Benoit]

I call the meeting to order. Good morning, everyone.

We originally had scheduled for 11 o'clock to maybe 11:15 for Mr. Cullen to bring his motion, but he isn't here, and apparently he won't be here for a while, so we are going to change the agenda and get right to our witnesses. I know we all want to spend as much time as we can with them.

We have three witnesses on the first panel, and then three on the second panel as well.

We have with us on the first panel from Suncor Energy Inc., Gordon Lambert, vice-president, Sustainable Development; from Petrobank Energy and Resources Ltd., John D. Wright, president and chief executive officer; and from the Canadian Association of Petroleum Producers, David Collyer, president.

Thank you all very much, gentlemen, for being here today. I know you're very busy and I do appreciate your taking the time to come.

We will start with presentations in the order that you are listed on the agenda. Presentations are between five to seven minutes each.

We will start with from Suncor Energy, Gordon Lambert, vice-president, Sustainable Development. Go ahead, please, with your presentation.

[Gordon Lambert, Vice-President, Sustainable Development, Suncor Energy Inc.]

Thank you very much, Mr. Chair.

Thank you to the committee for providing this opportunity for Suncor Energy to share some thoughts on this very important topic of energy security. Of course I am very pleased to be here, as well, with Dave Collyer and John Wright this morning. We are going to discuss, during the course of my comments, the important challenges and the contribution that the oil sands make to Canada.

I've come here this morning to talk about the oil sands in the context of energy security. I'll share some brief introductory remarks on some major themes relevant to your study, including the economic benefits of oil sands to Canada; the need for continuously improving our environmental performance; increased global demand for energy; and the need for energy strategies and new technologies, which we believe are necessary to ensure the responsible development of oil sands as a secure energy supply for Canada and for markets outside our borders.

Let me start with a simple statement: development of the oil sands is all about science and technology. It always has been. In the first 40 years of development of the resource, the research was directed toward the challenge of achieving commercial viability, and the perseverance and the magnitude of the innovation effort that occurred during that timeframe should be a source of pride and courage for all Canadians as we pursue our future energy challenges.

While improving the economics of the business is still a major priority, this is increasingly being achieved through an enhanced focus on technology to reduce the resource intensity and the associated environmental footprint of the industry. Let me be clear that these two goals are compatible. If we use less water, energy, and land, the environmental impacts are reduced and costs are lowered.

What it really comes down to is that we need to develop this Canadian resource in a way that harnesses both Canadian and global intellectual capital and is consistent with Canadian values, with benefits to all Canadians. It is about Canada, not just Alberta. To name just some of the benefits to Canadians, the industry is Canada’s largest private sector investor, with $1.7 trillion in GDP impact expected over the next 25 years and nearly half a trillion in new government revenues over the same period, mostly federal. It is the livelihood of half a million Canadians, with about half from outside Alberta. Lastly I’d point out that Suncor has spent more than $1 billion on aboriginal business contracts in the past decade, a point that we are particularly proud of.

That said, I think we could do a better job of explaining our importance to the Canadian economy and our progress to Canadians on the environmental front and with regard to new technology. Let me give you examples of improvements related to air, land, and water.

Suncor has reduced our greenhouse gas emission intensity by 53% since 1990. The industry has cut greenhouse gas emissions by 40% on an intensity basis during that same timeframe. This puts this industry at the forefront of all Canadian industry in terms of intensity reduction.

Current research shows CO₂ emissions from an oil sands barrel are now about the same as, maybe less than, some crudes from places like Nigeria and Venezuela or California.

Total water use at Suncor’s oil sands operations has been cut by about a third since 2004, and that's in absolute terms. At our Edmonton refining operations, we’re using high-tech filter systems to allow us to use municipal grey water.

On land impacts, Suncor recently celebrated the surface reclamation of pond 1. It becomes the first oil sands tailings pond to have been reclaimed in the oil sands, and there will be many more to come.

Getting to these kinds of improvements doesn’t usually happen in a single technological leap. It’s mostly been a journey with a lot of small steps. It’s not especially sexy, and it's probably why it doesn’t have much profile. But it’s practical, and it is delivering real results.

We also have a few game changers. Suncor is moving on one major leap right now. Recently we rolled out our new tailings technology, which will reduce the need for ponds to store tailings in the future. And the pace of reclamation to natural habitat will be reduced from 30 years to approximately 10 years.

The fine clays in the tailings take very many decades to settle. This new technology can dewater tails in a matter of weeks versus decades. We plan to spend more than $1.2 billion on implementation of this technology over the next two years. We expect that investment to pay both environmental and financial dividends over the long term. We have made progress and we know there is much more to do.

For now, let me take these two themes, the major economic impact of oil sands development and continuous improvement in environmental performance through technology, and add a third.

The world will continue to need oil for the foreseeable future. Demand is expected to grow from 85 million barrels per day to more than 100 million barrels per day over the next 20 years. That's largely driven by India and China, but Canada will have a piece of that demand with our growing population.

Together these three themes say to me that we are better off if our needs are met by Canadian oil, oil that is produced in a democratic society in a strong and transparent regulatory regime, with a focus on improved technology that broadly benefits Canadians. Few, if any, of these attributes are found where 80% of the world's oil reserves are.

I really want to underline this point. The development of the oil sands and the work under way to continuously improve its environmental performance is the product of two key freedoms.

First is the political freedom of citizens and stakeholders to engage with governments and industries to drive toward solutions, because directly or indirectly we are all accountable to the Canadian people.

The second freedom, equally important, is regulated but free markets. It's no coincidence that the major technology advances that have shaped our world have sprung from free market economies. Innovation and entrepreneurial instincts are the critical drivers to achieving practical solutions to our challenges.

Frankly, Canadian oil should be differentiated on these positive qualities in the international arena. Our choice is not oil sands, yes or no; it's where do we want the oil to come from, and what it means to Canada and the rest of the world.

I focused on the oil sands because that's Suncor's main business today, but we should recognize that most oil companies are actually energy companies.

Suncor is one of Canada's biggest players in biofuels and we are also one of the biggest investors in wind power. We got into these businesses in part because we know we need to take a broader look at energy. As a company, we want to help create a constructive dialogue in this country on energy.

That includes the role of Canada's oil sands in our energy mix as both a secure source of supply to our economy and a bridge and an enabling resource to the new energy technologies for the future.

We think it's important to get Canadians engaged in a realistic, fact-based dialogue about our collective energy future.

We think the time has come for a dialogue on a national sustainable energy strategy, one that respects provincial jurisdiction but allows for a broad, integrative perspective on energy, the environment, and the economy.

A sustainable energy strategy must go well beyond the issue of basic energy production. We need to look at how we use energy, including the cars we make, how we plan and build cities, the role of mass transit, and a stronger conservation ethic from businesses and consumers.

We need to assess our likely energy requirements 10, 20, and even 50 years down the road. We need to determine the mix of proven and potential energy sources that can best meet those needs on an economically and socially sustainable basis. We must find ways to build the required infrastructure to deliver energy where it's needed and when it's needed.

We need to understand that the future is about increasing energy choice, not restricting it, and that targets for reducing greenhouse gas emissions must be part of our vision.

Governments will need to promote investment in technology. This includes direct funding as well as economic cooperation to stimulate a higher level of capital investment in new technologies.

For its part, industry needs to build more research and development into their business models, and the level of investment and deployment of new technologies should be a key measure of our success.

As a leader in Canadian energy, we are more than willing to contribute to this dialogue that enables a secure and prosperous energy future for all Canadians.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much for your presentation.

We now go to John Wright, president and chief executive officer, Petrobank Energy and Resources Ltd.

Go ahead, please, for up to seven minutes.

[John D. Wright, President and Chief Executive Officer, Petrobank Energy and Resources Ltd.]

Thank you very much, Mr. Chair.

Ladies and gentlemen, it is a pleasure to be here today representing our industry as well as Petrobank Energy and Resources and all our shareholders.

I've provided a brief slide deck for you to step through this with me.

Petrobank is a Canadian-born and -bred company. We are a pure upstream player, which means we have no interest in pipelines, refineries, or end-use marketing. Over the past ten years, we've grown into a group of three companies currently operating in the oil sands area through our Whitesands division, internationally primarily in Latin America through Petrominerales, and in the Canadian conventional oil and gas business through Petrobakken.

I would emphasize that while we'll talk about oil sands and technology here today, we would be happy to answer any questions regarding either the international outlook on the oil and gas industry or the use of multi-stage horizontal fracturing in developing Canada's resource plays in western Canada, which Petrobakken is the leader in.

Moving on to slide number four, which is a brief outline of the oil sands assets and opportunities in western Canada, we talk in big numbers in our industry. We talk about trillions, billions, and millions of barrels. To put things in perspective, 1.7 trillion barrels of heavy oil and bitumen resources have been identified in Canada. That's out of a potential worldwide total of nine trillion barrels that have been identified to date.

A surprising thing is that current technologies available to our industry can recover approximately 10% of this. But even a 10% recovery factor on Alberta's oil sands and heavy oil assets makes Canada the second-largest reserve holder in the world. This is a huge part of Canada's wealth. But the potential to increase that recovery factor, even by another 10%, would have a significant impact on the long-term worth of the Canadian economy and the long-term benefits that would be available to all Canadians.

Petrobank is an applied technology company and we're looking to implement technologies that will be the next step, or the disruptive step, to take those recovery levels to a new level.

If I can draw your attention to slide five, we outline there the THAI technology. The whole concept of Petrobank as an applied technology company is to take existing resources and find new and better ways to extract more value out of them. As one example, Petrobank is the owner and the developer of this made-in-Canada technology, but increasing the resource recovery on the substantial resource accumulations in Alberta and Saskatchewan has a significant impact on the wealth of our nation. With the ability to achieve higher recovery rates and potentially double existing technologies' recovery rates, we have the ability to create a large, sustainable, long-term growth opportunity in our industry.

The technology we're applying, which we hope will be the next step for the world to apply, invokes lower capital cost, it involves much lower operating costs, and it generates a much higher net back on every barrel. It does this through a process that I'll explain through a little diagram here. It's important to understand this technology uses no water, it consumes no natural gas, and it has a very small surface footprint, so it also has a very minimal impact on the surface.

The other aspects of it on the environmental front also allow us to reduce the overall carbon footprint of a barrel of oil, because an upgraded barrel requires less processing at the refining end. We already have reduced our greenhouse gas emissions by about 50% compared to other technologies. And in the event there's a viable CO₂ carbon capture technology in place, we are carbon capture ready.

I'll draw your attention to the diagram of the THAI process and quickly explain how this works. More importantly, I want the committee to understand that we already have two demonstration plants of this technology in action today, one in Alberta and one in Saskatchewan. Our first commercial operation is under construction in Saskatchewan as we speak. And we have two more operations awaiting regulatory approval.

The process itself is quite simple. As diagrammed here, it involves drilling horizontal wells to the base of a heavy oil reservoir. Instead of injecting steam and generating steam on the surface, we inject air into the reservoir. The air creates a combustion reaction. The combustion reaction is not unlike the reaction you would have with a charcoal briquette in your barbecue--the harder you blow on it, the hotter it glows, and the more heat it generates.

This heat is high enough to melt the oil in place. It actually cracks some of the lighter hydrocarbons in the oil, leaves behind some of the heavier hydrocarbon as coke deposited in the reservoir, and the production that comes up to the surface is partially upgraded.

The next slide gives you an idea of what a commercial operation would look like. This is our Kerrobert facility in Saskatchewan. I draw your attention to the fact that there are no huge steam generators. There are no tailings ponds. There is no water use of any significance in this process. Obviously, it's an operation we can integrate with the existing farming operations in place on the land there today.

Finally, on our slide that shows the international potential for heavy oil, it's important to note that heavy oil is a global resource. Outside of Canada few of these resources can match us from a regulatory, environmental protection, political transparency, human rights, or democratic freedom perspective.

It's very important for Canada to be a leader in the development of heavy oil technology, both for application at home across our vast resource, but also as a leader in showing the world how best to accomplish efficient resource extraction and wealth creation.

In conclusion, while resource development is typically a provincial responsibility, there are three initiatives at the federal level that we would strongly encourage.

First, we would hope you could provide a streamlined, transparent, and practical regulatory environment to allow our industry to grow and prosper, for all Canadians.

Secondly, it would be our deepest hope that you will protect Canadian intellectual property, both at home and abroad, and to promote the application of Canadian technology on a global basis.

Finally, it's our deepest hope that you can project an image of the Canadian energy industry, both in Canada and around the world, as the best-regulated, safest, most ethical, most transparent, democratic, and environmentally respectful industry in the world.

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you very much for your presentation.

We will now go to David Collyer, the president of the Canadian Association of Petroleum Producers.

Go ahead, please, with your presentation, for up to seven minutes.

[David Collyer, President, Canadian Association of Petroleum Producers]

Good morning, Mr. Chairman, and members of the committee. Thank you for the opportunity to present the views of the Canadian Association of Petroleum Producers on what I think is a very important and timely study you're doing on energy security in Canada.

I believe you have a copy of our submission, so I'm just going to try to hit the highlights. I'll try not to repeat points that have already been made by the other witnesses.

I think any discussion of Canada's future energy system, including the role of oil sands, has to be put in a global context, and it has to be grounded in a few realities.

First, as Mr. Lambert has suggested, global energy demand is growing at a rapid pace. Many forecasts suggest an increase of up to 50% by 2030 to 2035.

Second, our view, very strongly, is that we're going to need all forms of energy, developed responsibly, to meet that growth in energy demand. I think it is clear that renewables will play an increasing role in the energy supply mix. I think it's also abundantly clear that fossil fuels, including oil and gas, are going to play a dominant role in the energy supply picture for some time to come.

Third, as conventional sources of oil and gas decline, unconventional sources, including oil sands and shale gas, are clearly going to play a more important role in meeting that growing energy demand globally.

In that broader context, taking those points, I think Canada is uniquely positioned to develop very abundant natural resources, as Mr. Wright has pointed out to you, including crude oil and natural gas, in a manner that provides economic growth and jobs, contributes to global energy security and reliability, and delivers what we consider to be responsible environmental and social outcomes.

I know that the focus of this discussion this morning is on oil sands, but I just want to make three very quick points about natural gas.

First, we are very confident that shale gas is a game changer and that we're looking at a very different supply outlook, a much more robust and abundant supply outlook, going forward.

Second, we firmly believe that the environmental concerns associated with shale gas can and will be addressed.

Third, we believe that there are opportunities to broaden the use of natural gas, specifically in transportation, and, importantly, in power generation across North America. If you put those together, we firmly believe that natural gas should be a foundational element of a cleaner energy future for North America going forward.

Let me turn now to oil sands. In terms of energy security, there is no question about the resource potential from oil sands. The current reported reserves are based on current technology and economics. As Mr. Wright has said, there is considerable potential for upside in those numbers. Over 80% of Canada's oil sands reserves are amenable to in situ recovery, versus mining. Both will be important for some time to come, but in situ will become increasingly important.

I think a very important point is that Canada has approximately half the global crude reserves that are accessible to private sector investment. That is, they are fully available to the private sector. That's a very important point, and I think it highlights the importance of Canada's role in meeting the future of global energy demand requirements. It also highlights why there is so much interest globally in oil sands in terms of investment.

Second, in terms of economic growth, I think there is also no question that the development and operation of oil sands is critically important to Canada. It benefits shareholders. It benefits investors. It benefits companies across the country. Most importantly, it impacts and benefits people who are directly or indirectly employed across the country, not just in Alberta, in oil sands activities.

Finally, our industry, I firmly believe, clearly understands that we need to maintain our social licence to operate. That is dependent on our environmental performance and our social performance and how we communicate about both. It is critically important that we deliver in both areas. I believe we are doing so. We'll continue to do so. That is not to say that there is not an opportunity for improvement. We recognize that, and I think there is an ongoing focus on that area.

We have a very good track record of significantly improving performance across a broad spectrum of measures, such as operational performance, environmental performance, and social performance. We clearly have an expectation around continuous improvement. We believe this is what Canadians expect of our industry. Our polling suggests that about 74% of Canadians support oil sands development if there are measures to improve environmental and social performance. That doesn't vary a great deal by jurisdiction, and frankly, from our polling results at least, it doesn't vary a great deal by political affiliation.

I think it is also important to note that Canadians don't expect a silver bullet in terms of environmental and social performance. What they do expect is a commitment by industry and by government to continuous improvement.

I think it's incumbent on us as industry to continue to improve performance. It's incumbent also, I think, on governments in Canada to ensure that we have a policy environment that enables responsible development.

Let me just make a few points in both respects, and then I'll wrap up.

From industry's perspective, we need to continue to invest aggressively in technology development, because that is the key lever to improvement in both cost and environmental performance.

We need to collaborate more effectively among ourselves, with governments, and with academia in terms of technology development. We need to work with governments to make sure we have state-of-the-art measurement and reporting systems.

I think we need to be as transparent as we can possibly be with respect to our performance around oil sands, and make sure that our reporting systems are open to credible new sources of information. I think we have a role, as Mr. Lambert said, to contribute constructively to the discussion around energy strategy in Canada going forward.

Governments, I think, also have a role to play in realizing the future oil sands opportunity. Some key elements that I would highlight for you include the following.

I think we need policy that is right for Canada, recognizing our particular energy circumstances.

We need policy that concurrently advances economic interests, environmental performance, and energy security and reliability. This is a three-dimensional challenge, which is in part what makes it so difficult.

We need policy that maintains open borders to trade and market access, both with the United States and potentially offshore.

We need policy that stimulates investments and the use of technology and innovation. As I said, I believe that is key to improving performance.

We need policy that's founded on ensuring that we have a competitive regulatory and policy environment in Canada, to attract investment and intellectual capital.

I think we need policies in energy that look across the energy system. We need solutions that impact both the upstream and the transmission system in Canada and, most importantly, the downstream consumption.

I would say we need policy that's founded on honest conversation, if I can characterize it this way, about energy and the environment. We need to be transparent about impacts, both costs and benefits, and how various energy choices impact throughout the energy system in Canada.

Finally, I'd say that a balanced approach to policy is only effective if we have a world-class regulatory system in Canada—and I believe in most respects we do in fact have that.

Mr. Chairman, members of the committee, thank you for your time. I look forward to your questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much, all of you, for your presentations.

This is just fascinating. I grew up with the oil and gas industry around me in the late sixties and early seventies, and I want to say that there have been remarkable changes in terms of the technology used and the environmental considerations. Thanks for bringing a little bit of that to us today.

From the official opposition, let's start with Monsieur Coderre, for up to seven minutes, please.

[Denis Coderre, Liberal, Bourassa, QC]

Thank you, Mr. Chairman.

Good day, gentlemen.

Just to be sure we are not strictly talking about perception, I would add that for my part, I had the pleasure of meeting with members from a number of your organizations several weeks ago in Alberta. I also had an opportunity to visit the Suncor facilities. We had extremely frank and honest discussions with CAPP representatives. We also met environmentalists and first nations leaders.

Mr. Lambert, there is one thing I find quite interesting about your approach.

We need, frankly, a well-framed dialogue. If we believe, and rightly so, that the oil sands are a strategic resource, this shouldn't also be at the cost of our quality of life and our environment. I think we need a balanced approach, which is what I felt from what you said.

You have a famous name in Alberta, that being Dr. Schindler. He is coming out with some figures and some numbers, including on toxicity rates and all of that. You spoke about political freedom. I understand also that there might be some problem between the federal government and the Alberta government, because you don't have the feeling...who's doing what; there seems to be a problem there.

My first question—I would ask it of all three of our witnesses—is about our need for transparency if we want to make sure that everything will be okay. Transparency means having scientific figures. We have issues with the water; we have issues with the toxicity of the air; we have issues with the tailing ponds. I understand that we now have new technology.

What would be in the best interests of the Canadian people? I'm thinking of a monitoring process that would be acceptable and that would really show two things: first, that you're for real, and second, that we're addressing.... I'm talking about perception here. That would provide, probably from coast to coast to coast, a better perspective, or would address some of the perceptions that people might have against the oil sands.

Maybe, Gordon, you could start.

[The Chair, Conservative, Leon Benoit]

Mr. Lambert, do you want to start, please?

[Gordon Lambert]

Certainly. Thanks.

I will say at the outset that the protection of the Athabasca River and the assurance of the quality of that Athabasca River basin is a common interest across all participants in the dialogue--the federal government, Alberta government, and industry.

I do think it's important that we get a fact-based discussion under way on that topic. I think the creation of this panel that the Government of Alberta has sponsored, which will have Dr. Schindler sitting down with fellow scientists to really determine what the data tells them, is an important first step.

I also believe that the dialogue under way on establishing a world-class monitoring program for the Athabasca River is a worthwhile discussion as well. Because this is a world-scale resource, we need to set the bar very high on the approaches we take to the integrity of the science and the assurance for the public that environmental protection is occurring at a proper level.

I think the actions under way are appropriate. We are hopeful, though, that at the end of the day the two panels, the Alberta panel and the federal panel, could come to some agreement on common findings. That's something we're encouraging strongly. We don't want to have battling views on the science going forward, that's for certain.

Thank you.

[The Chair, Conservative, Leon Benoit]

That's fair enough.

Mr. Collyer.

[David Collyer]

Thank you. There are a couple of comments I would make.

First, industry does believe it has a robust monitoring system in place. Having said that, we must be open to, and we should be open to, improvement in that. What we've said very clearly is that with the third-party review process that is under way—we would have preferred that it be one review rather than two, but we have the two different panels in operation—if they advise us and highlight that there are opportunities to improve that, then clearly industry needs to take that on board.

I think we do need to be open and transparent about data. There's no question about that. I think the whole notion of third-party review and validation by independent scientists makes a lot of sense, in any monitoring program. We should not be debating the basic data. We should have confidence, I think collectively, that we have good data that gives us confidence we are in fact measuring the right things, measuring them consistently and appropriately, and that we're very transparent about the results.

[Denis Coderre, Liberal, Bourassa, QC]

One of the questions we had concerns the relationships with first nations. Of course we're talking about the fact that you're providing a lot of jobs. You can provide some figures saying you're hiring. But it seems that in their minds, because it came from them, the leadership feels they are not part of it. It's not inclusive. It's one thing to be hired by the companies, but it's another to have a piece of it.

What would you tell them? What kind of relationship...or in what kind of deal--let's put it this way--in an inclusive way could you put first nations with the industry?

[The Chair, Conservative, Leon Benoit]

Mr. Collyer, go ahead, please.

[David Collyer]

There are a few comments I would make.

First of all, industry does go to some lengths to try to ensure there is effective consultation and engagement with aboriginal groups.

I personally believe, having worked at Shell for a long time and having been engaged with the Fort McKay First Nation, that the engagement with that group goes well beyond simply jobs. There's been a lot of work put into capacity-building, helping the Fort McKay First Nation develop businesses where they have an equity interest and they are more directly involved in the business of oil sands.

Having said that, there is only so far that industry can go. There are other issues pertaining to the relationship with governments and so on that are also relevant to that discussion. The capacity of industry to deal with that breadth of issues is obviously, and I think should be, limited.

We need to work with some of the other first nations in the Fort McMurray area, I think, to build the same kinds of relationships we have with Fort McKay, which I look at as a model of how this should work. We also have to be realistic—Mr. Lambert might have a comment on this—about the timeframe in which that can happen. Fort McKay has been involved in oil sands for a long period of time, and both the capacity and capability in the Fort McKay First Nation have evolved over an extensive period of time. So we have to be realistic, I think, about how quickly that can happen with some of the other first nations in the Fort McMurray region.

[Denis Coderre, Liberal, Bourassa, QC]

Mr. Lambert, perhaps I can add and highlight some comments.

You spoke a lot about political freedom, and I think the federal government has a role to play. There is, of course, a convention where it's up to the province to take care of the resource. Would it be a role of the federal government regarding that issue of first nations? We spoke about monitoring. What should be the role of the federal government?

[Gordon Lambert]

Certainly a key role of the federal government relates to the education system for first nations communities and the importance, at that fundamental level, of encouraging a higher graduation rate of students from schools in those communities. That's a more difficult place to intervene, but it is at the foundational level for what's needed to take advantage of the opportunities within the sector.

Fort MacKay was used as an example by Dave Collyer. It was an intervention at the school level, initially, that helped to get them to where they are today.

We have an important pilot program under way currently, in the community of Janvier, that is directed at students. It's involving collaboration between the federal government, the provincial government, and industry to help encourage that graduation rate from elementary right through to the secondary level.

It could be replicated elsewhere. Early signs are encouraging. But the communities also need to have an inherent desire to receive this assistance, too. It's a partnership in the true sense of the term.

[The Chair, Conservative, Leon Benoit]

Thank you, Monsieur Coderre.

We will go now to Madame Brunelle, for up to seven minutes.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Good day, gentlemen.

In September 2009, G20 leaders acknowledged the following: Inefficient fossil fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources, and undermine efforts to deal with the threat of climate change.

Following that, Canada committed to completely eliminating tax deductions for oil sands projects. Three hundred million dollars per year was the figure that was quoted. Apparently, according to research by the International Institute for Sustainable Development in Geneva, these tax deductions amounted to $1.3 billion per year, in fact. You are therefore aware that Canada should further commit to reducing these deductions.

On this point, Mr. Wright, you referred to the new THAI technology, saying that your operating costs are lower. Is this good news in that you could do without these tax benefits from the Government of Canada?

[John D. Wright]

Well, to begin, I'm unfamiliar with what tax advantage the Canadian oil industry has over other industries. Certainly I think there are different deductible rates for investments that we make in our industry versus the life expectancy of assets and so forth. Beyond that, quite frankly I can't tell you what advantage our industry might see.

I can tell you from working internationally that the tax regime in Canada is very similar to what we experience in Latin America, for example. I can go further than that and say that I think the single biggest reward that the Canadian government can get for any type of encouragement in investment is a long-term flow of taxable income. Obviously that's the goal of any public company, because that in fact is the ability for us to deliver returns to our shareholders, but also, my hope is that our technology will generate substantial tax revenues for the government.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Some measures were designated, including 100% tax deductions for operating costs or 30% for development costs. There is also some mention of flow-through shares and amortization rates. So there are hosts of measures, but we cannot lose sight of the fact that in responding to G20 pressures, the Canadian government will have to...

When we are looking at $1.3 billion per year in deductions to encourage companies while we are in the process of signing economic agreements with Europe, I think it is a matter of fairness, we will have to address these issues.

Mr. Collyer, would you like to respond?

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Collyer.

[David Collyer]

Thanks for the opportunity to comment on that point.

We're familiar with the study that's been put out. Our observation of that study is that it has been written from a particular perspective that does not represent a balanced view. There are some very fundamental errors in the study, frankly, in terms of highlighting tax deductions that are represented as being unique to the oil and gas industry but that are, in fact, applicable to other industries. The deduction of things like operating expenses is standard tax practice that applies to any industry.

So we fundamentally disagree with the conclusion of that study. I would refer you to some of the more recent work by the IEA on behalf of the G-20 that I think takes, frankly, a much more balanced view of the question and represents the oil sands in a light quite different from that of the IISD study.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Very well.

Mr. Wright, you are saying that the government now needs a streamlined regulatory environment.

What do you mean by that?

[The Chair, Conservative, Leon Benoit]

Go ahead on a point of order, Mr. Allen.