Natural Resources Committee on Feb. 8th, 2011

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Mr. Tertzakian, I wanted to ask you a couple questions about.... You said you felt we weren't optimizing the value of our resource. I'm wondering whether you have a couple of suggestions for how we might do that. We're looking at energy security, and certainly optimizing the value of the resource should be of concern to us.

I think my colleague is later going to talk a little more about the labour market, but I'd like to focus on this. Then I have a couple of specific questions, if I can get to them, about shale gas. I assume you've done some work on that as well in your estimates for the future.

[The Chair, Conservative, Leon Benoit]

Go ahead, please, Mr. Tertzakian.

[Peter Tertzakian]

Optimizing the value of our resources, given that we have made a conscious decision to be exporters of meaningful quantity, means that we need market diversification.

I certainly support access to the west coast for both oil and natural gas, to be able to export these global commodities to other markets, whether it's in Asia or beyond. That would certainly help us get away from being hostage to the weather in Chicago, or pipeline breakages, or refinery fires, or just lack of capacity in a market—the United States—that, as I have mentioned before, is now flat to declining in overall energy demand.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Your main call is to try to diversify our markets, you're saying.

[Peter Tertzakian]

Yes, absolutely. The global prices are higher than the continental prices.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Okay. Good.

I want to talk a little about the value of investment in shale gas. We've spent a couple of weeks talking about it. I know today is not specifically about that, but do you have any idea of the potential values of investment in New Brunswick, Quebec, and British Columbia?

[Peter Tertzakian]

I can speak to British Columbia. It's pretty high. The natural gas business—I have the numbers here—is substantial. It's about 37% of the $100 billion in revenues, so it's $37 billion. A large fraction of that is in Alberta, but it's expanding more into B.C.

The important thing to remember about the oil and gas business is that it re-invests almost every dollar of cashflow back into the ground. That is unlike most other industries in Canada. So the dollar value in Quebec and New Brunswick, as the production grows, is very substantial.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Let's talk a little about foreign investment, in particular in the oil sands. I'm wondering whether there are things you want to say about that. What is the level of foreign investment there? Is this something for which we should be looking for larger foreign investment? Do you have any thoughts on that?

[Peter Tertzakian]

Sure. It's already coming. In the last 18 months, $17 billion worth of foreign capital has come into Canada that is not from the United States or Europe. In 2010 alone, there was $10 billion, most of which was directed toward the oil sands.

The oil and gas industry, because it is so capital-intense, has always historically been very dependent upon access to foreign capital, because we don't have enough of a capital base here in Canada to develop these resources ourselves. The balance of where that capital comes from is shifting. Historically it has come from the United States and to a certain degree from Europe, but now the large quantums of capital are coming from Asia, and I believe we are going to need more, if we want to maintain the level of investment and prosperity that we derive from this industy.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Do you see the majority of new money, then, coming from that Asian area? I wonder whether you could talk a little about some of the benefits and drawbacks of that shift in investment.

[Peter Tertzakian]

The debt and equity that come in under normal circumstances is not all going to come from there. It's still about $10 billion per year that comes in.

Actually, no; debt plus equity is closer to $15 billion to $20 billion per year. I can get you the numbers.

It is going to become increasingly important that we be amenable to having investment from other parts of the world come in, as we cannot always count on the capital being there from traditional western sources. We're going to need more and we have to be open to it.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Are you comfortable, then, with investment from foreign state-trading enterprises in our national economy?

[Peter Tertzakian]

Yes.

[The Chair, Conservative, Leon Benoit]

Okay.

Thank you, Mr. Anderson.

We go now to the second round, starting with Mr. Tonks, for up to five minutes.

[Alan Tonks, Liberal, York South—Weston, ON]

I'd like to follow up on that last question that Mr. Anderson asked.

Mr. Tertzakian, when we were talking about Ontario and the acquisition of natural resources assets there, the issue of Chinese capital through state-owned corporations came up. What is the difference between private capital coming from Asia—in particular, China—and the issues related, I guess, to the value and culture system and interests of Chinese state-owned corporations? And does that source have implications with respect to whether we should tie that capital investment to a different protective regime, if you will?

[The Chair, Conservative, Leon Benoit]

Mr. Tertzakian.

[Peter Tertzakian]

I'm not an expert on cross-cultural issues. I can just tell you that the world is becoming more global. Other countries in the world--like Australia, which is also very resource-rich--are very active in dealing with the Chinese and other countries. It's not exclusively the Chinese; it's Indian capital, Thailand capital, Korean, and Japanese.

If we are going to isolate ourselves and be scared of accepting capital from these sorts of countries, competitively we are going to be left behind.

[Alan Tonks, Liberal, York South—Weston, ON]

Yes. I think it was in relation to fair trading practices and fair state issues with respect to labour standards and that kind of thing, and there were concerns raised. But we'll leave that for the moment.

My question is to Ms. Dowdeswell.

Ms. Dowdeswell, in the Royal Society of Canada report there were a couple of recommendations on which I'd like to get your response. When we were talking about shale gas, we were talking about the cumulative effects and the lack in the environmental regime of establishing clear assessment of cumulative effects for flowback water and the content of that water in terms of the impact on the water tables, and so on.

I notice in the Royal Society of Canada report there are two flags that have been raised. The first one is in terms of the regional cumulative impact on groundwater quantity and quality, which has not been assessed, and they're transposing that to the environmental assessment process.

And the second is the last recommendation--at least that we have before us--that environmental data access for cumulative impact assessment needs to be improved. That is a general statement with respect to the general regulatory regime in Alberta.

My question to you is, given those caveats and those concerns, how do you see the public's confidence, especially on new applications, being guaranteed if there isn't any immediate response to those kinds of concerns that have been raised through the Royal Society of Canada's report?

[The Chair, Conservative, Leon Benoit]

Ms. Dowdeswell.

[Elizabeth Dowdeswell]

First of all, the panel would concur with what the Royal Society, in its report, said about cumulative effects. We raised that ourselves, and I think it is important that that be done.

I cannot speak to the motives of Environment Canada, but I can say that the minister's commitment to immediately starting work on the kind of coherent monitoring plan that would address those issues is under way, to the best of my knowledge.

[Alan Tonks, Liberal, York South—Weston, ON]

And how rigorous is the reporting back with respect to that? Is there a targeted date?

[Elizabeth Dowdeswell]

The minister committed to releasing a plan within 90 days, and depending on whether or not you count weekends or just work days, that should be toward the end of March, I believe.

[Alan Tonks, Liberal, York South—Weston, ON]

Okay.

Do I have time for just one short one to Mr. Marushack?

Mr. Marushack, just in terms of the point that was raised on capital, if you were to prioritize the reinvestment strategies with respect to in situ mining--and I understand you're not involved in open mining--where would the technology priority be that would assuage the concerns the public has that the footprint is not being narrowed? In fact, application after application seems to be just widening that footprint, perhaps unnecessarily. Where would it be that you would tactically suggest the maximum return could be made on an investment in technology?

[The Chair, Conservative, Leon Benoit]

Briefly, Mr. Marushack.

[Joe Marushack]

I'll answer only from the in situ standpoint here. Right now I believe we're making great strides in this. Roughly 95% of the water we use is recycled water. We don't take any water from open sources and none from the Athabasca River. We're using non-potable water; effectively it's not quite saline, but it's non-potable water.

So I really think that the technology we're using right now.... When I came over to this particular job from Australia, I was very impressed with the level of technology that's being used right now.

The next major step that we need to do, in my view, is getting that steam-oil ratio down, and we're looking at that by.... If you use less natural gas, you could have less steam, you could have fewer greenhouse emissions, and that's a real focus area for us, as well as the water usage.