Natural Resources Committee on May 7th, 2013

[Joan Crockatt, Conservative, Calgary Centre, AB]

Am I correct that in the layman's description of Kearl, it's a fairly significant achievement?

Are they now producing a barrel of oil from the oil sands with a GHG level comparable to a refinery-produced conventional oil in the U.S.?

[Greg Stringham]

Yes, that's exactly correct.

The new technology they are using gets them within 2% of the U.S. average. That U.S. average is from 2005, so we think it's moved around. The easy way to say that is it's very comparable, from a greenhouse gas footprint, to the oil they are producing at that plant.

[Joan Crockatt, Conservative, Calgary Centre, AB]

What about water use? Can you tell us what has happened or changed in water use?

[Greg Stringham]

I think there have been two things. I'll talk about a lot of things in the oil sands industry, but it also applies to the natural gas industry. Water use has gone down for the amount of production, which is going up, so they're finding more ways to reuse the water.

For the oil sands in particular, they have been using water out of the Athabasca River and they want to try to minimize that. The latest projects have what we call off-site storage, essentially a lake next door to their plant, in order that during those low-flow periods, they can draw water from that lake rather than draw it from the Athabasca River. That's becoming more—

[Joan Crockatt, Conservative, Calgary Centre, AB]

Is there a key quantifier of how much they've reduced water usage, by any chance?

[Greg Stringham]

They're still using water significantly from the river. Essentially, it's just less than 1% of the total Athabasca River flow, but that's over an annual period.

The real concern is during the low-flow periods. That's why these offsetting lakes are important, so that during the low-flow period, they can draw from a different source.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Okay.

Could I address the benefits to all provinces? I think there is still some feeling that maybe the west and maybe Alberta are the primary beneficiaries.

I know that CAPP has put out quite an interesting list of the Ontario suppliers to the Canadian oil sands, and I counted 300 B.C. suppliers.

Could you outline for us how the benefits actually flow through to other provinces, and to consumers for that matter?

[Greg Stringham]

The benefits of the development of this resource are such that we are drawing on all of Canada and beyond Canada as well.

For our supply chain list, we simply went out and said to name the companies they are working with in these other provinces. There are over 600 in Ontario. Quebec has them. In B.C. there are over 300, almost 400. This is just from the initial list we did.

The real key to us, though, is that it becomes personal, “What does it mean to me?” That's really how Canadians recognize that the benefits are coming through.

One thing that has been a surprise to us actually is the communication we've had for the Prevost bus company out of Quebec. We did a commercial on it, not knowing what it would be, but all of a sudden Quebeckers understood, as the commercial states, that even though the distance between the oil sands and Quebec is 4,000 kilometres, it's very short because 400 coaches are seen as being built in Quebec and moved out that way. That resonates personally with the individual and has an impact on Canadians, more than just saying that it affects all across the country.

We're doing the same now with a company out of British Columbia. Using B.C. forest products, they're building modular facilities that are being taken up and used in the oil sands for kitchens and other things as well. That starts to make it real.

We've looked at the big numbers, but we've also tried to make sure that Canadians understand what it means to them.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Mr. Chair, do I have time for one more short question?

[The Chair, Conservative, Leon Benoit]

Yes, you do.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Okay, I'll just go ahead.

I want to go to the imports right now. Canada is importing a lot more oil than most people understand, and you addressed it. Quebec and Atlantic Canada import 700,000 barrels per day, which is seven-eighths of their oil consumption. Where is that oil coming from?

[Greg Stringham]

That's coming from offshore sources in the world oil market that range from all the way in the U.K. and Norway to Africa and the Middle East.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Quebec imports by far the majority of its oil from Algeria. Is that correct?

[Greg Stringham]

I'm not sure if that's Quebec alone, but that region does import oil from Algeria, for sure.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Why would Quebeckers and Atlantic Canadians not want to continue with that practice of importing a significant chunk of their oil?

[Greg Stringham]

There are at least two or three reasons for that.

Number one, we already have a pipeline in place that could serve them, but it's been flowing in the other direction. It was built back in the 1970s and then reversed to bring oil from offshore into Ontario. Now it's being looked at to reverse and go in the other direction. That is an existing pipeline, so it’s an easy way to satisfy that.

Number two, the price they're paying today is a world oil market price, which we would all hope to get, but in stranded oil in Canada and the U.S., it's about $15 less than that right now, so there is an economic driver as well.

But clearly, the main one is a security driver. Canadian oil for Canadians is an opportunity that they can choose in the marketplace. It doesn't mandate it, but it opens that option for them to choose Canadian oil, and that's where I think they would really want to get it from.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Ms. Crockatt.

We'll go now to Monsieur Gravelle, for up to five minutes, please.

[Claude Gravelle, NDP, Nickel Belt, ON]

Thank you, Mr. Chair.

Thank you to all the witnesses for being here today.

Mr. Lemphers or Mr. Weis, my first question is, have we learned any lessons from Alberta when it comes to energy production diversification?

[Nathan Lemphers]

Absolutely. We can learn a lot of lessons from Alberta when it comes to diversification.

The former finance minister for Alberta, Ron Liepert, said that Alberta has a problem, that they want to get off the oil revenue roller coaster. Right now, 30% of their provincial budget comes from oil resources. That pays for teachers, schools, and doctors. That's causing Alberta to have the worst track record in Canada for meeting its budget targets. It's a highly volatile resource that they have no control over.

The best idea is to put those resource revenues off the table so you're not overexposing the economy to the volatility of the oil market. There are ways you could do that. You could set up a savings fund. Alberta has. You could do that federally as well. It's not just something Pembina has recommended. Ms. Drohan's report recommended it as well. The OECD has also recommended it. It's not just a green idea.

Right now federal corporate income taxes from the oil and gas sector amount to around $3 billion, which is a very small fraction of the federal budget. It's not a whole lot, but as the oil and gas sector grows in the country, that amount will also increase, which will start to shield the economy from that sort of volatility. So I think that's one lesson you could learn.

Another one is straight from the province's Emerson report. The Premier's Council for Economic Strategy released a report, quite a good report coming out of the Stelmach government, that warned Albertans to plan for the day when they have all the heavy oil in the world to sell but no one willing to buy it. That speaks to not just the product, but the value-added component of the industry as well.

It's important to diversify outside that particular energy product and look at the other things that are growing. As Tim suggested, renewables are accounting for 50% of new energy investments. That's a phenomenal amount. That's seeing growth in all sorts of emerging and advanced economies. That's something that Alberta and Canada can certainly get on with.

[Claude Gravelle, NDP, Nickel Belt, ON]

Okay.

I take it you're saying that value-added oil sands related activities would help our economy be more resilient.

[Nathan Lemphers]

It can. You could capture more value and more economic activity per barrel, but you're also increasing the susceptibility. The foundation is based on bitumen, and if bitumen is not fully priced, if you're not pricing those externalities, those costs, the environmental costs in particular that come with bitumen, could act as a house of cards, if you overdevelop an industry based on that one particular resource. There are all sorts of economic stories of that happening throughout the world.

But there are opportunities. You could use the resource revenue from the oil sands to help transition to a cleaner energy economy. That could be done through savings funds, the elimination of federal fossil fuel subsidies, which currently amount to $1.3 billion. That could be plowed into cleaner energy sources, which not only provide jobs, but provide a window we could leverage to open a longer-term competitive advantage for the country as well. You could use the wealth that's coming from the oil sands to see a brighter future.

[Claude Gravelle, NDP, Nickel Belt, ON]

Does Canada have a niche market for renewable energy manufacturing?

[Nathan Lemphers]

I think that's something my colleague could answer.

[Dr. Tim Weis]

Sure.

I think we could be taking advantage of a couple of areas. One is some of the existing manufacturing we already have, and that's with some of the developments of wind energy that we've already seen in Quebec and Ontario in particular, but also in other parts of the country. One of the reasons that's important is that wind turbines are so big that moving them around is a big cost, so being local to the demand is going to be important.

Other key areas we can contribute to are going to be in integrating renewables as well as power storage. Geothermal is potentially an interesting area for us to be looking at as well, because I think it takes advantage of some of the synergies we have with the oil and gas industry. Obviously, we're good at drilling, and a lot of geotechnical work goes on. I think there are big opportunities for developing geothermal as an exciting new renewable energy that can provide baseload opportunities. I think that's a particular area Canada could and should be a leader in.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Gravelle.

We go now to Mr. Calkins, followed by Mr. Choquette, and then Mr. Allen.

Go ahead, please, Mr. Calkins.