Natural Resources Committee on Feb. 17th, 2011

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

Do you work on carbon capture and storage projects? If so, what do you think of those technologies? Have you thought of other possible technologies? As you know, there has not been much progress in that area, and we are still only at the exploration stage. Can we expect to see any other initiatives, other technologies that would help reduce the impact on the environment?

[Dr. Eddy Isaacs]

I hope I understood your question. Am I correct that it has to do with carbon capture and storage, the sequestration project?

It does; okay.

We've been very active in this area. With regard to the investments that have happened between Alberta with the $2 billion that Alberta has invested and the federal government with the $800 million or so that the federal government has invested, many of the projects have come through our shop, in the sense that we have piloted some of these projects. We still have this project with Shell to look at and delineate the wells that are going in, and the rate at which you can inject carbon dioxide into the formation. These are saline formations that are deeply buried. We're looking at what the rates are at which you can do this. We have been looking at making sure that the technology is safe and that it can be applied securely.

You're right, though, that it will take a long time to make these technologies commercial, just because of the cost of doing this. Most of the cost is associated with capture of the carbon dioxide and making sure that you have the carbon dioxide. There's also the compression cost; to put it under high pressure is very expensive. It will require new technology to make this whole technology viable, but if we don't start now, it's not likely that we will achieve success in the next 20 years or so.

I think there's been a good start, but this will require a long period of time. Fortunately we're working very closely with international collaboration in this area. There is a lot of interest internationally.

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

Mr. Reid, in your presentation, you talked about shale gas. As you know, that is a big concern for us in Quebec. You mentioned something very important, the very high decline rates in early years. That is the first time I have heard about that. What does it mean?

[Robert Reid]

What I meant by that is when you first commence operations for a shale gas well, there's a large initial output from the well; then it declines as much as 65% in the first year, and then it continues on out.

There's not a great deal of experience with shale gas. It's a relatively new phenomenon regarding the length of the tail and the overall supply from a given well.

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

Is the decline still noticeable when there is a similar well and other horizontal wells? Is there still a decline then?

[Robert Reid]

Yes, that's correct.

As you're aware, a shale well is drilled vertically, and then there's horizontal drilling that can go out for a kilometre or so. That's done because they have to fracture the shale rock to release the gas. Once they've done that, the output from the well is very high in the initial year, and then declines rapidly in the first year and then tails off. The rate of decline tapers off after the first year.

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

Thank you. I understand now. You also said that the extraction of shale gas required a significant quantity water, typically a hundred times more than the gas.

Is that figure based on scientific data? Is it reliable? Is it really a hundred times more? If I include that figure in one of my speeches in Quebec, will they laugh at me?

[Robert Reid]

No, there are published numbers to support those data. That's for a typical well. Some are higher and some are lower, of course.

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

I have another quick question.

I want to come back to your pipeline. Have you received any federal or provincial funding for the project?

[Robert Reid]

We haven't, not at this point in time.

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

Would you like some?

[Robert Reid]

Of course!

[The Chair, Conservative, Leon Benoit]

Thank you, Madame Brunelle.

Go ahead, Mr. Cullen, for up to seven minutes.

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

Because this is recorded by audio and not video, I want to point out for the committee that Mr. Anderson was in fact signing a cheque, so it should be done by the time we're done this meeting.

Thank you, gentlemen.

It was in 1974 that Justice Tom Berger started his inquiry into the Mackenzie Valley pipeline. Now, 37 years later, here we are with the government issuing their order in December.

Mr. Reid, you were saying today that essentially the order from the NEB is sitting on the cabinet's table, and you folks are waiting for that. Is this the final sign-off? If cabinet signs off on this final piece of paper, have you got all the regulatory things in place in order to proceed with the project?

[Robert Reid]

That's correct. The order in council is usually a procedural matter that follows any NEB decision. It gives effect to the NEB decision.

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

Would it be unusual for an order in council to overturn an NEB ruling like this?

[Robert Reid]

Yes, it would be very unusual.

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

Do you know why there's a delay? I'm sure you're in conversation with the government. I'm sure your partner members--Imperial Oil, ConocoPhillips, Exxon, and Shell--have good connections with this government as well. Do we have any notion as to why it's taking this long?

[Robert Reid]

Typically an order in council would take four to six weeks following the NEB decision. This decision occurred right before Christmas, so I would expect it could be longer. We're right at the eight-week point now, so we're right at the tail end of what would be normal.

I have not been able to find out any reason for a delay, or even if there is a delay.

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

We're essentially at the eight-week mark after the decision came in, given the Christmas holidays as well, and maybe we'll hear an answer today, but I doubt it.

I hesitate to ask this question. One of the money reports after this announcement was made was questioning whether this project was dying of old age. Being around for 40 years is a long time for a project to be proposed in anyone's world. These large companies have equity that they can move around the planet for different projects. Holding money up and holding engineers up, etc., is very difficult.

I got no sense from your testimony today that you fear that the delay we're under right now, waiting for the order in council, jeopardizes the project. Is there, in fact, a so-called drop-dead date with this project? If you don't have an answer by spring, late spring, or summer, are you in a lot of trouble?

[Robert Reid]

The concern is that the NEB certificate contained a number of conditions, one of which was a sunset date that indicated we must commence construction no later than December 31, 2015. We have about three years of detailed engineering work and permitting, as I mentioned—about 7,000 site-specific permits, etc.—that we need to undertake before we commence construction. That's about three years' worth of work.

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

To sum up, with the building season being what it is in the north, you're starting to bump up against the early limits of when you could complete this project in order for your NEB certificate not to expire.

[Robert Reid]

That's correct. It's unusual in this circumstance, because it's winter-only construction; the tundra will not support heavy equipment.

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

Yes, of course.

To both of you, a number of the energy companies--both traditional oil and gas companies and some of the so-called alternative-energy folks--have come before us and said that one of the things lacking in Canada is any notion of an energy security strategy, or an energy strategy at all. It creates uncertainty in the marketplace. We're the only energy-exporting nation in the world not to have a plan of this type, essentially. When I look at 37 years of Mackenzie experience, I see uncertainties around things like native land claims and whether or not there will be a price on carbon, and if so, how much it will be.

Do you have any opinion on whether there's a need, or are these other companies in fact wrong?

[The Chair, Conservative, Leon Benoit]

Dr. Isaacs, go ahead.