Natural Resources Committee on Nov. 30th, 2010

[Marcel R. Coutu]

All right. I'll listen, but I'll jump in if I can't hear.

[The Chair, Conservative, Leon Benoit]

Okay.

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

Mr. Coutu, more and more, we hear how detrimental oil sands production is to the environment. It affects fauna, forestry and so forth. I went to Alberta at the end of the summer. One report talked about high levels of refuse metals and toxins in the Athabasca River.

What is your response to that? Does Syncrude plan to respond, to do anything about that? Have you improved your processes or practices?

[The Chair, Conservative, Leon Benoit]

Mr. Coutu.

[Marcel R. Coutu]

Thank you for your question.

My understanding of your question is that it's with respect to the impact on the biodiversity of forests and fauna, etc., and also about what is in the river's water chemistry and what processes we use.

We do open-pit mining, so we do strip all of the forests. We preserve all of the topsoil. We do our mining operations. When they are complete, we replace that topsoil and replant the trees. This process takes anywhere from 20 to 40 years. We have proven that we can do it. As I mentioned earlier, we've been in business long enough, for 30 years, to have fully reclaimed and returned re-certified land to the province. So I think that cycle works quite well.

To your other question, about river toxicity, remember that the river cuts through the Athabasca formation of oil sands. So the oil sands formation actually intersects the river, and has ever since the river started cutting through this region many millennia ago. So the toxicity level is a reflection of the riverbed, if you will, and we have no impact on that. The oil sands mining industry does not return any processed water whatsoever to the river. There are some sanitation water returns that happen, but that's the same as any municipality: it's treated water. But all the processed water is contained in our tailings ponds and we recycle it in our process. So we do not affect any of the river's chemistry and we only extract, on average, 1% of the river's flow.

I think our processes are fairly well proven. They are under strict scrutiny by the Alberta government and are monitored by two independent water panels.

While I'm at it, if I could, Mr. Chairman, I'll comment on a couple of other questions relating to water. To my knowledge, there have been no breaches of earth-filled dams at Syncrude or elsewhere, and if there have been, they've probably been very minor, which is why I've never heard of them. I've been in this business over ten years. The dams are closely monitored by geo-technical experts, both within industry and by outside third-party independents. We have wells drilled around all these tailings ponds so that we can monitor any flow through the ground. Through these wells and through interceptor ditches, we collect any leakage that comes from these dams and pump it back into the tailings ponds. So that water is maintained and continues to be recycled. Of course, as it evaporates it returns to the atmosphere quite cleanly that way.

In the long term, which Suncor has proved up, these tailings ponds do get filled with sand and sediment and are finally topped off with topsoil and reclaimed as well.

I'll perhaps leave my comment on that, but I'd be happy to comment on upgraders, if you like, as well as on creating wealth for the future from these vast operations.

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

Thank you, Mr. Coutu.

Ms. McEachern, you raised a number of interesting points, including the economic impact of oil sands production. That is something we do not hear a lot about. The oil sands have led to a strong dollar, which in turn has led to a drop in exports, so it is harder and hard to export goods. In Quebec, as in Ontario, many manufacturing companies have shut down. You said we need an energy plan that works for the entire country. I think that is a very good point.

In this committee, we study energy security, but we never talk about energy savings. We want to ensure the country's energy security, but why is there so little focus on saving energy? We do not talk much about clean energy, renewable energy. Should we expect a national energy plan such as the one you described to include both of the elements I just mentioned?

[Gillian McEachern]

Yes, I think addressing the economic impacts and implications of our energy security is absolutely a role for this committee and any type of national energy strategy or discussion. We see provinces like Ontario and Quebec investing heavily in the transition to cleaner energy sources—getting off coal in Ontario, and Quebec of course has hydro power—and creating jobs in that process, thereby receiving some economic benefit for it.

I think until we have a national-level discussion and debate about how to deal with some of the negative impacts of increased tar sands production, it's hard for us to come to a true national energy strategy. We need to figure out how to look at examples like Norway, how to adapt to that, and then have an honest discussion about the pace and scale of energy development in Canada, particularly fossil fuels, in light of the need to address climate change.

There is one issue related to regional fairness that I didn't bring up in my earlier remarks. As we trek toward a federal system to reduce global warming pollution, to reduce greenhouse gases, we have a set target for the country. In theory, we have a hard limit on greenhouse gas emissions. If one sector continues to grow quite rapidly, what that risks doing is squeezing other sectors of the economy into a smaller and smaller piece of the carbon budget. Some in the oil industry, including Mr. Coutu, on a tour to Ontario last year, think that's okay and should be allowed. But from the perspective of an aluminum plant in Quebec or the forestry industry in Ontario, it probably isn't that palatable.

Should one sector be allowed to grow and squeeze everyone else into greater reductions as a result? Or do we need to actually set some absolute limits on polluting industries like the tar sands?

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. McEachern. We're out of time.

Before I go to Mr. Cullen, Mr. Coutu, we have two more questioners of about seven minutes each. If it would be possible for you to stay just a few minutes beyond 12:30, that would be much appreciated.

[Marcel R. Coutu]

Mr. Chairman, I'm happy to extend my stay here, so I would appreciate dealing with those as soon as we can.

[The Chair, Conservative, Leon Benoit]

Mr. Cullen, up to seven minutes.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Chair.

Mr. Coutu, as you see, our time together is brief, so I'll keep my questions brief, if you could as well with your answers as much as possible.

There's been a call from various sectors of the Canadian economy for a national energy security strategy--or at the very least, a discussion. Would Syncrude be opposed to such a conversation?

[Marcel R. Coutu]

No. In fact, I would think folks should recognize that we've been one of the proponents to entertain a national energy strategy of sorts, so that all of us can do a bit better planning with respect to the development of the oil sands.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you.

Some of the elements that are commonly referenced when talking about energy security is that a country needs an affordable, safe, and sustainable energy future. Are those the three key elements that you would also consider in this conversation?

[Marcel R. Coutu]

I think we need the energy security for ourselves. But remember, when it comes to crude oil, it is a global market. You should not act unilaterally as a country, because all you'll do is isolate the economics you create with whatever subsidies or other policies you might bring to bear. So you always have to deal with oil from an open, free-market type of perspective.

I'll remind you as well that we are tied to doing this with the United States in our free trade agreement. We do not have the ability to subsidize this business, or withhold exports, etc. So the approach needs to be global.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Sure, that's appreciated.

Can you understand Mr. McGowan's concerns about the export of raw bitumen and the associated export of jobs? To review the numbers, we're going from 70% upgrading in Canada to a proposed 48% by 2019 if the planned pipelines proceed. I know you're not a pipeline company, but I'm sure you're a proud Canadian and Albertan, and the idea of having more than half of the material upgraded and value-added abroad is probably troubling for you.

[Marcel R. Coutu]

I not only understand Mr. McGowan's concerns, I sympathize with him. I am as Canadian as the next guy, and I would very much like to see more of any product that we make here being upgraded in Canada.

The unfortunate economic reality we're facing is that some of the existing upgrading capacity in the U.S. is being freed up. I understand that some of it has been built as an adjunct to existing refineries, which means it can be done a lot less expensively in those locations. But some of it has become freed up for no money, in large part because other heavy crudes from Venezuela, Mexico, and even the Middle East have reduced their volumes to the U.S., making all this upgrading capacity available at a very low cost, and bidding up the price of competing for this feedstock from Canada.

That has made building upgrading capacity here from grassroots extremely uneconomical and very expensive, and that disadvantage has been compounded by the fact that labour rates, which probably make up half of the cost of doing anything, are much more expensive in Canada than in the U.S.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Let me get to that.

[Marcel R. Coutu]

Well, let me finish.

For this reason, you will not get a single person with an economic mind to invest in upgrading capacity. The only way you could do it is by subsidizing it with government money, and this subsidy would be like burning money. That is what I would suggest to you at this point.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

In your presentation, Mr. Coutu, you talked about the economic vitality and importance of the tar sands and what they bring to Canada, but in the same breath you said that economic realities would lessen that impact over the years.

Mr. McGowan, Mr. Coutu says it's simply the law of economics that because cheaper upgrader capacity has been made available south of the border, we must continue to allow more raw bitumen to leave Alberta, and consequently more jobs to leave Alberta. Is there a place for the federal and provincial governments to say we must seek, as Mr. Lougheed did, to create wealth for Canada from Canadian resources?

[Gil McGowan]

I don't think Canadians should throw up their hands and say that the decisions have been made by market forces. At the end of the day, from our perspective, it's a choice made by our leaders. It's unfortunate that this choice has been made more difficult by the fact that the Alberta government and the federal government, through the National Energy Board, have approved the construction of these very large bitumen super-pipelines that connect Alberta to these refineries that are looking for new feedstock. If that decision had not been made, if those approvals had not been granted, we would have been in a better position to upgrade here.

In fact, the Alberta government knew that by building these pipelines they would actually be undermining their own competitive advantage. Before the construction of the Keystone pipeline and the Alberta Clipper pipeline, their own economists were telling them that one of the great competitive advantages Alberta had was that its refineries had access to relatively cheap feedstock in the form of bitumen. Bitumen was sort of a stranded resource. It needed more refining than traditional crudes. The result was that it was cheaper. We could have used that cheap resource to feed our refineries and create a more expansive refining industry, but we undermined that competitive advantage by building these pipelines.

Having said that, that has happened already. So what we're left with now is a choice. The only choice is some form of export restriction, which is exactly what Peter Lougheed did in his day. He basically said that in the case of natural gas, natural gas by-products, especially ethane, would have to be made available to Canadian companies for value-added production, and they couldn't be exported until all Canadian demand had been satisfied.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Let me get a question to Ms. McEachern before we run out of time here.

We talked about tailings ponds. The question was whether any of the dams had ever failed. Every company has to submit an emergency response plan. Are you aware of whether Syncrude or other companies have made public their emergency response plans in case of failure of any of their dams?

[The Chair, Conservative, Leon Benoit]

You have ten seconds to answer, Ms. McEachern.

[Gillian McEachern]

No, they have not. People have asked Alberta and the companies, and they have refused.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Cullen.

We go now to Mr. Shory, for up to seven minutes.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair, and thank you to the witnesses for coming out this afternoon.

I'm swamped with all the numbers, Mr. Chair. There are so many conflicting views here. On the one hand, we are studying energy security here. I believe we all understand that the requirement for energy will increase globally in the coming days. Mr. Coutu made a comment that all forms of energy should be developed responsibly. It seems, from his presentation, that the oil sands sector is improving technology consistently and is working in a responsible manner.

I have a couple of questions for Mr. Coutu. He mentioned one word. He said that the oil sands industry is economically vital, not only for Alberta but for Canada as well. First, I would like you, Mr. Coutu, to elaborate on that.

I'll ask another question after that. Basically, what I need from you is whether the industry's development has any impact on Canadian jobs or Alberta jobs. And how does it affect jobs directly or indirectly?