Natural Resources Committee on Nov. 28th, 2011

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Trudeau.

We go now to Mr. Trost for up to five minutes.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair.

I notice in the material that we've been given that the Nuclear Safety Commission is being allocated an extra $13 million this year. Whenever I see extra money for a regulatory body, I'm always of two minds, and the question is this. Are more resources being given so that things can be done more efficiently, or will there be more duplication?

So I was wondering if you could give me some background as to why the safety commission needs extra resources, and particularly how they benchmark the effectiveness of these new resources coming in.

What is the particular thinking here? Is it to increase efficiency? Is there a greater workload? And can you give me some of the background behind this extra $13 million?

[Mark Corey]

Mr. Chair, I could start by saying again that this is in supplementary estimates (B). It's $13.3 million, and maybe I can just walk through some of the items. I do have the director general responsible for that program, and if I can't provide enough detail, I'll call him to the table.

The first item, which addresses workload pressures associated with fee-exempt licensees, is something that CNSC has done for a number of years now. The funding for that is basically just to continue to provide ongoing money for them. It's for non-recoverable activities required to fund fee-exempt licensees. These are things like hospitals, research and academic institutions, and other activities that CNSC undertakes to ensure the protection of health, safety, security, and the environment.

The second one is funding for regulatory services. Again, that's part of it. They have a number of transfers that go back and forth between National Defence and NSERC. Again, those are basically agreements that they have with them.

The greatest bulk, really, is the fee exemption for non-cost-recoverable activities, which basically covers their work with hospitals and others where they do not recover the costs because they're not profit-seeking organizations.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

So are we seeing an uptake in the workload for, as you said, hospitals? I'm sure universities, if my memory serves me correctly from other times I've been on this committee, are generally part of that.

Is that because of greater research? Is that because of changes in medical...?

What is driving the need for the extra $13 million?

[Mark Corey]

Mr. Chair, I will start, and then I'm going to ask if Jonathan Will, our director general of the electricity branch, could come and address it in a bit more detail than me, because it's actually his file. I will say that we have seen the workload increasing for the Canadian Nuclear Safety Commission in this area.

Jonathan, would you give a little more background on that.

[Jonathan Will, Director General, Energy Resources Branch, Department of Natural Resources]

Yes. The workload from this activity, as Mr. Corey mentioned, has increased in this area. However, it is an increase from previous years. It is consistent with the amount of money they've been receiving since 2008, in fact.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Okay. Then let me ask a more generalized question in regard to spending on regulations.

How do we benchmark the effectiveness of our spending when it comes to regulatory bodies? In our study on northern development, we've been hearing continual frustration with regulatory delays for approvals and duplication, and things of that nature. How is the department measuring its effectiveness in pushing through effective regulatory reform? If you could give an example—and here the Major Projects Management Office springs to mind—that would be appreciated.

[Mark Corey]

Mr. Chair, again, as the minister has said, one of the major preoccupations of the government right now is to make sure that.... It's not that we would have any less effective regulation; we want the regulations to be as effective as they are now, or more effective. It's a question of efficiency and making sure that things are done in a timely manner. The Major Projects Management Office, as you noted, is one of the major initiatives we've taken in this area. The federal and provincial ministers of energy and mines agreed that this would be a major topic to be developed.

As the minister mentioned, we're now working federally, provincially, and territorially to see what exactly we can develop in the near term. I would mention as well that when we were renewing our suite of energy efficiency programs, we basically reviewed how much was spent on each program and how many megatonnes of GHGs were reduced as a result. that was one of the effectiveness measures that we developed for our own programs, and we found that actually--

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Not to interrupt too much, but regulatory-wise, how do we calculate whether or not the regulatory bodies are being efficient in servicing the industries that are approaching them? Do we have timelines? What do we do to say they're getting good value for the regulatory dollar spent?

[Mark Corey]

Again, Mr. Chair, I think I would just repeat what our minister said, which is that it's one of the major preoccupations of the government to improve the regulatory efficiency of the system right now.

Again, that's what ministers agreed to at the last federal-provincial conference. That's what the Major Projects Management Office is about, and that's what some of the other programs we have in the department dealing with energy efficiency are about. It's making sure that we have efficient regulation and that they are effective and they are cost-effective.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Trost.

Mr. Cannan, up to five minutes. Go ahead, please.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair, and thanks to our witnesses for being here.

I represent a riding in the Okanagan in beautiful British Columbia, Kelowna—Lake Country, and our provincial counterpart is the Minister of Forests. He had an opportunity to go with our federal minister to Japan and China for the Canada wood export program, and it was very encouraging.

The associate dean of Okanagan College in my riding, Doug MacLeod, wrote a paper on the use of wood and the importance of emerging markets using wood and wood foundations for an environmental purpose, because of the immense reduction in greenhouse gases as a result compared to the use of concrete. I don't know if you guys and gals in the department have looked at that and reviewed that perspective, but I think it's another way that Canada can use....

It's great to see the lumber experts have doubled every year over the past five years, and 120% over the last nine months. I think it's the part that Canada is playing to help reduce greenhouse gases globally. Have you examined that perspective at all?

[Tom Rosser]

Yes, Mr. Chair. It is true that there is a fairly robust body of evidence that compares wood against other materials on what is usually called a life-cycle basis, meaning that you look at building a particular structure out of different materials—concrete, steel, wood—and you look at the total life-cycle environmental impact. From taking the raw material to producing the building product, transporting it to the site, construction, building life, to end of use disposal, you look at the entire life cycle of the product and what the greenhouse gas and environmental footprint associated with different building techniques is.

There's been a lot of analysis done along those lines, and it shows pretty consistently that wood has a lighter greenhouse gas and environmental footprint than other types of building materials.

We certainly are aware of this research and have been partners with different organizations and agencies conducting it over the years. And it is particularly in the international marketing of wood, where we're trying to encourage people, who don't have a deep culture of building with wood, that it is something they should consider. The environmental benefits and the green building benefits of wood, particularly wood from sustainably managed forests, is a major selling point in markets like China.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

So wood is good. That's what we like to say. Thank you.

Moving on to Mr. Corey.

I just want to ask a supplemental question. It's something that I get asked often.

I grew up in Alberta. I used to have a gas station and dealt with the element of supply and refineries, and I spent many years in Edmonton. If you could maybe remind me, when was the last time a refinery was built in Canada?

[Mark Corey]

Mr. Chair, I was wondering if I could bring Jeff Labonté, the director general of the Petroleum Resources Branch, to the table, because he actually has a little bit more experience with this than I do. So Jeff, could you...?

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr.Labonté.

[Jeff Labonté, Director General, Petroleum Resources Branch, Department of Natural Resources]

From memory, I think it was the mid-eighties the last time a major refinery was built in Canada. There have been a number of upgrades to existing facilities to expand production and throughput, but it was the mid-eighties.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I just want to know, because my understanding—and you can maybe clarify some of the reasons why Mr. Corey alluded to the private sector doing a cost analysis—is that it's also a result of the time delays, the uncertainty, the regulatory reforms, environmental, in each province and territory....

There's a lack of harmonization and regulation in the review, and it takes a number of years. So when the investors are going to put millions and in some cases billions, as you mentioned, on the table, is that one of the delays? Are we looking at that with our Red Tape Reduction Commission on removing red tape within the bureaucracy? Is that something that is going to help harmonize and streamline the process?

[Jeff Labonté]

Certainly, the development and plan to build the refinery would encompass significant environmental regulatory reviews and approvals. But as Mark has pointed out, there are many other factors as well, so it's part of the factors that one would look at. Certainly, the economics between the premium achieved from upgraded, refined-in-Canada product and the price achieved in the market by doing it somewhere else—where the capital infrastructure exists—is one of the primary factors, but the timeline to build a refinery from a greenfield is estimated in the 5- to 10-year range, in terms of all the permitting and processes involved.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I have one last quick question on solar. I come from a place where there's 2,000 hours plus of sunlight in the Okanagan valley. We are a strong solar marketer and consumer, but we've had.... And here I want to compliment to Jeff Knapp from your department. Jeff Knapp, the solar chap, has been out to market his program, and we had a solar hot water heating program, working in partnership with provincial utilities.

There is a gap between using alternative energy sources to providing the carbon, or oil, for example, as our fuel source. My understanding is that it only uses 20% if we maxed out because of the intermittent power sources. Is that correct?

[Mark Corey]

Mr. Chair, I should say that the department has actually had a number of programs that have dealt with promoting renewables. As you mentioned, one of the issues with renewables is the fact that they are intermittent. But the way that we think people will deal with that has to do with things like smart grids, where you start developing an overall capacity for the grid to absorb intermittent power as part of how it actually operates in terms of load management. One of the areas the federal and provincial energy ministers identified as a priority at Kananaskis was smart grids. It deals with things like intermittent power and how you deal with that, along with a whole bunch of other issues.

The other thing I'd mention is that the provinces have really stepped up and promoted renewables, and in a lot of areas their programs are actually much more generous than ours now. For example, I know that Alberta is huge in terms of wind power right now, and if you drive through the southern part of Alberta, you will see field after field of turbines. In fact, it's well-priced power for them out there. It works well.

The question about intermittency is one that you have to deal with in terms of the larger design of the power grid.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Corey, and thank you, Mr. Cannan.

Finally for today, we go to Mr. Stewart, followed by Mr. Lapointe, if there is time.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Thank you, Mr. Chair.

I would just like to return to the topic of refining. I've been looking through a number of figures, and actually talking to many of the businesses in this sector. From my research, I found that in 1971 we had 41 refineries—or around that. Now we have about 19. Our peak year for refining oil was 1977. We refined about 2.3 million barrels then, and now we're down to under 2 million barrels.

The question earlier from Mr. Cannan was about increasing capacity. My fear is the other side, that it's an industry in decline—and perhaps rapid decline. There is a fear that if we are constructing large pipelines that just export crude or unrefined conventional oil, these will require long-term service contracts of 15 to 20 years, perhaps. Some of the refineries in Canada don't—at least some of the industry leaders I've talked to said they don't—want to sign on to a 20-year deal.

My big issue is that this industry might be on the verge of collapse over the next little bit. You were talking about how we haven't built refineries and how they have all the capacity in the U.S. states. So we might be in an absurd position wherein crude is exported out, and we then buy back gasoline at the cost of our own refineries, our own refining industry.

My question is, has this been discussed? We've been hearing a lot about pipelines: Keystone, Enbridge, Trans Mountain, TMX, these giant pipelines. Has there been any discussion about the future of the refining industry and what we can do to keep what we have, or is it all for naught? Should we just throw up our hands and say it's dead?

[Jeff Labonté]

That's a complex set of questions. Maybe I can try to deal with certain stages of it.

You're correct that the number of refineries in Canada has been declining, but the throughput in terms of the volume being refined is actually increasing, and has increased since the seventies.

What's happening is that the smaller, less economical refineries are replaced. The refineries go through upgrade cycles that are usually on two-to-five year horizons. Rather than upgrade facilities at the cost of hundreds of millions of dollars, a new, larger facility is typically built in the same brownfield—the same existing footprint, if you will.

The refining capacity is held fairly constant in Canada. We still remain a net exporter of refined product, as well as crude oil. From a supply-demand perspective in the country, Canada still exports more refined product than it actually imports.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

But we are importing it much more than we used to. You say that our capacity has increased, but the other day I was looking at the figures provided by the refining industry itself, which show that it depends on where you mark the time. But it does look like, since 1977, we have had a decrease in the amount of oil that's been.... It's not dramatic, but it still is a decrease.