Natural Resources Committee on Feb. 12th, 2013

[Peter Howard]

Very simply, we are not currently looking, nor do we have anything on our agenda, at the economics of actual upgrading to refined products or anything like that. We have a project under way right now that is looking at what we call North America in 2022. We are taking the reserve base as far as oil is concerned and extrapolating it and trying to come up with a supply projection of how big the United States could get as far as domestic production is concerned, and by implication what that means for Canadian oil sands and Canadian conventional oil. The fallout of that is the change in flows on pipelines, using rail as an offset and stuff like that. What we hope to get out of that is a better understanding of how the differential is going to change in the future. The differential is what is driving whether refining should or should not take place.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Julian.

Mr. Hsu, you have up to seven minutes.

Go ahead, please.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Thank you.

Thanks for coming today.

I want to start with Mr. Heintzman. First of all, I want to get a sense of Bullfrog Power. What sort of customer growth have you had in the last five years or so? Can you give me some numbers?

[Tom Heintzman]

Sure. Bullfrog Power launched about seven years ago. In that time, somewhere between 8,000 and 9,000 homes and roughly 1,500 businesses signed up.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Is that growth accelerating?

[Tom Heintzman]

It was quite strong until the recession hit, and it would have diminished almost at the same time, but it's still a growing, healthy market. The United States has a longer history in this than we do, and it's shown quite impressive growth over a 15-year timeframe.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Okay. Any idea of overall numbers of people in Canada who are willing to pay a premium for renewable energy?

[Tom Heintzman]

It's difficult, because you can only tell a propensity to pay, rather than actual people putting down the money. The polling would suggest that in the neighbourhood of 15% of consumers are prepared to pay a premium for environmental products, and sometimes that manifests itself as organic food, hybrid vehicles, etc. You would expect that type of penetration is possible, and certainly we do see in excess of that in the most successful U.S. programs.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Okay, thank you.

Mr. Howard, as I understand it, your institute does some work in projecting future prices for both producers and consumers. Has there been any innovation in producing a forward curve for natural gas prices in the last 10 years? The futures trade out to five years or something. I know that in certain markets, if you can develop the market for longer-term forward contracts, it helps reduce business risk.

[Peter Howard]

I'd have to say no. I'm not sure I absolutely understand your question. On the long-term forecasts, even on price, that we come out with, it's a process of putting a whole bunch of information into a computer model and coming out with that forecast. The answer coming out is only as good as the information going in.

Am I going down the right road here on that?

[Ted Hsu, Liberal, Kingston and the Islands, ON]

I think so. I'm just curious as to whether things have changed since I last looked at it about 10 years ago.

[Peter Howard]

There are several ways of doing price forecasting. Some people absolutely look at the long-run price of gas and then do an extrapolation of that. There are other people who use, basically, just a rule of thumb: gas is going to go up at 2%, following GDP.

The method we use is a very involved method of the interaction between the supply costs of the upstream supply, transportation tolls, and the change in those tolls based on flow volume, and of more importance is the demand side of the spectrum. How big is the market, or how big could the market go?

When I mentioned converting coal-fired plants to gas-fired plants, there's a huge variability in there in the sense that when you get somewhere above $4.50 per mcf, coal becomes another player, and it's very difficult to get them out of there and not have them come back on you.

LNG exports have a huge implication on the North American price, because if you can get it off, if you can bleed the supply off the basin, then the price will move upwards, which will enhance supply and all that kind of thing. We're not secure in our LNG markets yet. We have, as I mentioned, something around 22 projects that are on the books in North America. We only have one project under construction right now.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Thanks.

A question for Mr. Dunn is about fugitive emissions. I'm wondering whether there is third-party monitoring of fugitive emissions in Canada, generally. Or how is that monitoring done?

[Richard Dunn]

That's a good question.

By regulation, the provincial regulator requires that you have a fugitive emissions monitoring program. What this program requires is that on some sort of a regular schedule you go around with fugitive monitoring detection equipment to detect, let's say, leaky valve stems or connections in pipe. Where you find any issues, you will fix them. That's by provincial regulation.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Has there been an innovation in that area?

[Richard Dunn]

Certainly. The detection equipment we use is very, very cool. It's infrared cameras, effectively, so you can see plumes of methane emissions. You can readily detect any kinds of very small amounts of emissions and work them into your maintenance schedule.

Yes, some really neat work has been done to minimize emissions.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

You're using their greenhouse gas properties to detect them, I guess. Is that right?

[Richard Dunn]

Yes, I guess they would have some sort of—

[Ted Hsu, Liberal, Kingston and the Islands, ON]

The infrared radiation is bouncing off the fugitive.... Okay, thank you.

Have there been innovations in technology to control fugitive emissions? Has Canada been involved in that?

[Richard Dunn]

That's a good question.

I would say certainly in terms of what you measure, you manage. I would say it's certainly there, that aspect of measuring fugitives.

Also, on the regulatory front, more and more attention has been paid to ensuring that, for example, the amount of gas that's flared is minimized and that best practices are built around managing flared volumes. That's a good example there of innovation and collaboration with the regulators.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Hsu.

We go now, starting the five-minute round, to Mr. Trost.

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

Thank you, Mr. Chair.

As much as I've tried to get witnesses away from always asking for money, it seems money makes the world go round.

I'm going to start with a question to Mr. Howard about general economic growth. If energy companies have money, apparently they can do more innovative energy developments.

Does the Canadian Energy Research Institute have any estimates of what Canada could forego in economic growth, tax revenue, etc., if some of the pipelines that are currently in the news are just blocked off and they don't go? Canada West Foundation did a bit of a report the other day. I was wondering if you have any data or information or have approached that subject.

[Peter Howard]

Are you talking oil?

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

We're talking oil for now.

[Peter Howard]

CERI published a report in the springtime as it related to what we call the Pacific access, where we are looking at the Trans Mountain and Northern Gateway pipelines. Within that report we drew out of that the economic spinoff effects of the existing operations, both conventional and oil sands. Then we highlighted the GDP growth, employment, taxation, royalty growth, as a result of each one of the three primary pipelines that are being proposed.

You could take any one of those pipelines and say, those numbers there, if that pipeline doesn't go...then that is lost to the Canadian economy. In its very simplest form, what I can suggest to you is that we are about 40% along the full development curve. That's primarily led by oil sands, but it also includes—this is on the liquid side. That would mean there's 60% of the development that's out there. If the pipelines aren't built, it's not going to get to market.