Natural Resources Committee on Feb. 10th, 2011

[The Chair, Conservative, Leon Benoit]

Good afternoon, everyone.

We're here today to continue our meetings on energy security in Canada. We're focusing on the oil sands today.

We welcome three witnesses. Steven Guilbeault is co-founder and deputy executive director of Équiterre. Glen Schmidt is president and chief executive officer of Laricina Energy. Clayton Thomas-Muller is a tar sands campaigner from the Indigenous Environmental Network.

We'll proceed in our usual fashion with a presentation of up to seven minutes. Then we'll go to questions. We will end the meeting today at 5 o'clock. At least two of our panellists have to leave to catch flights, I believe. Then we will have a very brief meeting on future business to pick a date to deal with the supplementary estimates. The date we chose last time was too late in the cycle.

Mr. Harris, go ahead on a point of order.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

On a point of order, I see on the sheet produced by the clerk that Mr. Thomas-Muller is described as a tar sands campaigner. You mentioned that we were going to deal with the oil sands. Is this Mr. Thomas-Muller's official title, or is it an error in print?

[The Chair, Conservative, Leon Benoit]

I'll just confer with the clerk.

That is the title he goes by. You can certainly ask him about that later. You know the procedure here. But that was very smooth, Mr. Harris.

We'll start in the order that the panellists are listed on the agenda.

Monsieur Guilbeault, go ahead for up to seven minutes, please.

[Steven Guilbeault, Co-founder and Deputy Executive Director, Équiterre]

Thank you very much, Mr. Chairman.

Members of the committee, thank you for inviting me to appear today to discuss such important issues as energy security and the oil sands.

In French, we are not engaged in the same discussion that you seem to be having with respect to the name of the oil sands. In French, the term is “sables bitumineux” and it's the same for everyone and everyone seems quite willing to accept it.

For us at Équiterre, issues such as energy security and the oil sands are both crucial for the energy, economic, environmental and social future of the country. We have prepared a report which suggests how Quebec could eliminate its dependency on oil by 2030. We sent you copies of that report, but only in French. We will be forwarding an English version which can then be distributed.

In light of the scientific data that we have received over the last decade with respect to climate change, and various reports, be they from NASA, Environment Canada or the Department of Natural Resources, or places around the planet, it is clear that in the coming decades, we will pretty well have to stop using fossil fuels.

It is clear that the starting point is fossil fuels, which have the highest rate of greenhouse gas emissions, in terms of either units of energy or units of GDP—whichever. As we were reminded again the day before yesterday, by a report tabled in the European Parliament by the European Commission, the oil sands have a GHE content which is 25 times higher than traditional oil fuels.

As we see it, that means one of two things: either we have to quickly reduce greenhouse gas emissions associated with the oil sands—which, I remind you, emit two to four times more greenhouse gases than traditional fuels—or, if we are unable to do that, reduce our use, and therefore our production of oil from the oil sands.

In the report that we will be tabling with the committee, we show that we are well aware that humans will continue to use oil for quite some time to come. However, we believe that it is necessary, on the one hand, to reduce our dependency on oil, and also to move away from fossil fuels, conventional or otherwise, as quickly as possible, since they emit high levels of greenhouse gases. In that regard, the oil sands are clearly in a category by themselves.

In the report we will be forwarding to you, we have information from a study we conducted of the economic cost of this for a province like Quebec. And, what we did for Quebec can be done for other provinces. Indeed, it would be a good idea for the committee to look at that.

The economic cost of our dependency on oil is $74 a barrel of oil. The exodus of capital from a province like Quebec amounts to approximately $10 billion a year. If a barrel of oil costs $105, the loss of capital amounts to almost $15 billion. If a barrel costs $150—as was the case in 2007—the loss of capital outside Quebec is almost $20 billion. In budgetary terms, that corresponds to the second largest budget item for the Government of Quebec, which is the Ministry of Education.

Yet we believe there are many other things we can do with our money—public money—than use it to boost other world economies. We think we should be boosting our own economy instead.

You may say that it is impossible to reduce our dependency on oil—that it's unthinkable. And yet some countries have made a commitment not to import any more oil between now and 2025. Those countries, such as Sweden, are comparable to ours in terms of their climate, their economy, their social programs and education systems. But 2025 is coming quickly. If Sweden is able to do it, I don't see why a country like Canada could not do the same if, of course, it has the political will to do so.

I am one of those who believes that there is no lack of solutions, either technical or technological. We have enough creativity and intelligence to be able to deal with the issues.

In Sweden, they are now building houses that don't need a heating system. They still put heating systems in these houses, simply for psychological reasons, because the people who live there do not believe it is possible to live in Sweden in a house without heating. However, these houses are so energy efficient that the only heat that is produced is the heat loss from the people who live in them.

There are a great many things that we should be doing in Canada—for example, in terms of electrifying our transportation system, particularly transportation over long distances, both passenger transportation and shipping. That would allow us to greatly reduce our consumption of oil in this country.

You may ask whether we will gain something if the electricity used to power these transportation systems is produced using fossil fuels. But there will clearly be very significant gains if one considers the fact that the rate of efficiency of an electrical device in converting energy—in this case, moving electricity—is between 75% and 95%. In comparison, an internal combustion engine has an efficiency rate of between 20% and 25%. For every vehicle that is electrified, the energy efficiency would triple, which would represent a very significant gain.

There are many different things that should be done with respect to energy efficiency. Alas, Stephen Harper's government has abolished pretty well all the energy efficiency programs that were in place, particularly those aimed at low-income Canadians. Équiterre is an organization which, like many others across the country, has for years now provided energy efficiency services to low-income households, to help them reduce their energy bill.

However, the Harper government cut $500 million from energy efficiency programs for low-income households. Hundreds of jobs were lost across the country. In that sector, jobs were being created all across Canada, in small and large municipalities alike, from north to south, and from east to west. It was not only one part of the country which was benefiting from that.

We must focus on renewable energy. Wind energy is an obvious example. On behalf of the Quebec Minister of Natural Resources, I was in charge of a special team on renewable energy. The mandate of our team was to look at the development of emerging renewable energy sources, such as photovoltaic solar, thermal solar, biogas and second-generation biofuels.

In closing, there is huge potential for Quebec, Ontario and the country as a whole. Unfortunately, we are one of the only OECD countries to no longer have an incentive program for renewable energy development.

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Guilbeault.

I understand that you have to leave by 4:30. Is that correct? Okay, just a bit of a correction.

We go now to the second panellist today, Mr. Glen Schmidt, president and chief executive officer of Laricina Energy.

Go ahead, Mr. Schmidt, please, for up to seven minutes.

[Glen Schmidt, President and Chief Executive Officer, Laricina Energy Ltd.]

Thank you, Mr. Chairman.

Good afternoon. Thank you for the opportunity to share, with some pride, some news on the development on the in situ side.

Laricina is an example of a Canadian-founded in situ company, leading in innovation to support the goals of all Canadians: responsibly developing resources, having the needed energy, and providing economic support while also balancing environmental performance.

In situ is the future of oil production in Canada, and it will produce for a long period of time. The International Energy Agency identifies this resource as the largest outside of OPEC.

Think of in situ oil sands or drillable oil sands as the cousin of conventional oil. The footprint of a horizontal well in drillable oil sands is very similar to that of a conventional well. For example, there is the same land surface impact as the resource is drawn upon. However, in return, up to 10 times more energy will be produced.

Unlike the case for many conventional oil and gas projects, given the scale, we can operate using non-potable, non-drinkable water, and we recycle that.

What is exciting, with regard to the question of innovation, is that in the field today we're testing steam and solvent combinations for enhanced recovery that would decrease the carbon footprint per barrel on a full-cycle basis to less than what it is for much of the crude oil imported to the United States.

You might have seen or heard about the recent CBC documentary on oil sands. What this program did not discuss is what drillable oil sands are doing to meet the needs for economic prosperity, energy supply, and responsible environmental performance. I would like to emphasize just how proud you should be of Canadian companies because we are achieving this today. There is more progress ahead, and we are but one example of that.

Laricina is a private company. It was founded by Albertans. I was born in Calgary and educated at the University of Calgary in chemistry, engineering, and business.

In a little more than five years we have positioned projects for development to recover more than 4.5 billion barrels of oil. While that's part of a larger in situ development, the project we're bringing on stream is focused on carbonate oil sands, in addition to innovating both economically and environmentally. With respect to the community, we do look at it as jobs, but we do make contributions beyond simply jobs.

Laricina began steaming at our first SAGD, or steam-assisted gravity drainage, project in December 2010 after five years of delineation, studies, and research. The Grosmont formation is a carbonate reservoir that is dolomite. This is unlike the sand reservoirs that are mined in Fort McMurray and is more like the large carbonate oil reservoirs of the Middle East.

The ERCB has identified more than 400 billion barrels of bitumen-in-place, or 25% of the bitumen resources for Canada. It is a material growth opportunity for Canada. We estimate that in the project area we're focused on, up to 150 billion barrels are recoverable, and that would be incremental to what's considered now.

Carbonate reservoirs have yielded the largest conventional oil fields, and the projects are on the same scale as is Ghawar.

The oil sands are changing. More than 50% of production is from in situ or drillable techniques, and that is the growth area of the future. But just as in the case of unlocking the carbonates, we don't look at just what has been done in the combination of steam and the draining of the reservoir; we look at new opportunities. By adding light hydrocarbons to steam, as I said, we can reduce the potential carbon impacts and at the same time improve the economics.

Laricina has partnered extensively with the University of Calgary as part of our fundamental approach to research and innovation. The technology for drillable oil sands was initiated by Dr. Butler at the University of Calgary in the 1980s. He can be considered the father of SAGD.

We are pushing this further. Laricina chairs a consortium of 16 companies doing fundamental research on solvent-enhanced recovery. Adding light hydrocarbons to steam is nothing new. Thirty years ago, Alberta was leading EOR development in light oil pools using similar additions of propane and ethane in the West Pembina region.

Our focus, notwithstanding we had neither cashflow nor production, has included donations and research of up to a million dollars committed to the University of Calgary. This summer we will have 15 co-op and intern students, which will represent about 10% of our staff complement.

In Wabasca, where our operations are located, we try to play a positive role in the community across the spectrum, from donations and staff time to economic development. We work closely with the Bigstone Cree Nation, Métis Local 1935, and the MD of Opportunity. We chair the local business development group, and we've initiated our first business development plan. That first business, which will be locally owned, will be launched shortly.

This is in addition to nearly $10 million of locally awarded contracts in our construction and operations in the field.

We translate our information. We use newsletters. We have that information presented both in print and visually in Cree.

I believe Laricina is doing what Canada has asked us to do in developing the resources. In return, we look for stability of regulation. We need effective regulation, not more regulation. For illustration, this is the pilot that is 1,800 barrels a day with respect to the Grosmont carbonate, more than two years worth of work in a regulatory environment.

This is directly offsetting a conventional polymer flood of 30,000 barrels a day. This is a code of practice. The in situ is not underregulated in terms of its development. Water management is an important issue. Our projects do not use potable or drinking water. We are in areas where there is no shortage of information. The data is mapped. We have tested, monitored, and put our wells in place prior to production.

Now, like all companies, we must focus on selling our product, and access to Asian markets is an important consideration for the industry. It protects our sovereignty in terms of energy. Market diversity is a very important issue to western Canadian oil producers to offset the single market in the U.S.

I believe Laricina is doing what is asked and needed—investing in innovation and technology, collaborating with researchers, universities, and peers to improve methods of production and environmental performance—and we are proud of the work we do in leading the development of one of the newer emerging assets within the Grosmont carbonate.

Thank you, Mr. Chairman and members of the committee. I would be pleased to speak to you today and answer any questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Schmidt, for your presentation.

We will open up to questions right after we hear from our next panellist, who is Clayton Thomas-Muller, a tar sands campaigner from the Indigenous Environmental Network.

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

[Clayton Thomas-Muller, Tar Sands Campaigner, Indigenous Environmental Network]

[Witness speaks in Cree]

My name is Clayton Thomas-Muller. I'm the tar sands campaigner with the Indigenous Environmental Network.

IEN is a non-governmental indigenous organization formed in 1990 addressing indigenous rights and environmental and economic justice issues.

IEN has become a leading voice within Canada and the U.S. on climate and energy policy locally, nationally, and globally. IEN implements the Canadian indigenous tar sands campaign and is working with leadership of both first nations and Métis in the region affected by the Alberta tar sands development.

Aboriginal title encompasses large areas of land throughout Canada. It is a treaty and legal term that recognizes aboriginal interests in the land. First nations are not mere stakeholders or the public but are political and legal entities that have treaty rights with Canada.

Despite the concerns of first nations, the Governments of Alberta and Canada are not listening. The areas of concern are under aboriginal Treaties 6 and 8. These are treaties that ensure the lands of first nations should not be taken away from them by massive, uncontrolled development that threatens culture and the traditional way of life. The dewatering of rivers and streams to support the tar sands operation is a threat to the cultural survival of these communities, and the battle over tar sands extraction and concerns of who invests in this development comes down to the fundamental human rights of first nations to exist and to have a future with a safe, clean, healthy environment.

Fort Chipewyan is approximately 250 kilometres north or downstream of the Athabasca River from all tar sands projects. Fort Chipewyan, also known as Fort Chip, is a small settlement. It is the oldest continuously inhabited community in Alberta, Canada. Access to the community is by air and riverboat in the summer months. It is accessible in winter by driving over ice bridges. The Fort Chipewyan population is composed of about 1,200 people, primarily aboriginal. The Athabasca Chipewyan First Nation, Mikisew Cree First Nation, and Métis all make up this beautiful community.

Fort Chip is situated in the Peace–Athabasca Delta on the boundaries of Wood Buffalo National Park, which is our largest park here in Canada and is a UNESCO-designated world heritage site.

The encroachment of tar sands development from the south and its impacts have surfaced in the community of Fort Chip. Spills of the tailings ponds onto the Athabasca River have alarmed Fort Chipewyan residents. Fort Chipewyan is downstream of the tar sands and the Athabasca River.

For about four decades the aboriginal people in this community have observed noticeable differences in the environment, water quantity, water quality, change in bird migrations, deformities, cancerous tumours, and blisters and mutations in the fish, a critical food resource, and, more recently, an increase in health conditions and a confirmed number of unusual and rare and aggressive cancers to the tune of 30%.

The tar sands are the biggest industrial development in the world and the second-fastest source of deforestation, next to the Amazon. Alberta's vast deposits of bitumen, an unconventional hydrocarbon trapped under the boreal forest, is a source of one of the world's most energy- and carbon-intensive fossil fuels, and it has made Canada the Saudi Arabia of the western world. Canada is one of the world's highest per capita greenhouse gas emitters.

The Alberta tar sands are an environmental justice issue affecting treaty rights and human rights of aboriginal first nations at Fort Chipewyan and other first nations communities in the region. As one tactic to halt the tar sands development, first nations are using a rights-based approach to participate in the formal application process of the multitude of billion-dollar project expansions taking place. First nations are demanding the capacity to conduct their own environmental assessments, looking at cumulative and cultural impacts. With their assertion of rights, first nations at Fort Chipewyan have raised the standard for the regulatory process, including the quality of the Athabasca River, compelling the Government of Alberta to develop a water management framework for the Athabasca River. Since 2006, first nations have demanded a moratorium on any new expansion of existing applications.

Tar sands infrastructure and transport routes. Shipping lanes are represented by half a dozen major pipelines: B.C.'s northern gateway, Keystone XL, and others, including two massive natural gas projects--the Alaska natural gas pipeline and the Mackenzie Valley gas pipeline. Dozens of refineries in the lower 48 are impacting Alaskan first nations and American Indian nations across the continent. These infrastructure projects represent the hard-wiring of the fossil fuel economy here in North America at a time when we should be transitioning away from fossil fuels to zero carbon energy technological forms.

[The Chair, Conservative, Leon Benoit]

You have about two minutes left.

[Clayton Thomas-Muller]

Forgive me. I'm aware of the timeframe, hence my fast speaking.

As we move closer to a decision by the U.S. State Department on the Keystone XL pipeline, a few overlooked aspects of the debate emerge. The Keystone XL pipeline is not needed. There is an overcapacity of pipelines for tar sands oil. The Keystone XL will raise gas prices at the pump in the United States, and consumers will pay for the waste caused by the overcapacity. It will raise the price of heavy crude in the Midwest in the U.S. by spreading supply to the gulf. It could facilitate the exports of Canadian tar sands to Europe and other markets as well, thus undermining the argument for an American energy security supply, which has been a very close conversation with the Canadian discourse on energy security within the North American context.

Against this lack of benefit to energy security, let's weigh the clear negatives. These pipelines and the tar sands in general will increase greenhouse gas emissions and oil dependence; encourage the reckless expansion of a dirty industry; put clean water and public safety at risk in six states; lead to further degradation of the Athabasca watershed and air quality and the rights of first nations peoples via the massive expansion of current operations in the Athabasca region that this and other infrastructure projects like the Enbridge gateway will lead to.

So what do first nations people want? Well, they want a moratorium on any new or any expansion of existing applications until the environmental, cultural, social, human health, ecological health, and treaty rights impacts have been assessed and mitigated. They want a separate, non-industry, comprehensive, long-term, robust monitoring program for fish and water in the lower Athabasca River and the Peace-Athabasca Delta established to replace existing industry-funded bodies like RAMP. This program must incorporate both western experts and first nations traditional knowledge experts. First nations people also want a peer-reviewed epidemiological and toxicological study of cancer rates and levels of exposure to environmental toxins in communities of the lower Athabasca River.

Canada must take the ecological debt that is owed by the state to communities that have suffered disproportionately as a result of the current economic paradigm governed by the fossil fuel regime, while developing a just transition model that allocates revenues generated by public sector climate policy mechanisms--such as penalties against emitters that violate laws on emissions caps--as well as financing programs set up by other programs that would include, for example, the re-diversion of military spending and oil and coal subsidies to zero-carbon energy investments.

Canada and Alberta should adhere to and respect--

[The Chair, Conservative, Leon Benoit]

Mr. Thomas-Muller, could you wrap up quite quickly, please?

[Clayton Thomas-Muller]

I'm done right now, right here.

[The Chair, Conservative, Leon Benoit]

Great.

[Clayton Thomas-Muller]

The final point I'll make in conclusion is that an independent, comprehensive assessment on the total footprint of tar sands operations must take place. This would focus on the cumulative environmental effects of these operations on the land, air, water, and health of first nations people and on culture and treaty rights impacts.

Thank you very much. I look forward to answering any questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much for your presentation.

We go now directly to questions and comments.

Mr. Andrews, you have up to seven minutes, please.

[Scott Andrews, Liberal, Avalon, NL]

Thank you, Mr. Chair. I'll be sharing my time with my colleague.

I have a couple of questions for you, Mr. Schmidt, on innovation. Your company has done a lot of innovation. We've had a small discussion here at the committee, and we hear how government should be investing in more innovation versus tax credits and that kind of thing.

Could you give us some sense of where the government should go, where we should go, when we invest in innovation? What forms of investment should we recommend to invest in more innovation in the oil sands?

[Glen Schmidt]

In terms of areas, our relationship with the University of Calgary has been a strong one. Federal or provincial support for the research institutions at any of the universities that are focused on these areas is important. The fundamental work on solvents and their application is common to all companies, so support of the fundamental research is important.

In addition, there is direct support for innovations that are addressing the questions directly. I'll give you an example that I didn't talk about in the presentation. We partnered with a communications company called Harris, and Nexen and Suncor, and received CCEMC funding from Alberta focused directly on carbon, and directly on carbon in utilizing radio frequency. So the comment of electrical energy displacing hydrocarbon in its production--that's one we're doing research on now, and one where we had been the beneficiary of support from the provincial government.

[Scott Andrews, Liberal, Avalon, NL]

How long would you have to do the research on that to come to some concrete solutions and to make changes? Is it simple? Is it a long process?

[Glen Schmidt]

With regard to the cycle time on innovation, if we go back to how SAGD started, these are five- to ten-year programs. Concepts are tested in the field and then moved to commercialization.

On the issue of solvents, while solvents have been used in the past for conventional recovery, the applications in the field have been under way for between five and eight years, I guess, in a variety of pilots. It's not only us, but there are a number of others who are now moving to commercialization.

On radio frequency, we're right at the generation of the tool level, and it will then move to the next phases of development. I would expect it will be five to seven years before we see that opportunity potentially going into commercial development.

[Scott Andrews, Liberal, Avalon, NL]

In your statement you talked about effective regulation. Did you say we need to make changes to have effective regulation? Are you insinuating that the industry is overregulated? What changes will we have to make for effective regulation?

[Glen Schmidt]

I think it occurs at two levels. One, and I did hold this up, is that this is a 30,000-barrel-a-day conventional heavy oil project that is directly south of ours. This follows a code of practice, much the same way that if you were to build a deck at the back of your house and you have a code of practice, you follow it.

There's a high degree of similarity. These are horizontal wells. This is actually in an oil sand, and this project is 1,800 barrels a day. We're building the code of practice. So with the shift to a code of practice that allows us to move, efficiency is important.

The second level would be with respect to changes the federal government made recently. It has investigated the adequacy of the provincial regulation so the review is adequate for purposes of meeting federal requirements.

With Navigable Waters, for example, their reviews on bridges and access to the various projects have been modified so that as part of the review provincially it's not also done federally. That would be a clear example of the efficacy of seeing that the right things are being done. But there is efficiency, in that it isn't done twice.

[Scott Andrews, Liberal, Avalon, NL]

Thank you.

I have a question for Mr. Thomas-Muller.

Near the end of your presentation you talked about some of what you're asking for. I'd like to expand a little on the Athabasca River and more monitoring. We've heard a few examples that we need to do more monitoring; we need to expand what the Canadian government is doing.

Could you expand on that a bit as to exactly how we can improve the monitoring in the Athabasca?

[Clayton Thomas-Muller]

I think transparency is a big issue in the concerns of first nations peoples. I think the recent response by the federal government and the Government of Alberta to some of these concerns regarding water quality and contaminants within the Athabasca is a step in the right direction.

That said, the lack of any first nations experts on the recent panel that was set up to do such monitoring, leading to the resignation of some of the panel members, I think is a sign that we need to do more. I think the inclusion of traditional ecological knowledge within the analysis of how water management is done is really critical.

I also think there could be more done to support bottom-up methods of community-based water monitoring in local communities. That doesn't exist at this point.

From the federal perspective and its relations with first nations, given that first nations' concerns are federal jurisdiction, I think resourcing should be made available for first nations to do their own community-based water monitoring programs, aside from the other responses the Government of Canada is putting forward.

[Scott Andrews, Liberal, Avalon, NL]

Massimo?

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Scott.

I have several questions for Mr. Guilbeault.

Is there an opportune time when it would be advantageous and efficient to explore the oil sands? If so, is it based on a specific amount of greenhouse gas emissions? Is there a return? Will there ever be a point where the price of a barrel of oil--