Natural Resources Committee on Feb. 26th, 2013

[The Chair, Conservative, Leon Benoit]

Good afternoon, everyone.

We're back here at the natural resources committee to continue our study on innovation in the energy sector. We have a number of witnesses to appear over the next several meetings, because we did expand our witness list, and everyone wants to try to get in as many witnesses as possible.

Today we have four witnesses with us, two in person and two by video conference.

We have, from the Canadian Gas Association, Timothy Egan, president and chief executive officer. Welcome to you.

We have, from Enerkem, Marie-Hélène Labrie, vice-president, government affairs and communications. Welcome to you again. You were here a few years ago.

We have, by video conference from Calgary, Alberta, from ENMAX Corporation, Robert Hemstock, executive vice-president, regulatory and legal services. Welcome to you, sir.

By video conference from Washington, D.C., from the Energy Recovery Council, we have Ted Michaels, president. Welcome to you, Mr. Michaels.

We'll have the presentations in the order your name appears on the agenda today, so we'll start with Mr. Egan, for up to seven minutes.

Go ahead, please, sir.

[Timothy Egan, President and Chief Executive Officer, Canadian Gas Association]

Thank you, Mr. Chairman and members of the committee, for the opportunity to appear today.

As mentioned, my name is Timothy Egan. I'm president and CEO of the Canadian Gas Association.

CGA is the voice of Canada's natural gas delivery industry. As the map in your handout shows, our members include the natural gas distribution and transmission companies that deliver energy solutions to more than six million homes, businesses, and institutions in communities from coast to coast to coast. What this really means is that well over half of the Canadian population rely on natural gas in homes, apartments, buildings, hospitals, and schools.

Let me also note what isn't shown on the map, which is that we also represent over 50 equipment manufacturers and service providers who are part of our organization.

Today I would like to address three key topics that are relevant to the committee's work on innovation: the role that natural gas as an affordable and efficient energy choice has in supporting current productivity; how the natural gas distribution industry has an important and unique role in driving energy innovation; and finally, two very specific initiatives that we are working on around the innovation theme.

First, on the role of natural gas in support of productivity, what most people don't know is that today natural gas already has a central place in Canada's energy mix, meeting over 30% of the country's energy needs. The majority of our customers are homes, but the greater volume of natural gas is delivered to non-residential customers, such as businesses, institutions, and large industry, for heat and industrial processes.

If you look again at the map, you can appreciate how today extensive pipeline infrastructure and storage facilities have facilitated the bringing of natural gas across the country, and indeed across the continent. In fact, the natural gas distribution sector has invested about $14 billion in this extensive network, and continues to invest about $2 billion each year to ensure the safe, secure operation and maintenance of the natural gas delivery system.

Looking to the future, we think there is significant opportunity for natural gas to affordably and efficiently meet even more of Canada's residential, institutional, and industrial energy needs. These efficiency gains and energy cost savings drive productivity and attract investment to Canada.

Natural gas has always been an affordable energy option, but as Statistics Canada data shows, the cost of using natural gas to heat homes has fallen by about 19% in just five years, improving its energy affordability even more for the end-user.

By comparison, the cost of electricity during the same time has increased by over 12%, and the cost of fuel oil and other refined petroleum products has increased over 46%. While household energy spending, as a whole, is increasing, natural gas continues to be very affordable.

Beyond the benefits to the individual homeowner, this is also of great value to commercial and industrial customers. For schools, hospitals, small businesses, or large industry, any reduction in operating costs while maintaining the same level of client service or production output means that savings can be redirected to other uses or to help maintain and strengthen our competitiveness.

Of course, an added advantage of natural gas is that it is an efficient, clean-burning energy choice, very flexible in its applications, and compatible with many other technologies. Further, natural gas technology applications are highly efficient.

This brings me to how the natural gas distribution industry has an important and unique role to play in driving energy innovation, the subject of your discussions. Distribution companies have a long history of investing in the people and communities where they operate. That means they are experienced in bringing new technologies to customers; they're well financed and stable, and therefore well-positioned to initiate projects and help mitigate risk; they have a skilled workforce to operate natural gas systems; through cooperative joint efforts, they can bring new energy end-use technologies into operation quickly; and they have a history of designing and operating innovative and cost-effective programs.

With this expertise and history, natural gas distribution companies are uniquely positioned to work with a range of stakeholders to help technological innovation move into the implementation and commercialization phase.

To illustrate some of the specific things we're doing on innovation, let me highlight two initiatives currently under development.

The first is called ETIC, or Energy Technology Innovation Canada. It was created in 2011 by the natural gas distribution industry to stimulate the application of new—and improvements to existing—natural gas end-use technologies. We have four specific areas of focus: industrial use, transportation, integrated community energy systems, and renewable natural gas. These are areas where we think there is opportunity for greater use of innovative and efficient natural gas technology solutions.

ETIC works to establish relationships with other interested private or public bodies to leverage support for its innovation agenda and for specific projects. We have worked with CANMET; the Gas Technology Institute in the United States; the European Gas Research Group; and we're discussing potential collaboration opportunities right now with Canada's National Research Council and Sustainable Development Technology Canada.

On the latter, let me note particularly our current discussions around a targeted cooperative funding mechanism to drive innovation in applications of natural gas. We believe that together CGA and SDTC can advance some significant project opportunities to the benefit of Canadians.

To date through ETIC, 20 projects with a total value of approximately $9.5 million have been moved under way.

The second slide in your package highlights some of the specific ETIC projects that have come forward, including examples of the partners involved and some of the dollars contributed by partners.

We think ETIC offers a unique forum for projects with interested partners where technology and innovation lessons are shared and dollars can be leveraged. We want to build a closer relationship with government here wherever possible. I note the hot water heater project as an example of where we have worked closely with NRCan and leveraged significantly on public investment on a project that delivers real benefits in terms of energy efficiency savings to customers.

A second effort I want to raise with the committee is one around the opportunity for natural gas in what we call off-pipe communities, including across Canada's north. If you look at the map I gave you and referenced earlier, you can see that today's natural gas distribution network serves customers in and near urban centres. We believe there is an opportunity to expand the system to deliver more affordable, cleaner, and more efficient energy services to customers, communities, and industry located off the existing distribution system and in more remote areas.

We're having discussions with technology providers like General Electric and large end-users like Canada's mining industry through our counterparts at the Mining Association of Canada to share ideas about finding a natural gas solution to northern community energy needs.

Many of these communities are currently dependent on diesel energy. Looking at cleaner and more affordable energy solutions for the customers in these communities can serve a number of national priorities. I'll note several of them: driving economic growth and enhancing productivity; fostering economic development in Canada's north; identifying new markets for Canadian products like natural gas; advancing environmental objectives; supporting an innovation agenda; and offering northern communities more cost-effective use of energy dollars, often public energy dollars; and better performance of energy services.

At this time we're in the process of investigating LNG, or liquid natural gas, technology options across the off-pipe market. We're investigating the logistics and economics related to delivering LNG by truck, barge, or rail in a reliable way to these customers. We're developing a robust map of the opportunities as a visual aid for all decision-makers to understand the scope and scale of it. And we're investigating the possibility of pilot projects in select locations across the north.

As we look to answer all of these information points, we'll be looking at opportunities to engage with officials at Natural Resources Canada and Aboriginal Affairs and Northern Development.

Mr. Chair, thank you for the opportunity to present to the committee today. I think I'll stop here. I look forward to questions from committee members.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Egan.

We go now to Marie-Hélène Labrie, from Enerkem.

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

[Marie-Hélène Labrie, Vice-President, Government Affairs and Communications, Enerkem]

Thank you.

Good afternoon. First, on behalf of Enerkem, I would like to thank you for having invited me to participate in the Standing Committee on Natural Resources' work on innovation in the energy sector.

In my presentation I will discuss Enerkem's experience, the benefits of its innovation for Canada, the challenges of developing and commercializing innovations in the energy sector, the role of the government, and the potential for the future.

Enerkem makes biofuels from waste. With its proprietary technology, Enerkem converts non-recyclable municipal solid waste, wood residues, and other waste feedstocks into ethanol and renewable chemicals.

Headquartered in Montreal, Enerkem operates both a demonstration plant and a pilot facility in the province of Quebec.

Enerkem's clean technology is now ready to be deployed commercially. The company is building a full-scale waste-to-biofuel facility in Edmonton, Alberta, and is developing similar facilities in Varennes, Quebec, and in Mississippi.

Each of these facilities will produce 38 million litres of second-generation ethanol annually, which is enough to fuel 400,000 cars on a 5% ethanol fuel blend.

Enerkem's technologies and facilities will help diversify our energy mix and make greener everyday products while offering an alternative to landfilling.

The company was founded in 2000 by Esteban Chornet, professor emeritus at the Université de Sherbrooke, and his son, Vincent Chornet, an entrepreneur. Today, it has over 130 employees.

Since its creation, Enerkem has raised over $200 million in private funding. Enerkem's shareholders and investors include venture capital groups from Quebec and the United States. Enerkem has even managed to attract big companies like Waste Management and Valero, the parent company of Ultramar, as shareholders.

Today, Enerkem produces cellulosic ethanol from used electricity poles and urban waste residues at its demonstration facility in Westbury, Quebec. Enerkem, through its affiliate, Enerkem Alberta Biofuels, has signed a 25-year agreement with the City of Edmonton to build and operate a plant that will produce next-generation biofuels made from non-recyclable and non-compostable municipal solid waste. This project is a partnership between Enerkem, the City of Edmonton, and Alberta Innovates. It is expected to be the world's first collaboration between a metropolitan centre and a waste-to-biofuels producer to turn municipal solid waste into fuels and green chemicals. Construction is well under way, and this commercial facility will begin its operations later this year.

Enerkem's future plant in Varennes will be operated in partnership with GreenField Ethanol. This plant will use non-recyclable urban solid waste, like construction and demolition debris. Engineering work is advancing and construction will begin this year.

This first-of-a-kind facility will be located on the site of an existing grain ethanol facility operated by GreenField Ethanol. It will be among the world's first integration of first- and second-generation biofuel facilities. The federal government, via the SDTC NextGen biofuels fund, is contributing to this project.

Enerkem's industrial innovation produces many spin-offs.

First, in terms of the economy, Enerkem has over 130 employees today, which is a 400% increase over 2008. Each new full-scale Enerkem plant will create 40 direct permanent jobs, about 50 indirect permanent jobs and over 200 construction jobs. These plants stimulate jobs in the manufacturing sector. The plant being built in Alberta is generating over $40 million in spin-offs in industrial equipment and engineering services contracts in four provinces in Canada

In terms of energy, Enerkem is increasing biofuel production in the country and will allow us to reduce biofuel imports from the United States and Brazil.

In terms of the environment, Enerkem's plants help reduce greenhouse gas emissions by over 60% compared to gas. In addition, they offer communities a sustainable solution to solid waste management as well as an alternative to land filling and incineration.

There are many challenges related to developing and commercializing an innovative technology like Enerkem's. Government policies and programs play a crucial role in ensuring the success of these innovations, from R and D to commercialization.

During the development and pilot phases, R and D credits from Quebec and the federal government, as well as research support programs from Quebec's Natural Resources Ministry and the federal government's Natural Resources Department, played an important role.

Aside from the technical challenges, it is the financing chain that is the biggest challenge, because industrial innovation in the energy sector requires significant capital. For its demonstration phase, Enerkem benefited from support from SDTC's Sustainable Development Technology Fund. Today, SDTC is contributing to financing Enerkem's commercialization phase by supporting the planned plant in Varennes, Quebec, through its NextGen Biofuels Fund.

The one cloud in the sky is the fact that the ecoENERGY for Biofuels program isn't available for next generation fuels.

Commercial projects for the production of next-generation biofuels are now ready to be developed in several provinces across Canada. Unfortunately, these projects do not have access to the ecoENERGY incentive for biofuels producers, given that the program was closed for new applicants in 2010. This situation puts these first-of-a-kind projects at a competitive disadvantage with existing Canadian biofuel producers who are receiving such incentives, as well as with their U.S. cellulosic biofuel peers, who are all eligible to receive a federal producer incentive in addition to a premium, a cellulosic RIN credit, as part of the U.S. RFS program.

The ecoENERGY for biofuels incentive has proven to be an effective incentive to attract private investors for the first-generation ethanol sector. We strongly believe that next-generation biofuel producers should also benefit from an operating incentive for their first years of operation.

The cellulosic fuels sector has great potential. One just has to look at the spin-offs being generated by first generation ethanol today to understand the economic impacts.

In its 2011 report called “Ethanol's Potential Contribution to Canada's Transportation Sector”, the Conference Board of Canada stated that:

Ethanol production is contributing almost $1.2 billion in annual economic impacts and generating almost $240 million in federal and provincial tax revenues.

Future growth within the biofuels sector is coming from the next-generation biofuels sector. This sector offers synergies with traditional industries such as forestry, agriculture, and waste management. In North America this sector has strived and built cellulosic biofuels facilities at a fast pace, given the additional challenges brought by the world financial turmoil, which significantly reduced access to capital. Large-scale commercial projects are now being built and developed in several states and provinces across North America.

I have with me the report revealed last December by U.S. Secretary of Agriculture Tom Vilsack, about the industry progress. The map showing current cellulosic biofuels facilities and commercial projects under development and construction demonstrates that this sector is ready to make a significant contribution to renewable fuel standards in North America.

Enerkem's project in Edmonton is included in this map, given its importance to the North American advanced biofuels industry.

In conclusion,

I would like to remind you that industrial innovation in the energy sector stimulates regional economies, diversifies our energy portfolio throughout the country, provides an opportunity to revitalize the manufacturing sector in Canada, and positions the country at the forefront of clean technologies.

As Canada is challenged to reduce its GHG emissions, our innovations and commercial projects can also contribute to attaining our GHG reduction commitments.

Enerkem is now entering its commercialization phase. It is at this point that innovative companies achieve their commercial potential and generate the expected economic, social and environmental spin-offs. Enerkem hopes to continue to contribute to economic development in Canada by developing next generation biofuel production plants here and around the world.

Thank you for your attention.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Labrie from Enerkem.

We go to our next presenter now, by video conference from Calgary, from ENMAX Corporation, Robert Hemstock, executive vice-president, regulatory and legal services.

Please go ahead with your presentation, sir.

[Robert Hemstock, Executive Vice-President, Regulatory and Legal Services, ENMAX Corporation]

Thank you, Mr. Chairman and members of the committee, for the invitation to speak.

Today I will be speaking specifically about innovation in the electricity sector.

ENMAX is a for-profit corporation wholly owned by the City of Calgary. We are in three core businesses. One is the generation of electricity through the ownership of coal power purchase arrangements, natural gas, wind, and micro-generation facilities. We also own regulated wires in the city of Calgary, both transmission and distribution wires. We also supply end-use customers in Alberta—industrial, commercial, and residential customers—with electricity and natural gas.

We have revenue of approximately $3 billion a year, 1,700 employees, and approximately 830,000 metered customers in Alberta. We are in business across Alberta, not just in the city of Calgary. We own or control over 2,000 megawatts of actual electricity generation in the Alberta market today.

I'm going to touch on two examples of what we consider to be clean, cost-effective, efficient, and reliable electricity generation projects that we are pursuing in Alberta at the present time.

The first project I'm going to speak about is the Shepard natural gas-fired combined cycle generation plant, which is an 800-megawatt natural gas-fired plant that is scheduled to commence operations at the beginning of 2015. It is approximately 50% built at the present time. We have just entered into a partnership with Capital Power Corporation, which is another Alberta-based corporation, to which we have sold a 50% interest in the Shepard facility.

This facility contains world-class technology, the latest Mitsubishi natural gas turbines, which are both efficient and clean. We measure efficiency and cleanliness in relation to generation fundamentally by two measures: one is the amount of natural gas that it takes to produce a megawatt hour of electricity, which is the efficiency measure, and the environmental measure is normally criteria air contaminants and greenhouse gas emissions. This is certainly a world-class technology in relation to those emissions.

In addition to producing electricity, the design of the plant involves the availability for the use of low or medium pressures of steam to be used to provide heating and cooling for new developments in the Shepard area, which is a very large industrial park in the southeast portion of Calgary where the plant has developed.

Ultimately, we are hoping to transition the waste heat through cooling towers to use the waste heat to support commercial processes and heating processes. The facility is also quite innovative, in that it will use reclaimed water from the city of Calgary's Bonnybrook Wastewater Treatment Plant. The water source for this natural gas-fired cogeneration plant will not come from a river, but rather from a waste treatment facility for make-up and boiler make-up water. It is located close to Calgary, and the benefit of efficiency in that regard is the transmission infrastructure that's needed to support the movement of the electrons that it produces to the end-user is obviously less than if it were located in a remote portion of Alberta.

That is a key facility for us that we have presently under development.

The second facility I would like to speak about today is the Bonnybrook Energy Centre, which is also a natural gas-fired combined cycle generation plant. It will be located within a few kilometres of downtown Calgary. The innovative element of this project is that the waste heat from this gas-fired plant will be used to heat buildings in downtown Calgary. In fact, the Calgary district energy centre is already built and operational. It is located about two blocks north of the Saddledome, on 9th Avenue. Right now, through natural gas-fired boilers, it is producing hot water that is used to heat city hall, Calgary's Bow Valley College, and a number of other high-rise buildings in downtown Calgary.

The ultimate vision for this combined facility is that the power plant that will be built in the Ogden area, about two kilometres from the existing district energy plant, has piping from it to the district energy plant, where the waste heat from the natural gas power plant will be piped to the district energy centre and distributed to buildings in Calgary. The present capacity of the district energy plant is ten million square feet of office space.

Those are the two projects. There are other projects noted in the materials I submitted that ENMAX considers to be innovative, but given the time constraints, I won't touch on those in my presentation.

With respect to the question of how the federal government can assist in innovation, I would remind the committee that Alberta is a competitive electricity market, so investments are driven by competitive market pressures, and shareholder money is at risk. My key message for the committee in relation to that is that regulatory certainty and a reasonable expectation that there will be recovery of investments and a reasonable return on investments is critical to the development of new generation in Alberta, especially in a competitive energy market.

A fine example, in our view, of recent legislative steps taken by the federal government in this regard is the coal-fired generation of electricity regulation, where the federal government has made it very clear what the expectations and requirements will be for the future of coal-fired generation in Alberta, and it has provided industry in Alberta with a very clear picture of the retirement schedule of those facilities. That is critical to supporting the development of the types of innovative technologies that I've just spoken about, because now companies like ENMAX understand what the supply portfolio will look like in Alberta long into the future and can plan accordingly for the development of new generation to meet those supply requirements.

The final component of my submission relates to the future challenges to innovation. There is one more piece left that the federal government is involved in that impacts the electricity sector significantly, and that is the regulation of criteria air contaminants. Our message here is that the Alberta government in particular is already involved in the regulation of criteria air contaminants, and we would very much urge the federal government—which we're pleased to see is actually happening at this stage in the game—to continue to work closely with the Alberta government to ensure that any regulations relating to criteria air contaminants do not stall the progress on innovation and do not make projects uneconomic that otherwise are economic.

Thank you again for allowing us to make a presentation. I'd be happy to answer any questions.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Hemstock, from ENMAX.

We go now by video conference to Washington D.C., to Ted Michaels, president of the Energy Recovery Council.

Welcome to you, Mr. Michaels. Go ahead with your presentation, please.

[Ted Michaels, President, Energy Recovery Council]

Thank you very much.

Mr. Chairman and members of the committee, I'm pleased to be with you via video conference this afternoon to talk about the role of waste to energy in the innovative energy sector.

I am president of the Energy Recovery Council, which is the national trade association representing the companies and communities engaged in the waste energy sector in the United States. In this role I work collaboratively with the Canadian Energy-From-Waste Coalition, which does excellent work in Canada.

I want to give a little bit of the perspective of what we are doing in the United States and how it compares and complements what's happening in the rest of the world. I think that will give you a sense of how other communities are engaged in this sector and driving innovation.

In the United States there are 85 waste energy facilities. I define waste energy facilities as those facilities that are using municipal solid waste—garbage or trash collected from households and office buildings, or buildings of that nature—and converting it via different technologies, whether it be combustion, gasification, pyrolysis, or plasma gasification, into electricity or steam.

Certainly there are technologies, like the one the Enerkem representative was just describing, where companies are engaged in turning the municipal solid waste into fuel. But in our association we are currently representing those engaged in the electric sector. This is an important technology in order to manage the waste in addition to generating electricity. However, it really is at its core a solid waste management function. If there were no need for trash and waste management, then there would not be a waste energy sector. The energy we receive is a benefit from managing the waste in a sustainable way.

In the United States we believe firmly in the solid waste hierarchy. After reduce, reuse, and recycle as much as you can, the preference is for waste to energy before landfilling. After you reduce, reuse, or recycle, there is going to be waste left over. The most sophisticated countries in the world have a recycling rate of approximately 60% to 65%. Nobody is recycling 100% of the waste, but those countries that have highest recycling rates have the highest utilization of waste to energy and the lowest reliance on landfills. That is a model we would like to advance in the United States, and it would certainly be an illustration of a sustainable model for Canada.

Why is the rest of the world investing so heavily in waste energy? I would argue that some parts of the world—western Europe, Asia—are ahead or are moving ahead of the United States in terms of how they manage their waste. Land mass certainly has a lot to do with a country's interest in waste energy. In western Europe, where population density is incredibly high, the value of the land is very high, and the opportunity to develop new landfills is incredibly challenging, waste energy makes a lot of sense. In a place like China, you would think they would have ample opportunities for landfill. It's a country with a land mass roughly the size of the United States, but it has four times the population. They are going to build hundreds of waste energy facilities in China over the next decade or two. They're well on their way. It's a very exciting opportunity. They are implementing policies that are driving investment in these waste energy technologies.

Why do this? In addition to land management, you want to produce electricity. Everybody has a need for energy. This is a non-fossil source of electricity that should be incentivized. This is a baseload technology. This is unlike a wind turbine. This generates power 24 hours a day, 7 days a week. It has greenhouse gas benefits. On a life-cycle basis it is a net reducer of greenhouse gas emissions. For every tonne of trash sent to a waste energy facility, that is one tonne of trash that did not have to go to a landfill where it would have created methane, which is a much more potent greenhouse gas than carbon dioxide. It is electricity that is generated at one of our facilities that didn't have to be generated at a conventional power station. It was metals that were recycled after the combustion process and were able to be turned into other products, for which you did not need to use virgin materials. There were greenhouse gas savings for that.

When you compare the avoided emissions versus the amount of anthropogenic emissions that are emitted from the waste energy process, our Environmental Protection Agency, and others around the world, have shown that there is a net negative emission of greenhouse gases from a waste energy facility.

As the Enerkem witness mentioned, there are jobs associated with waste energy. In the United States there are more than 5,000 people employed at waste energy facilities and companies across the country. An average waste energy facility, in addition to the hundreds of construction jobs that will be available over a few years, has about 60 employees, who are well paid. These facilities can last for decades.

It promotes recycling. As I mentioned, metals can be recovered from the waste energy process after the combustion. In addition, the communities that engage in waste energy are very sophisticated on a solid waste basis. If you are going to invest the types of capital that are necessary for a waste energy facility, you most likely have a very sophisticated solid waste management approach and you have done as much as you can to get the recycling out of the waste.

In America, the communities that have waste energy have a higher recycling rate than the communities in America that do not have waste energy.

In terms of technology—I get asked this question a lot—the prevalent technology in America is combustion. All 85 facilities in the United States are combustion-based technologies. There are hundreds of companies, though, that are developing alternatives to this combustion. There are companies engaged in the gasification of waste, the pyrolyzation of waste, and plasma arc. These are all promising technologies. However, at this point in the United States, none has been able to produce this technology on a commercial scale in managing mixed municipal solid waste. I would expect that will change over the next few years as folks put more investment dollars at risk on these ventures.

As the technology enhances and improves through demonstration and commercialization, I would expect that we are going to see alternatives to combustion. At that point we will be able to evaluate the ability of those technologies to complement what the existing fleet of waste energy facilities in the U.S. and around the world are doing.

Economics really does make a difference. In the United States, one of the key reasons we don't have as many plants as they do in Europe is that land is not as critical a resource in the United States as it is in Europe. We have a vast amount of land and it is inexpensive. In Europe, they have taxed landfilling heavily, which has made waste energy more competitive.

What we need in the United States—and I would argue that it would be beneficial in Canada—is to incent policy drivers that would drive investment in this technology from the federal or state level, in our case.

The investment dollars are going to follow the policies that promote this technology. Right now that's the United Kingdom and other places in western Europe and in Asia. We would love to see that type of investment made in the United States. There's plenty of waste, and this is a technology that is proven, although it is always evolving. I think there are exciting times ahead in the sector.

I'll leave my remarks at that, and I'd be happy to answer any questions.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Michaels, from the Energy Recovery Council of Washington, D.C.

We'll go now to questions and comments, starting with, from the government side, Ms. Crockatt, for up to seven minutes.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Great. Thank you very much, Mr. Chair.

I'd like to start with Marie-Hélène Labrie, please, just briefly.

I'm wondering if the deferred capital cost allowance, which essentially kicked off the development of the oil sands in Alberta—it made the entire difference in those being developed—would be something your industry would look to. You mentioned entering the commercialization phase, needing some kick-start. Would that be the type of kick-start, in that there's now $240 million in federal tax revenue that's being paid?

[Marie-Hélène Labrie]

Is this like an accelerated depreciation?

[Joan Crockatt, Conservative, Calgary Centre, AB]

Yes, exactly. You use that as a tax write-off until you're making money, so you don't pay tax on depreciation.

[Marie-Hélène Labrie]

I don't know if these plants will necessarily be paying taxes in the first years of operation, so I don't know if this would be a good tool for the first years of operation, but if they can attract private investment, like flow-through shares, for example, it could be used. Certain fiscal mechanisms could be helpful.

I would need to talk to my colleagues in the finance department, but I know that currently there are fiscal incentives available for oil and gas, including flow-through shares, that have been of interest to us and that we have looked at in the past. Unfortunately, those are not accessible to us, as they're usually related to the exploration phase of oil and gas. But I think this is something that should be looked into.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Great, thanks.

Now to Timothy Egan from the Canadian Gas Association.

A lot of people think the gas industry is low-tech, that somehow we're just pushing gas into a pipe and moving it from place to place. I wonder if you could talk about the innovations and the degree of technical competency that people who work in that industry require.

[Timothy Egan]

Yes, that is a common criticism of the industry, because there is the assumption, as you noted, that a commodity is just being run through a pipe and that's all there is to it.

There is significant technology involved at all stages of the value chain for natural gas. The most recent technological innovation that most people know about is through recovery of shale gas from reserves, which has made economical the recovery of vast supplies of gas that were previously assumed to be unrecoverable. That's had a dramatic impact on the North American market, and it looks like it will have a dramatic impact on the global market. That's because of significant technological innovation.

[Joan Crockatt, Conservative, Calgary Centre, AB]

But are we leaders? Are we tenth in the world? Where does Canada sit in terms of actually producing value-added high-quality technical jobs in your field?

[Timothy Egan]

I can't comment on the upstream. We're in the downstream side.

I was going to take you right down the value chain.

[Joan Crockatt, Conservative, Calgary Centre, AB]

You were just going to go down there. Okay, go right ahead.

[Timothy Egan]

I would say that in terms of major transmission lines we are world leaders in technology. We are some of the most significant innovators in large transmission technology, which is not surprising given the distances that we have to move commodities like natural gas across the country.

Downstream I would say we are further down the list as innovators. Many of our technology applications for natural gas are fairly dated. That's why we recently started this ETIC initiative I referenced, in an effort to start to move us up the value chain, or rather up the technology list of countries that are innovators, because we think there are significant innovation opportunities for natural gas.

The second part of your question is about the technical skills and the technology capacity within the industry. It is remarkable. People assume that, as a resource industry, it is just a hewers of wood and drawers of water kind of industry, and of course it isn't at all. The technical skill level is extraordinary right across the value chain. These are highly paid and highly skilled employees, not only on the extraction side of the industry but in the transmission companies and in the distribution industry. In the distribution industry we're looking at about 13,000 to 15,000 employees across the distribution companies.

[Joan Crockatt, Conservative, Calgary Centre, AB]

From coast to coast?

[Timothy Egan]

From coast to coast to coast. We have a utility in Inuvik.

These are technicians, these are engineers—these are highly skilled professionals in a host of different areas. The opportunity to expand on that is really significant as the industry continues to grow, and the affordability of the product is allowing us to consider that.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Okay, great.

What is the safest way to transport oil and gas? I would like you to explain the alternatives to pipelines, please.

[Timothy Egan]

I won't comment on oil because we're a natural gas industry.

Pipelines are an incredibly safe way to transport natural gas, and they've been relied upon for decades and decades to do that. The safety measures that are in place are.... First of all, it's a highly regulated industry at the national level. For pipelines that are interprovincial or international, it's regulated by the National Energy Board, and the safety standards are world-class.

Within each province the utilities are regulated by provincial energy boards. Here in Ontario there is the Ontario Energy Board; the Régie de l'énergie is in Quebec; and its equivalent in Alberta is the Alberta Energy and Utilities Board. Safety standards are very significant. There are often independent safety authorities governing the safe transmission of gas through pipelines and through distribution systems.

[Joan Crockatt, Conservative, Calgary Centre, AB]

I'm going to move you along, because the time is quite short.

What are the alternatives, if you don't transport by pipeline?

[Timothy Egan]

I talked about natural gas opportunities in the north. The reality is that we're not going to put pipelines in place to get natural gas to many of those remote project opportunities; we're going to move it in two other ways: either as liquid natural gas or as compressed natural gas. You will move it in containers of one kind or another, for CNG or for LNG. You can move it by truck, you can move it by rail, you can move it by barge, or you can have intermodal transport for the movement of that product, either as LNG or as CNG.

Those are the alternatives to moving by pipeline. Pipeline is the most cost-effective.