Natural Resources Committee on Jan. 29th, 2013

[The Chair, Conservative, Leon Benoit]

Good afternoon, everyone.

It's great to be back and to have our committee sitting again.

I know you all took time with your constituents. I hope you also took some time with your family and friends and got a little downtime so you're ready to go and refreshed for this session.

We are starting today by continuing our study of innovation in the energy sector. We're having our second-last meeting on the supply side of that study, and we'll go on to the other two sections later.

We have with us today four groups of witnesses.

We have from Sustainable Development Technology Canada, Rick Whittaker, vice-president, investments and chief technology officer. Welcome.

We have Sailesh Thaker, vice-president, industry and stakeholder relations. Welcome to you.

We have from the Canadian Wind Energy Association, Tom Levy, manager, technical and utility affairs. Welcome.

We have, by video conference from Calgary, Alberta, from Suncor Energy Inc., Bradley Wamboldt, general manager, supply chain management operations, business services. Welcome to you, sir, Mr. Wamboldt.

We have from Edmonton, by videoconference, as an individual, Dr. Murray Gray, director and professor at the Centre for Oil Sands Innovation at the University of Alberta. Welcome to you again, sir. It's good to have you back at our committee.

We will go to the presentations. You have up to seven minutes. It's in the order the witnesses are listed on the agenda. Then we'll go to questions and comments from members.

We'll start with Mr. Whittaker and Mr. Thaker from Sustainable Development Technology Canada. Go ahead, as you wish, with your presentation.

[Rick Whittaker, Vice-President, Investments and Chief Technology Officer, Sustainable Development Technology Canada]

Thank you, Mr. Chairman.

Thank you, everyone, for having us here today. Obviously this is a very important study, one that's near and dear to our hearts. I'm certainly happy to be here to talk about some of the questions you have on the supply side and where Canada ranks in these and where we might be going.

You have in front of you the slide presentation we have by way of background. The first slide or two are on SDTC. Suffice it to say SDTC is a commercialization instrument for clean energy and clean technologies. It focuses on all the primary economic sectors in terms of the types of technologies we invest in. So it's kind of a broad perspective on the technology scenario here in Canada and certainly as that applies internationally as well.

I'd like to draw your attention to slide 4, which really talks about the clean technology opportunity for Canada and about where some of this is going. As you see, today it's about a $1-trillion market. It's about as big as the defence market globally, and by 2020 it's looking to grow to about $3 trillion. Canada already has today a $10-billion opportunity in that, and it is looking to grow to $62 billion in revenues. So this sector we're calling clean technology and clean energy is a very substantive economic generator. A significant number of jobs are created out of this and a significant amount of economic growth is created out of this sector. There are 52,000 jobs today—and I'll get into that in a minute—which should grow to about 126,000 jobs by 2020. So clean energy is a very important topic.

I'm glad to see that this committee is diving into where the priorities need to be on the supply side and where Canada can really play a leadership role and continue to play a leadership role.

If we flip to slide 5, we'll look at what this means to employment in Canada. You'll see there are two graphs there. The first graph shows clean technology as a sector. If you collect all the clean technology and clean energy folks who are out there working, you'll see that this is a sizable sector. It's as big as the other primary economic sectors in Canada, and certainly as large as the aerospace sector itself. However, the jobs aren't just in a convenient single slice of the economy; they're actually distributed across it. The green bars or the light bars on the top of the graph on your right-hand side of slide five show how clean technology employment is spread out throughout oil and gas, throughout mining, throughout aerospace, and so on. So these are jobs throughout all the important economic sectors throughout Canada.

If we move to the opportunity spaces, to where Canada does well, it's really hard to pick a single sector. Naturally Canada has strengths across the board. I'm not here to be all-inclusive and to say we need to do everything. That message is there for sure. Canada has strength in a number of these sectors, but importantly, as you dive into these sectors, there are some areas of priority, some areas of focus where we can really shine above the rest of the global economy.

If I start with our aspirations to be a clean energy superpower, Canada and Canadians are already arguably in this space and have the aspirations to continue to be. SDTC's portfolio consists primarily of energy technologies. Eighty per cent of what we invest in touches on energy in one form or another, whether it's exploration, energy production, transportation efficiency, generation, or so forth. We work with the major players in those sectors—what we call “go-to-market consortia”—to realize these technologies. Without them you really don't have a channel to market. So those become a really important element in the overall innovation equation to ensure we have healthy relationships with the major players. You can see the types of folks we do work with. Their logos are at the bottom of the screen.

On slide 6, if we're looking into the traditional sectors, you'll see that efficiency and productivity is a theme. It's a theme that we keep pushing. Companies like Synodon have focused on a remote sensing technology for pipelines. Obviously natural gas pipelines are a very important topic. All pipelines seem to be very topical these days. Being able to detect the robustness, the security, and the integrity of these pipelines provides these operators with a social licence to operate. It provides them with a surety that these things will function. If they don't, we'll detect them early. Those are the types of enabling technologies that give Canada that advantage in being able to produce those traditional energies.

Similarly, there are companies like N-Solv partnering with Suncor for solvent-free bitumen extraction. There are certain types of solvents that reduce the amount of water consumption. The ability to reduce water for steam-free extraction is an important element if we want to improve the efficiency of the oil sands.

It is not a question of yes or no to oil sands. It's a question of where in the oil sands we can place the most emphasis to have the most impact, and these are some of the technologies that enable that to happen.

If we go to slide 9 on the new generation technologies, we're looking at different types of resources, different types of feedstocks such as waste and other renewables. This is an important area. Companies like Nexterra are partnering with large entities like General Electric, developing a distributed power-generation architecture based on biomass. As you get into the distribution side of your study in the next segment, you'll see that the choices between centralized and distributed become more and more prominent. These types of technologies enable those choices.

RER is looking at leveraging global river resources. These are things you can implement today to realize energy technologies in the market for global advantage and advantage back to Canada economically as well as the environmental benefits we get from using more renewables.

Finally, there are more examples of renewable energy dealing with grid reliability issues. These are predicated on the changing network we have out there right now for power generation as well as on the way we're going to change distribution, and so whether you're up in remote communities or you want to be off the grid or if you're right in the central part of the grid, as we start introducing more and more generation technologies, elements like grid control, grid stability, and storage, these are the technologies that become the prominent piece.

Just as a small example of where the priorities can play, if we look at the speakerphones that we have around the conference room today, the value in some of these speakerphones is not in how many of them you produce or in the microphone. It's actually in a little chip that does echo cancellation inside. So if we look at these renewable technologies in a very similar light, we're not necessarily looking for the whole big system. We are looking for the most benefit, the most revenue, the most profits that occur from the equivalent of that little echo-cancellation chip in each one of these sectors. That's what SDTC is trying to suss out of the market today. We are looking at the wind sector, the solar sector, the oil and gas sector—all of these—to find the key elements that are going to enable our social licence to operate.

Moving forward, we look at economic competitiveness. This is always a challenge, because as Canadian companies, we've been dealing with thousands of these companies, over 250 in our portfolio in consortium, which, when you add them all up, is into several hundreds of companies. They typically raise, on average, half to one-quarter as much money as do their counterparts globally when they develop new technologies. I use the American example here.

It is not the better technology that wins; it's the last dollar in. So what we really need to be sophisticated about is making sure we are attracting that last dollar in, through better management teams, more integrated packages, the ability to pick that echo-cancellation chip in each of these sectors. That will really enable Canada to be competitive in these sectors then.

If we look at the two programs we've created—these are on slide 13—you'll see that raising financing and getting customers, obviously, are the order of the day for any of the technologies, whether in traditional sectors or renewable sectors, whether you're dealing with the supply side or the distribution side. Being able to address those two elements is of prime concern for most of these entrepreneurial companies, and so SDTC has created two programs. One is technology adoption, which is rolling up the sleeves, partnering with the multinational firms that have access to the market, and the second one is enabling follow-on financing. As venture capital fades away into later- and later-stage rounds, the ability to track that capital becomes more and more difficult, so a focused effort on being able to track that private sector investment in these companies is important.

I will leave it at that.

[The Chair, Conservative, Leon Benoit]

Thank you very much for your presentation.

We'll go now to the second presenter for today, from the Canadian Wind Energy Association, Tom Levy.

Could you go ahead, please, sir, with your presentation?

[Tom Levy, Manager, Technical and Utility Affairs, Canadian Wind Energy Association]

Thank you, Mr. Chair and committee, on behalf of the Canadian Wind Energy Association.

We'd like to thank you for inviting us to speak with you today. I'm very happy to be here sharing our thoughts on R and D as they relate to wind energy.

I'll jump very quickly into the third slide on CanWEA. We're the national industry association. We represent about 400 corporate members that are involved in all areas of the supply chain. We're engaged in policy development, advocacy, communications, outreach, and so on.

I'll turn the page to a quick snapshot of the Canadian market. It's seeing substantial growth; in fact, about 40% on average since 2005. We're going to see this continue in the years ahead. Today it's supplying about 3% of our electricity needs. In some jurisdictions, that's rising to 10%, and even to 20% on the east coast.

Next you'll see a quick snapshot of the installed capacity. In fact, it just goes to show how quickly wind energy moves. This slide is now out of date. We're now at 6,500 megawatts in Canada. It does move that quickly, and sometimes it's hard to keep up. Broadly speaking, you can see that we have installed projects in every province in Canada. System operators continue to reconcile how to manage that variable supply of wind energy. Some of the R and D tools I'm going to speak to you about today are exactly that: tools that these system operators are using to manage that variable supply as we modernize the grid.

I'm not going to go through the whole slide on wind energy R and D in Canada. There are a lot of words there; you can read them for yourself. There is a wide variety of R and D initiatives across Canada: storage, modelling, and system operator tools. All of these initiatives are funded through the federal government. In support, with the federal government, there are many private companies—to name a few, GE, TransAlta, and so on—that continue to invest some of their own dollars, sometimes in partnership with SDTC, to bring projects to fruition and to commercialize these new initiatives as they improve the efficiency of wind turbines and siting and so on.

We have a good story to tell about R and D and funding from the federal government. I included, not in this presentation.... A table should have been provided to you that shows how Canada ranks relative to other countries. If we rank Canada on a per megawatt basis, while it's on the list, which is good to see, I think we clearly can see that we can do better. There are a lot of opportunities to do so. I'm going to go through these as we move forward.

Turning to the next slide, the 2008-09 “Wind Energy Technology Roadmap” developed with Natural Resources Canada and various other stakeholders—universities, academics, the system operators, and industry itself—identified a number of means of moving wind energy forward in Canada. I've pulled out a few of them in terms of the R and D side. I think these warrant a closer review. They certainly are areas in which we could see additional investment that would improve how wind energy is brought onto the grid and would ensure that it's brought on reliably.

In no particular order, these areas are integration—and I'll go into some detail on that in the next few slides, tools and materials to reduce icing, numerical weather prediction models and forecasting of wind energy, and a huge opportunity in Canada in terms of our remote communities, remote mining resources, and so on. These remote operations have a very heavy reliance on diesel fuel, making it expensive and difficult for them to manage.

Turning the page to “Areas of Need—Integration”, I'll very broadly describe integration. Our electricity system is undergoing massive change. The Conference Board of Canada is projecting that over $300 billion of investment will be needed between now and 2030.

This is being brought on by a number of needs. One of them is decarbonization, for various reasons. Others include: reduced volatility; improved domestic supply; an overall need to invest in our infrastructure, which has not seen significant investment and needs investment; refurbishing of plants; upgrading of the various systems; the onset of the smart grid; demand side management; and electric vehicles. All of these things are pressing on the electrical grid that we know today and are changing the way it interacts.

We are no longer a centralized grid per se. We're looking at distributed sources of energy. The customer is getting involved. There are a lot of changes, and with these changes comes a need to bring in new tools. When it comes to wind energy and other aspects, integration is a modelling exercise of examining that grid using very sophisticated models and seeing what is going to happen to it when we play out various scenarios.

There are no national studies of an integration model in Canada. They are done provincially. With an interconnected system such as ours, it certainly makes sense to study this on a national basis. We're unable to take part in continent-wide studies with the U.S. Our system is heavily interconnected with that of the U.S. We need to actually study this with the U.S., and we can't do so at the present time.

We require a technical foundation in which we can make policy decisions. We don't yet have that technical foundation. We do have a multi-million dollar proposal into NRCan, and we are quite confident that it will move forward. It is a proposal that has the support of every single utility in Canada as well as every single utility in the U.S. that borders the Canadian markets. They want to see us move forward on this.

Currently Environment Canada is undertaking a study that will provide necessary inputs into that study. We're looking forward to positive signals from NRCan as we move this proposal forward.

Moving forward into the issue of icing, obviously it's a common occurrence in Canada. We might step outside today and see some icing on our cars.

When icing happens, it reduces the efficiency of existing wind parks and causes them to shut down in some cases. The efficiency of the blades is reduced as ice accumulates on them.

We need to improve the prediction. We need to improve the tools to reduce the amount of ice that grows on blades when freezing rain or other such events occur. There is some limited research, but we can do a lot more. Countries like Sweden, with much less wind than us, are outpacing us in that area.

WESNet, or Wind Energy Strategic Network—a group of universities across Canada that have received significant funding from NSERC and that are about to run out of that money—has done a lot of research on that. The TechnoCentre éolien in Quebec, which receives federal and provincial funding, is at the forefront on that in Canada.

Certainly we could do more. We'd be ashamed to see Sweden outpace us in an area where we should clearly be leaders.

The next page addresses remote communities and the harsh climate. This report is not yet public, but I understand there is a report coming out, with the support of Natural Resources Canada, that details the number of remote communities and their reliance on diesel fuel, and what that means to them in terms of exposure to volatile fuel prices and significant environmental costs associated with emissions and the storage of large amounts of diesel fuel, which can only be brought in at certain times of the year, requiring significant amounts of storage of fuel.

The opportunities are nearly endless, especially when we start looking at remote operations. Just last year, our second of our third territory had brought a new wind project online at the Diavik Diamond Mine. That was a fully private investment. That shows the opportunity is there. It shows the need is there.

Studying how we can better interconnect wind in these very remote electrical grids, which are different from very broad transmission grids, is an area that certainly we could be leaders in as well. Benefits from environmental, economic, and local labour force perspectives can certainly be realized when we look at these sorts of opportunities.

Lastly, forecasting is a tool that is used to minimize challenges associated with variable energy. We're not talking about the six o'clock news weather forecast. We're talking about very sophisticated forecasts that look five minutes, one hour, three hours, two days ahead at what the wind is going to be, at what we think it's going to be. With that knowledge in hand, the system operator can ensure that they have a reliable and efficient system.

Certainly if you asked any system operator around the world if they'd like to have a better knowledge of what's coming up in the next hour as far as the wind goes, they'd say they would love to. The more knowledge they have and the more accurate that forecast is, the more efficiently the rest of the system operates as well, including the wind system itself on the grid.

The occurrence of improved forecasting will be shown as provinces like Alberta, Ontario, and Quebec continue to improve their forecasting. As these provinces grow their amount of wind on the grid, we'll find that the need for forecasting grows significantly as well. Certainly that's an area we can focus on. There has been some work with Environment Canada and Hydro-Québec, but obviously there's always room for more.

In conclusion, we certainly appreciate the involvement of the federal government in terms of R and D investments in Canada. It's reaped significant rewards in terms of improving efficiencies, improving the way wind is interconnected, improving the way we see wind at the community level as well. But there's room for more, and when we look at the way Canada is placed in the world, we think that's quite obvious.

When we look at the technology road map, there are certainly areas where we can identify significant need; integration, icing, remote communities, and forecasting are some, but that's not to take away from the need in other areas, such as storage and so on.

Thank you for your time. I'd be happy to entertain questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Levy, for your presentation today.

Our third witness today is from Suncor Energy and is here by video conference from Calgary. Mr. Bradley Wamboldt is the general manager, supply chain management and operations, business services.

Welcome to you, sir. Thank you for being with us. Please go ahead with your presentation for up to 10 minutes.

[Bradley Wamboldt, General Manager, Supply Chain Management - Operations, Business Services, Suncor Energy Inc.]

Thank you, Mr. Chair.

First, let me say that Gordon Lambert, our vice-president of sustainability, intended to be here today. Unfortunately, he's quite ill. I've been asked to stand in for him, given my previous role as general manager of tailings operations in Fort McMurray, as well as the fact that I spent the previous four years implementing our TRO technology on site. I am going to read from some prepared remarks and take questions afterwards.

Good afternoon, Mr. Chair and members of the committee. It's a pleasure to be here as part of this important discussion on innovation in the energy sector.

At the outset, I wish to extend my congratulations to the committee for the great work that it has been carrying out over the past few years. The committee has looked at a number of interesting issues, all of which are leading to increased understanding and appreciation for the tremendous work being carried out in Canada's energy sector. Suncor is proud to have been part of some of your earlier studies, and we are equally proud to be part of this one today.

Suncor has had the pleasure of hosting several of the members of this committee on tours of our oil sands operations, including our reclamation activities and, more specifically, our tailings management. As such, we are pleased to be here to offer insight and further understanding on TRO.

As a starting point, I thought I would take a few minutes to talk about Suncor and then address our approach to tailings management. Suncor is Canada's largest integrated energy company and, while we pioneered the development of oil sands in 1967, our operations now include upgrading, conventional and offshore production, both on Canada's east coast and in the North Sea, and our refining and marketing business, which operates four refineries as well, in Edmonton, Sarnia, Montreal, and Denver.

For many of you, I hope we're known as Canada's gas station, retailing products through a network of 1,500 stations under our Petro-Canada brand.

We're also very proud of our growing renewable business, with six wind farms now in operation in Alberta, Saskatchewan, and Ontario, and Canada's largest biofuels facility and ethanol plant in Sarnia.

While we maintain a significant scope of operations, it's our integrated business model—all pieces fitting together—that helps us drive value for our shareholders, spur investment in the resource, and contribute to the economy through jobs, taxes, and royalties.

Clearly, the biggest single challenge to our industry's continued success is demonstrating that we are developing and can continue to develop the oil sands in ways that minimize our impact on precious air, land, and water resources. The good news is that we're making significant progress.

On the air front, our industry is working hard to address carbon emissions. Compared to 1990, the oil sands industry as a whole has reduced energy emissions intensity by a third. That puts us among North American leaders on this front, along with the steel industry in Ontario.

Water use within the industry continues to decline. As an example, Suncor has reduced water use at our oil sands operations by 50% since 2004. Despite bitumen production nearly tripling, our water use is below 1998 levels.

If anyone doubts our industry's ability to drive positive change, consider what we're doing on tailings ponds. All mining operations produce a waste product known as tailings. For the oil sands industry, the sheer volume of tailings and the fact that they're difficult to solidify has meant building more and more holding ponds. To put it bluntly, the ponds are big, unsightly, and difficult to reclaim. However, we are making game-changing progress when it comes to tailings ponds. Allow me to quickly review for you our tailings challenge.

Tailings are leftover mixtures of fine clay, sand, water, and residual bitumen that are produced during the extraction process which separates the bitumen from the oil sand. Tailings are pumped into holding ponds, where the solids settle from the water.

The heaviest material, mostly sand, settles to the bottom. Water rises to the top, and the middle layer, mature fine tailings or MFT, is made up of fine clay particles suspended in water. Some of these MFT particles settle, but most remain suspended in water. MFT takes many decades to consolidate to a state where it can be reclaimed. As a result, Suncor has required more and larger tailings ponds over the years to store MFT, but these ponds take up space and are a significant environmental footprint.

In response to this enormous challenge, Suncor implemented a new tailings management technology that promises to dramatically accelerate the pace of reclamation. TRO is a new dewatering process developed by our company that will reduce our tailings backlog and the need for future ponds. It should also allow us to reclaim entire mine sites in one third of the time it now takes. Implementing the TRO process involves converting fluid tailings, the leftover material produced through the extraction process, into solid landscapes at a faster rate. To accelerate the speed at which the solid landscapes are formed, MFT is combined with a polymer that causes clay particles to bundle and separate from the water. The MFT mixture is then deposited in thin layers over sandbanks with shallow slopes to dewater. Water released during this process evaporates or drains back into the settling pond for reuse in the extraction process. Once the MFT has dewatered, it is capable of being reclaimed in place or removed to another location for final reclamation. At the end of 2012, we will have spent more than $1.2 billion to implement this technology.

Because tailings management is an industry-wide concern, all seven oil sands companies currently running mine operations have committed to an unprecedented level of cooperation on this issue. Suncor, for its part, has agreed to share its patented technology with industry competitors as well as university and government scientists so the environmental benefits can be maximized. The progress we are making on tailings is something we believe we can repeat in other areas including greenhouse gas intensity and water-use reduction and discovery of more efficient energy sources to power our operation.

We look forward to accelerating environmental improvements. In early 2012, along with other oil sands producers, we announced the creation of Canada’s Oil Sands Innovation Alliance or COSIA. To our knowledge COSIA is the largest collaborative effort of its kind in any industry anywhere in the world. But collaboration on our energy future must go well beyond industry alliances. We need to involve every sector of our economy and all our citizens in an informed, fact-based dialogue about the path forward.

Suncor has a strong track record of engaging with communities and stakeholders including critics of the oil sands industry. We believe that no one has a monopoly on good ideas. When it comes to our shared energy future, we need to get past our differences to that which unites us: strong communities, a healthy environment, and ample economic opportunity for the future. By listening closely to the concerns of our stakeholders and responding in an appropriate and timely manner, we are working to build bridges rather than walls.

As many here know, success in the energy industry is achieved by taking a long-term view. Not only are we collaborating on environmental performance but we’re also working on a world-class water monitoring system, facilitating discussions on a national energy strategy, working together on socio-economic impacts, and more. Our industry is responding to our stakeholders and changing the way we do business.

I’m confident that by working with our stakeholders and finding workable solutions to environmental and market-access questions, we can continue to be a strong force in the Canadian and global economies.

On behalf of Suncor, I appreciate the opportunity to be part of the committee’s study and look forward to any questions you may have.

Thank you.

[The Chair, Conservative, Leon Benoit]

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

We'll go to the final presenter of the day by video conference from Edmonton, Dr. Murray Gray, director and professor, University of Alberta, Centre for Oil Sands Innovation.

Welcome, sir. It's good to have you before our committee again.

[Dr. Murray R. Gray, Director and Professor, University of Alberta, Centre for Oil Sands Innovation at the University of Alberta, As an Individual]

Thank you very much, Mr. Chairman, for inviting me to participate by video conference this afternoon.

I would like to bring my perspective as a university researcher and leader with a particular interest in energy research and development and significant activity in oil sands processing.

The Centre for Oil Sands Innovation at the University of Alberta was established in 2005 as a collaboration between universities, industry, and government. A $20-million commitment from Imperial Oil was leveraged in partnership with Alberta Innovates, the Natural Sciences and Engineering Research Council of Canada, and Natural Resources Canada.

Currently we have 20 active projects with seven universities across Canada and with government labs as well. We're focused on breakthrough technologies for oil sands mining, focusing on reducing the footprint of the mining operation; trying to extract the bitumen without freshwater consumption, and with minimal creation of tailings; and upgrading the bitumen to valuable products with less rejection of resources and higher energy efficiency.

The Centre for Oil Sands Innovation is only a small part of an extremely large effort on energy at the University of Alberta, where we estimate we have as many as 1,000 researchers, faculty members, graduate students, and lab technicians working on not only oil sands but a range of fossil and renewable energy sources.

It's with that basis that I would like to comment on the questions posed by your committee with respect to the role of the federal government in energy innovation.

In terms of the current status of research and innovation, let me comment specifically on the oil sands industry, where the industry as we know it is largely the result of the application of Canadian inventions and continuous innovation to an extremely significant world-class resource. We have a thriving ecology of industrial innovation that is supported by both university research and government laboratories, such as the CANMET labs of Natural Resources Canada.

The investments by government in the 1970s and 1980s provided some of the key prerequisites for the oil sands industry as we know it. One was a range of new ideas that have been subsequently commercialized and developed into important new technologies. The other was highly trained personnel to actually move into the industry and make that happen. I think it's important to keep both of those aspects in mind when we look at the long-term strategic role in supporting energy research.

As an example, the research partnership program of NSERC was essential for the expansion of university capacity since 1990, especially at the University of Alberta, by supporting university-industry partnerships.

I'm very happy, Mr. Wamboldt, that Suncor is one of our most important partners in many of these efforts.

During that period, though, NSERC did not actually identify oil sands as an area of strategic importance; rather, their general programs enabled a broad range of industry partnerships to develop and flourish and launch a huge amount of very important work.

I think the point here is to think about enabling a broad range of activities and not try to pick too many as high priorities. An example is the national centres of excellence program, which for most of its history has had no particular activity whatsoever in the oil sands, with the exception of one recent effort that includes work on carbon dioxide emissions only.

In terms of comparison with other countries, clearly Canada is a world leader in research and innovation for production and processing of oil sands and heavy oil. The oil sands technologies in many areas are moving internationally and are having a significant impact.

I won't spend too much time talking about new technologies except for two that I'm particularly excited about. Since they're launched from university labs, they have a longer timeline than the kinds of developments you've heard about so far this afternoon.

The first is non-aqueous extraction, where we take the mined oil sands and extract the bitumen without using water. By using solvents and other chemicals, we have promising results that show that we can create dry tailings instead of some of the wet tailings materials that Mr. Wamboldt was talking about with the TRO process. This approach uses an insignificant amount of fresh water and leaves no tailings ponds.

The second technology that's further down the road is a new class of very high-activity catalysts, using cheap metals like iron and nickel, that would enable much cheaper upgrading of bitumen from the oil sands into high-quality crude oil.

From the university perspective, we've seen many new technologies developed in the oil sands. As I said, we see a very rich level of innovation and commercialization going on.

The main barrier we've seen on the university side has been intellectual property. It was delightful that the oil sands companies, with Suncor as a leader, were able to put aside intellectual property issues and combine efforts to form COSIA last year.

In terms of what role the federal government can play in strengthening the foundation, the federal government is responsible for international relations, but from the perspective of the University of Alberta, we see relatively weak support for international research linkages related to energy in a range of other areas.

The University of Alberta is internationalizing its research effort. For example, we have a very large collaboration with the Helmholtz Association in Germany focused on oil sands research. We're building a new collaboration with the top university in China, Tsinghua University, focused on coal conversion and carbon capture technologies.

Unlike many other western countries, the federal agencies that work with universities on research have a much narrower mandate to help support and encourage international linkages. This is an important gap. It's not unique to energy but cuts across many different sectors.

Major problems of research like the oil sands need not only the best brains in Canada but also international cooperation to bring the best available minds to bear. We think the support, not for money to go overseas but to help fund and support Canadian efforts in joint international efforts, is an important opportunity to advance energy leadership not only in Canada but internationally.

Thank you for your attention. I'd be delighted to answer questions.

[The Chair, Conservative, Leon Benoit]

Thank you, Dr. Gray, for your presentation.

We have four presentations that will be very helpful to us in preparing our report.

Just before we get started with questions and comments, I want to say a couple of things.

First of all, we will have a short future business meeting at the end of this, at 5:15.

Secondly, I want to take this opportunity to introduce a new member of our committee, in fact a new member to this House, elected in a byelection in Calgary Centre, Joan Crockatt.

Welcome to our committee. We're delighted to have you here and look forward to your active participation.

Let's go to questions and comments.

Mr. Trost, you have up to seven minutes.

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

Thank you, Mr. Chair.

To the witnesses, if you're new here, seven minutes goes past very, very quickly.

I'll start with you, Mr. Whittaker. Let's say I have a company that I've put together with a few of my friends. If I come to you and say that I need some help, what are the practical things you can do? What are the successes you've found? Maybe more importantly, what are the failures where you haven't been able to help smart guys with a better mousetrap to move forward to the next level and maybe sell their product or get a Suncor or something interested?

Briefly, what works, what doesn't, and how would you help me and my colleagues around here when we start our next company?

[Rick Whittaker]

Great. No problem.

The first thing is to have a conversation with SDTC. Our organization is one that provides funding to companies. That's usually what gets people interested. But what they really find valuable is not the money; what they really find valuable is actually the support they receive from such programs as our tech adoption or follow-on funding—the coaching.

To get these folks who are coming out of labs, coming out of getting together in their garage and saying, “Hey, we've got a great new technology”, to now become at a tiered level where they can sell product into large companies like Suncor is a lot of work. There's a cultural divide. Getting from the entrepreneurial, where you break all the rules to see if something happens, or if you can make a go of something, into a really well-run organization is an awful lot of work. And that has to happen in a very short period of time. You're talking about a timeframe of 18 months, two years, five years to see these things go.

To do that involves an awful lot of coaching. One thing you can expect by coming to SDTC and to organizations that do the types of things we do is not so much just about the money. It's how do you partner? Who can you introduce me to? What should I be doing at this stage of my company? What are the most important things in order to realize that opportunity?

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

Okay.

To take away from that and ask another question, I'll ask you, Mr. Wamboldt, from Suncor, how you take advantage of situations like that. When these junior companies or whatever, these bright inventors, come to various organizations, how does a company like yours say—not just through in-house R and D, but how do you actually say—that, hey, this guy has an innovative project, so how do I integrate that?

Do you look for opportunities at that? If so, how? If not, why not?

[Bradley Wamboldt]

I'll start by saying that it's not exactly my area of expertise, as in Suncor I was previously in our operations group, but I can say that we have a large technology group, both in Calgary and on site, that does look for innovative new solutions. They work with universities and other research providers.

I think companies like Suncor can offer access to materials, certainly, to do testing on, as well as space on our site to perform research live, if you like, in taking things out of the lab to the next step. Suncor in particular does not do a lot of—

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

Okay. So you don't do a lot of work with small, innovative companies. Most of what you're doing, then, would be in-house?

[Bradley Wamboldt]

Well, what I would say again is that it's not my area of expertise, but we have worked with—as I understand it—outside research providers and with small companies, with opportunities to work on site.

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

Okay. Thank you.

I sort of cut you off, Mr. Whittaker, so if you want to, keep going a little bit on where you're going and finish that off.

[Rick Whittaker]

It's indeed a great topic. In fact, with Suncor in particular we have companies that do partner with the organization, such as EnSolve.

I think we heard earlier today from the witnesses about how we need to reduce water and about all the fantastic work that has been done to reduce water. One of the ways we reduce water in different operations like SAGD—steam-assisted gravity drainage—extraction is to substitute solvents for water.

Where do those innovative solvents come from? They come from small companies, but do those small companies have the capacity and the wherewithal to scale up? That's part of the bridging. That's part of the growing: to allow small companies to deal with large companies. That's really what's needed. And you know what? The industry puts their money behind it. When I see that happen, our money is leveraged two or three times over.

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

Okay. Let me then go to Mr. Gray.

You said a couple of things that struck me as interesting. You mentioned the importance of people, which ties in to what Mr. Whittaker is saying: not just people individually but how to coordinate them. Then you brought in the international perspective, which again is about coordinating people but maybe in a different way, on a different perspective.

Could you comment about how we could possibly coordinate and integrate internationally people with the various programs that we have here and about the human resource aspects of what we need to do? How do we tie this in? If you can tie it in with any of the other witnesses, that just adds to their testimony as well as yours.

[The Chair, Conservative, Leon Benoit]

Go ahead, Dr. Gray.

[Dr. Murray R. Gray]

Let me give you an example based on our work with researchers in Germany with the Humboldt institute. That's a partnership between the University of Alberta and the Helmholtz Association, which is the German equivalent of the National Research Council. We have teams of researchers from Canada and from Germany who are working on applying new technologies, particularly for land reclamation. In dealing with some of the sites—for example, at Suncor—they've been advising on how to bring in new technologies that have been tested in Germany for reclamation of mine sites and that can be applied in Canada to speed up reclamation and to enhance the development and restoration of active ecosystems.

This is an example of where another country has had significant experience, and we're working with them to try to bring that activity to Canada and establish whether some of those ideas from Germany work in the boreal forest of Canada or whether they don't work. That's part of the screening that's essential before it can be applied on a large scale. I'd like to think that in terms of examples we are interested in collaborative research and in getting our students working with German researchers to learn about the best they have to offer. That's an example.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Trost.

Thank you, Mr. Gray.

We go now to the official opposition critic.

Mr. Julian, you have up to seven minutes. Go ahead, please.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you very much, Mr. Chair, and happy New Year to you and the members of the committee.

I'd like to start with Mr. Wamboldt and Mr. Gray.

Mr. Wamboldt, I've been happy to tour Suncor's facilities a number of times over the last few months. I've been up there of course with the NDP team on natural resources with our leader of the official opposition, Mr. Mulcair as well as a couple of times on my own. So we thank you for your accessibility.

I wanted to quote from an article that was written by Jeff Rubin, who's the former chief economist of CIBC World Markets. He says the following, which was published just a couple of weeks ago:

The rest of the oil sands industry may need to take a page from Suncor's playbook. Before rushing ahead to double oil sands production to 3 million barrels a day—and sending billions more in de facto energy subsidies to U.S. refiners—investors and the Canadian economy may be better off if producers figure out how to capture more value from what they’re already digging out of the ground.

My question to you to start, Mr. Wamboldt, is whether you would agree that the issue of value added is becoming perhaps the significant energy issue that we're going to have to contend with in the coming period. Why do you think the government's falling short on encouraging value added, wanting to rip and ship raw bitumen rather than concentrating and focusing on value added in the way that Suncor has so successfully done?

[Bradley Wamboldt]

I have to apologize to the committee on that particular question. I am not at all briefed on our thoughts with respect to value added. I can tell you what I know with respect to the development of our TRO technology as we were asked, but I'm afraid I don't have a good answer for you, Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I'll ask the same question to Mr. Gray.

Do you not feel that valued added has to be something that we need to emphasize as part of a national energy strategy?

[Dr. Murray R. Gray]

My personal opinion is that you're exactly right. The challenge of course is how to set the strategy and how to make it successful.

What we've seen of the history of upgrading of bitumen from the oil sands has shown us that in some cases it's been extremely successful and profitable. Some of Suncor's operations show that and show the benefit of having a blend of different products, not just bitumen and not just fully upgraded material but everything in between. At the other extreme we have examples of big investments through government-industry partnerships. Depending on the timing, they look either wonderful or awful.

One of the difficulties we see in looking into the future is that when you look at the value of bitumen versus upgraded product, there's a cycle. At present there is an extremely high incentive to upgrade. Five years ago there was very little incentive to upgrade. The challenge, in terms of public policy—and clearly from the government perspective and from the point of view of the public—is that you want to maximize value-added manufacturing, absolutely. But you also don't want to subsidize manufacturing that makes money sometimes and doesn't make money all the time. So you'd have to be very cautious about how to approach that problem. These are products that are going into a world market.