Natural Resources Committee on Dec. 2nd, 2010

[David Coon, Executive Director, Conservation Council of New Brunswick Inc.]

Thank you very much, Mr. Chairman, and good afternoon, everyone. Thank you for the opportunity to speak to you this afternoon.

I'm speaking from the perspective of New Brunswick, a place apart from the rest of Canada. In New Brunswick, we have more than 1.4 million hectares under licence for shale gas development, which probably you haven't heard much about. We have been working with local communities. Some 90 communities fall within the leased and licensed area, in a wide arc sweeping across the province, from Chebucto, on the Northumberland coast--nice swimming, beautiful beaches--all the way to the Maine border, by McAdam and St. Stephen, near where I live.

We have been working with many of those communities. They've banded together and created a coalition called the Citizens for Responsible Resource Development. We've been in conversation with our provincial government on this issue for almost a year now, and we've been in conversation with the industry since they arrived in New Brunswick.

We have a tiger by the tail with this issue. This is not the natural gas of our childhood—our communities are out there flicking on the end of the tail of that tiger.

I apologize to the translators; I'll try to minimize my asides from my notes.

We don't have the regulatory framework. Today, we want to try to identify some clear roles for the federal government, which we believe are important, and some of the needs that could be filled.

Last Monday night, the New York State Assembly passed a piece of legislation by overwhelming majority to suspend, until May of next year, the issuance of permits for shale gas drilling using hydraulic fracturing and horizontal drilling. This is a resource that could enhance their energy security. So why did they do that? In the United States, the U.S. Environmental Protection Agency, an august body recognized internationally for its work over the years, has launched a major study on the impacts of shale gas drilling and hydrofracking, which they expect to finalize some time in 2012, with some significant public engagement as they go along.

Why have they done this? Because experience in the United States has demonstrated that exploration for, and the development of, shale gas poses a host of risks to public health, the environment, water supplies, and the social fabric of rural communities, which conventional gas exploitation does not. We're talking about something very different. I say it's a sleeping tiger, because natural gas prices are low right now. When those prices rise, that tiger will wake up and we will see very rapid development, I expect, in places like New Brunswick and Quebec.

What are the problems? For one thing, we're talking about huge depths, drilling down to two kilometres. Doing something that in the conventional industry is quite straightforward, like cementing around the well casing to protect water supplies, is very difficult when you're in that deep. When you're fracking, that raises questions about the integrity of the cementing around it and whether in the long term it's going to protect water supplies.

So it's very different. You have to withdraw something like four million litres of water from somewhere for every frack. That's two Olympic-sized swimming pools' worth. In New Brunswick, just about every stream goes into the ocean and contains migratory fish. The Bay of Fundy salmon are protected under the Species at Risk Act, because their numbers have dwindled so much. So there are questions about, for example, the kind of stream flow that we require to maintain habitat for those endangered Atlantic salmon. It depends a lot on information that we don't have. Clearly, the federal government has a responsibility to address this situation.

That's one of the reasons we're concerned about these water withdrawals.

The millions of litres of water are mixed with sand and chemicals. These chemicals are pumped under pressure, as has been mentioned earlier, and something like 40% or 50% of that mixture is left underground. We don't know what the long-term fate of this might be. And we don't have the geological studies or hydrogeological mapping to help us understand what might happen if this flows through existing fractures or fissures, which we haven't characterized necessarily before this happens, to ensure that we don't create long-term environmental risks.

So by intentionally pumping this down, deep into the ground, and leaving it there, below the water supplies, the question is, what's the long term fate?

Then, of course, you have within that mixture, potentially, some CEPA toxic substances, like benzene. And there's no requirement at this point for companies to publicly disclose the chemicals they're using in these mixtures. Of course, when this comes back out—about 50%, or roughly so, of it comes out—you have a hazardous waste stream, a large hazardous waste stream that actually is of a different consistency than when it went in because you're scavenging other naturally occurring contaminants like heavy metals from deep in the geology.

In New Brunswick right now this hazardous waste stream is being trucked across interprovincial borders for treatment in Nova Scotia. What will happen when this takes off? How will it be treated? We're talking about thousands of wells in New Brunswick likely, if this takes off. What does that mean? How will it be managed as hazardous waste?

The high moisture content of this gas means that the water has to be stripped out as it comes to the surface, which produces volatile organic compounds, emissions, some of which are CEPA toxic.

As far as greenhouse gases go, there's been some work to suggest that in fact this kind of natural gas exploitation may have as big a carbon footprint equivalently as coal. So that's an important issue when you're thinking about this from an energy security perspective.

The stated purpose of the moratorium in New York is simply to afford the state and its residents the opportunity to continue to review and analyze the effects of hydrofracking on water and air quality, environmental safety, and public health. This is not happening in Canada. There are no plans for a national investigation into the consequences of Shell gas development, and there should be.

So let me quickly go to what I think the federal government could do here.

We see in New Brunswick—

[The Chair, Conservative, Leon Benoit]

Mr. Coon, you'll have to do that in a very short time. You're over time already. So just be very quick, please.

[David Coon]

On the question of energy security, how is this gas going to be used if it gets developed? Will it benefit New Brunswickers, will it benefit Canadians, or is it simply going to be shipped to the United States? That's an important issue, particularly given the risks here, and that needs to be addressed.

The Geological Survey of Canada and other parts of Natural Resources Canada have important resources capacity that could support provinces like New Brunswick that lack that, that don't have the money to do the kind of baseline studies that are necessary to help protect our people and our environment.

Certainly in terms of the potential impact on future fisheries, the federal government has an important role to play there.

Finally, I think the federal government could look at developing a model regulatory framework, because we've heard the same thing in Quebec. It doesn't exist in the provinces, and it would be a great help, particularly in the provinces with little resources, to have that to look towards and consider adopting.

Thank you very much for the opportunity to speak to you. We'll entertain questions when it's our turn.

[The Chair, Conservative, Leon Benoit]

Thank you for your presentation.

We go now to Barbara Pike, from the Atlantic Institute for Market Studies. Go ahead please, Ms. Pike, for up to seven minutes.

[Barbara Pike, Vice-President, Atlantic Institute for Market Studies]

Good afternoon.

My name is Barbara Pike, and I'm the vice-president of the Atlantic Institute for Market Studies, commonly known here as AIMS. Thank you for the invitation to speak to your committee.

As a quick background, AIMS is an independent, non-partisan public policy think tank. We're one of the most decorated think tanks in the world. We just celebrated our 15th anniversary. We're a registered charity in both Canada and the United States. We accept no money from government. About 70% of our money comes from philanthropic foundations, about 20% from corporations, and the rest from private individuals.

Our papers and research are peer reviewed in a double blind process. In addition to that, we basically do not take any contract work. We basically take a look at our projects by asking ourselves a few questions before proceeding. These questions include: is anyone else doing that work, and can AIMS add value to it? We also sometimes add in the question, is it fun?

Others are going to talk to you about the oil sands. They're going to talk to you about natural gas, or shale gas, or deepwater drilling.

Today I want to concentrate on one topic, electricity, and more specifically, the transmission of electricity.

We sit here in Atlantic Canada at the end of the grid, a grid that is not conducive to the free flow of electricity. Just last month, AIMS released a commentary by energy consultant Gordon Weil called “Freeing the Flow: Proposals for Reform of Canadian Electric Industry Regulation”. The conclusion: it’s long past time for Canada to reform the regulation of its electric industry.

Weil reviews the options to improve regulations governing Canada’s electrical industry. He says that while it's not necessary to go as far as a single national regulator, there does need to be reform, so that all provinces are treated fairly. He identifies a number of essential elements for the reform of the existing system.

There is no doubt that the current system of regulation discriminates against Newfoundland and Labrador. It discriminates against P.E.I., Nova Scotia, and New Brunswick. That’s because the federal system of review of interprovincial transactions does not function and offers no real protection for any province. As we witnessed last year with the failed NB Power-Hydro-Québec MOU, there is no federal regulatory regime for transactions from one province through another to a third, or to markets in the United States.

That’s not to say there should be a single Canadian system, like FERC in the United States, but rather that we should use the existing National Energy Board as the review agency that treats electricity transmission, just like we do oil or gas, so that one province can't block the transmission of electricity to another market.

AIMS has said for years that we need to lower the barriers to interprovincial trade across the country. Electrical transmission needs to be at the top of the list. The free flow of electricity is an important element of Atlantic Canada’s prosperity.

In the absence of regional cooperation on common regulation and open borders, a Canadian federal regulator could review transactions involving power flows originated in one province and crossing another on its way to a third market. Given our geography, and the current market conditions in North America, this authority would apply mostly in eastern Canada. For example, if Hydro-Québec wanted to sell power to New England by transmitting across New Brunswick, the transaction could be regulated. An impartial body might block Hydro-Québec, or allow it, from monopolizing the New England interconnections, thus encouraging new green power resources in Atlantic Canada.

Imagine if this proposal had applied to the original Churchill Falls transaction. Newfoundland and Labrador could have sold to the American market instead of being forced to sell to Hydro-Québec, and a regulator, i.e. the NEB, could have set a reasonable rate for both parties. Hydro-Québec reportedly wants to sell power to Nova Scotia and P.E.I across the New Brunswick system. A regulator could assure a fair deal for all parties.

For transactions between two neighbouring provinces, such regulatory review could be optional. The parties could choose federal regulation or make the deal without such a review. The regulator could also have the authority to approve mergers across provincial borders. It could provide neutral assurance that customers would be no worse off because of a merger.

Let’s take a look at the benefits of the announcement two weeks ago for Muskrat Falls on the Lower Churchill in Labrador. The Nalcor-Emera deal has the potential to benefit New Brunswick as well as Prince Edward Island. This is a win-win scenario. Yes, there is still work that has to be done. But most heartening on this file is the level of regional cooperation, seeking a win for everyone in the region. Now, I'm not saying parochialism is dead in this region, but this proves that it can be overcome for a common good.

As you know, the deal is between Emera, which is a publicly traded company, and Nalcor, which is a Newfoundland and Labrador crown corporation. The Newfoundland government obviously has a hand in the deal, but the support and participation of the Nova Scotia government is essential.

More to the point, the provinces have made it clear that while Ottawa’s participation is welcome, it is not a precondition. Premier Dexter has been particularly blunt: the deal will move ahead with or without a contribution from Ottawa.

That's what energy security sounds like in Atlantic Canada, and it sounds very good these days.

I'm not sure that there is a more secure or greener energy source for Atlantic Canada, in fact Canada as a whole, than hydro generated electricity.

Freeing the flow, opening the transmission corridors, and enabling provinces to transmit across interprovincial barriers and borders could mean that rather than having two new nuclear plants in Ontario supplying future energy needs, there could be electricity generated at Gull Island in Labrador powering homes in Toronto rather than in New York. Transmission is what enables this.

For the current deal, the fact that transmission exists in New England and that Emera is a player there helps. And it’s not just this project on the Lower Churchill at Muskrat Falls that benefits or the possibility that a second Lower Churchill project at Gull Island would benefit. It's also the independent producers of renewables in Atlantic Canada. Those include wind power and the wind technology being developed and researched on Prince Edward Island. Those include the tidal power that is being developed and researched in Nova Scotia. But transmission, as I have said, is the key to that, and it's the key to energy security.

Last April, Emera, Nova Scotia Power, NB Power, and the Governments of Nova Scotia and New Brunswick struck a deal to expand transmission between the two provinces. It too is an essential piece to the whole free flow discussion and indeed the question of viable energy security on a national scale.

Getting back to Premier Dexter's position that federal investment is warranted but not required for the Muskrat Falls project, he is right on both counts. Transmission capacity as nation-building is the principal foundation for the requested investment from P3 Canada of about $375 million for the transmission line to bring power from Muskrat Falls to the Maritimes. Such an investment does precisely what the P3 fund was intended to do, leverage private investment driven by a business case in needed public infrastructure, a far cry from the pointless largesse of traditional, politically driven, federal investment and stimulus programs.

The willingness of traditional “tin-cup” federalists to go it alone on this project speaks volumes to the current and future business case. The new energy source and the associated transmission infrastructure are huge boons for Atlantic Canada.

If Nova Scotia is to be weaned off fossil-fuel–generated electricity, it needs hydroelectricity. Biomass is an option, but it is not as green as hydro. Apart from one generating station at Tufts Cove, the existing plants are too far from the existing natural gas pipeline for natural gas to be a viable option in Nova Scotia. On top of that, Nova Scotia Power is a cost-of-service utility, so if oil is cheaper, it's required that oil rather than natural gas be burned.

With regard to tidal energy, we've talked about it for generations. Acadia has been doing work on it for decades. This is still, for the most part, in a research and development phase, but the potential is huge. Work is progressing in the Bay of Fundy. The environment is harsh, and the technology is in its infancy, but if it can work in the Bay of Fundy, it can work pretty well anywhere, and that means that we would be world leaders in tidal generation, an industry that can be exported around the globe.

Without the free flow of electricity in this region, such development just stalls. There is no doubt about Nova Scotia’s reliance on coal-fired generating plants. Foreign coal is an issue both from a greenhouse gas perspective and with respect to security of supply. The province's over-reliance on coal is the result of federal--

[The Chair, Conservative, Leon Benoit]

Excuse me, Ms. Pike, could you wrap it up really quickly, please? You're a little bit over time already.

Thank you.

[Barbara Pike]

Okay.

Basically, the Province of Nova Scotia's reliance on coal is the result of federal-provincial energy security and economic development policies of decades ago when coal was king in Cape Breton.

On the island of Newfoundland, the Holyrood plant continues to burn, yet that province sits on the largest mega hydro project existing in North America today. In New Brunswick, Point Lepreau is down and continues to be down.

Transmission is the key to this, and the National Energy Board and the regulatory regime need to be changed and need to be advanced in order for us to take the opportunity that exists for electrical transmission in this region.

[The Chair, Conservative, Leon Benoit]

We'll now go to questions and comments from members, starting with the official opposition.

Mr. Coderre.

[Denis Coderre, Liberal, Bourassa, QC]

Thank you, Mr. Chairman. I'm going to share my speaking time with my colleague Scott Andrews.

I'm a member for a Quebec constituency, but I know that energy security is important for all regions of the country. Without necessarily sharing this interpretation of the Quebec's situation, I understand that the important point is to ensure that two provinces can agree. I'm obviously sensitive to what the National Assembly and the Government of Quebec have said about the societal choice they made at the time regarding hydroelectricity.

I'm going to ask our friends from New Brunswick some questions. The situation we're in with regard to shale gas is somewhat the same.

There is an issue regarding the perception. People are scared because—I don't know about New Brunswick, but in Quebec they had a feeling that because the industry started first...frankly, they lectured people too much, instead of educating.

I'm at the federal level, and it is a provincial jurisdiction, but I would just like to understand how things are going in New Brunswick. How is the government working with the population on that situation? I have a lot of people in Quebec who are saying the same thing, that they want to have a moratorium, for all the same reasons that you're saying. They've been seeing all the documentaries, Gasland and all that, but at the same time this is a strategic resource, and if it's well done and environmentally okay, you might have something there. There is also a relationship with the municipalities and all that.

How are things going truly? Is there a compensation process? How does it work? What is the relationship with the people?

The second question is to Ms. Merrill, regarding water--water as the main issue, the way you treat it and use it. How are things going in your province from that perspective?

[The Chair, Conservative, Leon Benoit]

Ms. Merrill, go ahead.

[Stephanie Merrill, Freshwater Protection Program Coordinator, Conservation Council of New Brunswick Inc.]

Our provincial governments act in a number of ways. They are the promoter, they are the regulator, and they represent the people of New Brunswick. I think a lot of people feel there are probably conflicts of interest there. A lot of communities are really feeling that they've been railroaded.

Some exploration companies have had a licence for exploration for nine years before communities are even aware that they exist. So they are really feeling like the provincial government is not stepping up to the plate to inform them of what is happening, and what will happen, and to act on behalf of the public interest.

They really feel like they have been left to struggle personally with industry. We heard previously about some landowner negotiations with industry. Landowners do not have the tools to negotiate with industry. Industry has a lot of backing, public relations people who know how to have landowners sign leases. Individuals and landowners do not have the tools to know what's in their interests sometimes.

So I'm hearing a lot from the public of New Brunswick that the government is not stepping up and protecting them.

[Denis Coderre, Liberal, Bourassa, QC]

So you don't have anything like the monitoring process vis-à-vis toxicity or future...?

[Stephanie Merrill]

No. This is an exploration phase in New Brunswick. As David said, there are a lot of questions left unanswered. People in rural communities are posing questions about what is going to happen when damage occurs. Will industry be responsible for cleaning up the mess? Where is the water being treated? Where is it going? What's the end result? Where is that water being ultimately discharged? Do we have the processes in place to effectively take out the toxins? Do we have that technology?

So there are a lot of questions that are being asked and very few answers given to them. The provincial government points to provincial acts that are triggered at multiple steps along the way, but they don't actually clarify what the specific rules and regulations are to protect New Brunswickers.

[Denis Coderre, Liberal, Bourassa, QC]

Thank you.

Scott?

[The Chair, Conservative, Leon Benoit]

Mr. Andrews, go ahead, please.

[Scott Andrews, Liberal, Avalon, NL]

Thank you very much.

My questions are going to be for Barbara, an old neighbour and friend of mine from Newfoundland.

Barbara, you spoke at great length about the deal that was just struck in Newfoundland and Labrador and Nova Scotia for hydro development of the Lower Churchill project. You said that both premiers have mentioned that the project will proceed whether or not the federal government invests. The amount of the project is $6.2 billion. They've asked for $400 million, a small amount, to invest in a green energy project. Do you think the federal government should be investing in this type of green energy?

The other part of their ask would be for loan guarantees, which are similar to the aerospace industry and the auto industry as well. I don't know if you'd like to comment on that, Barb.

[The Chair, Conservative, Leon Benoit]

Ms. Pike, go ahead.

[Barbara Pike]

Hi, Scott. It's nice to see you.

If there is a P3 project that fits the bill, this is it, because as you say, it's green. With a business plan of $6.2 billion, it's huge. As far as its impact on Atlantic Canada and its future impact across the country is concerned, this is a very large project even though the megawatts are small.

I guess the short answer is that this is what P3 was set up for. So if you're going to be handing out money, hand it out to something such as this.

[Scott Andrews, Liberal, Avalon, NL]

Secondly, you were talking at the end of your presentation about the environmental impacts of Holyrood generating station and the coal-fired generation. I don't know if you'd like to elaborate a little bit more on what this project will actually do for the environment and green energy.

[Barbara Pike]

For starters, it would shut down the Holyrood station, which I believe is currently burning bunker C. It would also take off line approximately 10% of what we're now generating in Nova Scotia through coal fired.... Once this project goes forward and we take a look at the next project, we can be completely green in Atlantic Canada.

For Newfoundland, I think then you would be green--probably the only province outside of Quebec that would be. I believe they are saying it would basically be 98% or 99% hydro generation. That is huge, but it also provides, down the road, the stability that is needed if we're talking about economic development. If you want to attract business to this region, the fact that you can have long-term, secure green energy with secure prices that are not fluctuating because of fossil fuel world prices is a huge selling point.

[Scott Andrews, Liberal, Avalon, NL]

What about an east-west power grid across Canada? How do you see that being beneficial to the nation as a whole?

[Barbara Pike]

As I mentioned, if you take a look at security of supply, the fact remains that we are powering New York when Ontario is talking about building new nuclear plants. Should we not be looking at an east-west power grid so that in fact the hydro power generated in this country is supplying Ontario markets?

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Andrews and Mr. Coderre.

We will go now to the Bloc Québécois. Madame Brunelle, you have up to seven minutes.

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

Thank you, Mr. Chairman.

Mr. Coon, Ms. Merrill, to date in Quebec, energy security has relied to a considerable degree on the development of hydroelectricity and wind energy. We've been taking considerable steps in that direction for many years now. Our environmental rules are definitely stricter than those enforced elsewhere in Canada. And we're proud of that fact.

However, this entire shale gas development issue has really taken the public by surprise. People aren't very informed. This concerns densely populated areas, particularly the St. Lawrence Valley where our most fertile farm lands are. We sense a great deal of concern and anger among citizens. However, I would say it's disorganized anger. BAPE is conducting hearings. There's some talk about that, but citizens are banding together in large numbers to demonstrate.

Mr. Coon, you talked about Citizens for Responsible Resource Development. What is that? Is it an organization? Perhaps we could use it as a model in Quebec. Can you give me more details about that?

[David Coon]

Stephanie actually works directly with the coalition, so I'll ask her to respond.