Natural Resources Committee on May 7th, 2013

[Jeff Hryhoriw]

Uranium concentrate is essentially yellow cake, so that's what I mean by that.

Yes, our facilities in Ontario at Port Hope, Cobourg, and Blind River are essentially that. They add value to the product. They are a conversion, refining, and fuel fabrication facility, particularly for the CANDU reactors. The Cobourg facility generates fuel rods for the CANDU technology.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Okay.

You will not have seen it, but in the CAPP presentation, there's a global primary energy demand here. If I look at nuclear over the next 25 years, it doesn't look like nuclear is growing that much relative to everything else. You mentioned there are 60 new reactors under construction, and some others are in the planning stage. Is it a relatively modest forecast, or do you think it could increase significantly?

[Jeff Hryhoriw]

What's interesting is even with the tremendous growth we're seeing in China, nuclear as a percentage of China's overall energy picture isn't really shifting. What's happening is the overall pie is growing. I think the International Energy Agency projected that between 2010 and 2035, global world energy consumption was going to increase by 75%. If you look at it and you say that in 2010 it took wind, solar, nuclear, hydro, coal, gas, and oil to get to that level, we're talking about almost a doubling of energy consumption in 25 years. It would be difficult to see just one source, one commodity, providing all of that increase. So even though the percentage stays the same, the pie is growing to such an extent that I think we're all probably going to see some growth in our areas.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Very good.

Mr. Egan, I'm sort of ignorant of some of these things. Your graph on page 5, on electricity and heating oil and natural gas, I understand. Propane kind of surprised me. How would you compare natural gas to propane? Are they on the way down and you're on the way up, or are they also on the way up? I'd like to have a comparison of the two, in your opinion.

[Timothy Egan]

I'd say they're also on the way up because propane is also, relatively speaking, affordable. As natural gas has become more abundant, so has propane. It's available in different markets. Certain markets will be using these products more than others. For instance, in northern Saskatchewan there's extensive propane use by industry and homes that are off-grid. It really depends on the availability of the fuel, the existing infrastructure, etc., as to which is used.

So, propane is on the way up. I think the prospects for natural gas are significantly greater.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Very good.

You mentioned methane hydrates. I just read a couple of days ago that the government has decided to stop funding research in methane hydrates. They were working on some projects, for example, with Japan. This sounds like an enormous source of energy, but there are some challenges.

Does the Canadian Gas Association have any involvement with the research involved? I know your primary focus is delivery, but what's your view on these hydrates?

[Timothy Egan]

In terms of research, the question should be directed to my colleague from the Canadian Association of Petroleum Producers, because we are the downstream association. But my view on the prospects for hydrates is that it means yet more supply, in fact significant quantities more, which on balance is a good news story and negates any suggestion that we're running out of the fuel. Obviously there are all kinds of technical challenges with its recovery, which again I would direct to upstream colleagues, but the story is a good one because the supply picture continues to get better.

Our conventional supply picture is getting better; our unconventional supply picture has made it better still. Hydrates would make it better still.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Good.

Would you care to comment on that, Mr. Stringham? I have some questions for you as well.

[Greg Stringham]

Sure, I'll make my answer brief, then.

The answer is that given the surge of what we've seen in shale gas across North America and the research that was done in cooperation with the industry and governments, and I think there were about 60 countries and 100 scientists who were working in the Northwest Territories on that project, it actually got to the results that they were looking for, and they've now taken it.

Japan has gone back home and they are looking at their hydrates offshore. That research has become more about individual countries and companies, but it's still looking at it. The market right now is so strong with natural gas that it is the next one out—

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

It's very cost-effective right now.

[Greg Stringham]

Yes.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Very good.

Ms. Drohan talked about a collaboration, and everybody's talking about collaboration. Most of the companies that you represent share the common challenges of how much water they use, what to do with tailings, how much greenhouse gas is produced, species at risk, and those kinds of things.

My question to you, Mr. Stringham, is this. Do the companies within CAPP talk to each other and work with each other on these very common challenges in terms of research and how best to approach it, or is everybody basically doing their own thing?

[Greg Stringham]

I think a decade ago everybody was doing mostly their own thing, although in some of the major projects, be they oil or natural gas, they were in consortiums or joint ventures with nine or ten companies. Syncrude, for example, has eight or nine companies in it. They have a research arm that spends over $100 million a year, that then distributes back to all those companies as well. So there were some smaller amounts of collaboration.

Really, the significant amount of collaboration happened on the health and safety side. Companies did not see any competitive barriers. So we have to be careful. We're in a competition bureau; we're in a market economy; we have to compete, and that's one of the laws of the land. But when it came to health and safety, to keeping people safe and making sure they were healthy on the work site, that was where there was a great deal of collaboration.

That was the real spark that led to this question on the environmental side: why can't we do this on water, air, land, and tailings? That's what led to the initiation of Canada's Oil Sands Innovation Alliance, where 14 of those companies—again, about 90% of our oil sands production—have come together to accelerate that research on those four areas for the oil sands. They have contributed their technologies for free into that group, and they can be used for free by any other company. Some of the multinationals that really had a hard time with that have now done that, and it's the first time it's been done anywhere in the world.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Garneau.

We're starting the five-minute rounds, and we go to Mr. Leef, followed by Ms. Crockatt and then Mr. Gravelle.

Go ahead, Mr. Leef, for up to five minutes.

[Ryan Leef, Conservative, Yukon, YT]

Thank you, Mr. Chair.

Thank you to our witnesses.

With the number of witnesses we have, it limits my ability to get to everybody, so I'll focus on some of the things that might be relevant in the Yukon. Of course, we're looking at liquefied natural gas up north. I see on your map that it's one of the only places in the country that doesn't have a dot on it right now, so we probably need to change that.

On your graph on page 7, it looks like your industrial use of natural gas seems to consistently take up the greatest bulk from 1980 to 2012, and then commercial and residential use has a pretty substantial piece of that pie. It seems as though all of them have maintained a similar growth rate. It's hard to really see, in the way that graph is lined up, but it looks like they've all grown proportionately the same.

When you look at diversification, would it be fair to say industry would drive the market first and then residential picks up because there's industry access, or do they come hand in hand? How does that play out in terms of where it diversifies within the country?

[Timothy Egan]

I think it will depend really on the market. You referenced the Yukon. You're not going to have significant residential demand in the Yukon. It's tough to make the economic case for a natural gas distribution system within the Yukon.

In a market like that, what you might look at is a different approach, a kind of hub-and-spoke approach. If there's a significant industrial load that could be met with natural gas, that's economic, you meet that application and then you can look at distribution to other applications, be they commercial or residential.

I'm not sure if that—

[Ryan Leef, Conservative, Yukon, YT]

Yes, that does. It got me thinking. Just on Friday I was back home and announced a Government of Canada investment in a clean tech project for biomass in the community of Haines Junction, in cooperation with Champagne and Aishihik First Nations in that community and Yukon Energy. The potential results for that biomass facility would generate two megawatts, and there are substantial resources there for biomass. In terms of being able to really spread that out, even if they have excess supply there, their ability to push out from the generation station of that size for that size of community, they're going to be limited in terms of what they can do. But it certainly serves the residential needs.

Mines coming on line are talking about energy needs, and everybody is trying to fill that. Diversification from a local perspective I think would be very much welcomed if industry picked it up, and then they could say, “Okay, industry has this, it's now available; natural gas is there” and the conversion would start to shift. Is that pattern consistent in Canada and in international markets?

[Timothy Egan]

Yes, I think it is. Again, most of the Canadian population is within roughly 100 miles of the U.S. border, and there's significant density, which makes the economics of gas distribution very good. In less dense areas you need different triggers in order to bring the fuel into the marketplace. Industrial demand is often the most significant trigger. So you have communities like Red Lake, Ontario, where there was a mine development opportunity. There were a couple of communities around it that wanted natural gas as well. The economics as stand-alone for those communities to get gas wasn't good enough. The federal government, through, I believe, the FedNor program, made a contribution in order to facilitate the development of the project. So you have significant industrial load met with natural gas, and then those communities could get access to it as well. That's the kind of model, and there are precedents that have been used over time across different provinces and territories in Canada.

[Ryan Leef, Conservative, Yukon, YT]

Perfect. Thank you.

How much time do I have, Mr. Chair?

[The Chair, Conservative, Leon Benoit]

You have one minute.

[Ryan Leef, Conservative, Yukon, YT]

One minute, okay. I'll make this question fairly quick, then, for Mr. Stringham.

We heard a reference from the folks at Pembina Institute that two-thirds of the acids need to remain in the ground to avoid catastrophic climate change. What kind of diversification is going on within the oil sands for distribution? Is that a fair assessment? Do we have to leave two-thirds in the ground, or are we working on technologies today that are going to allow transportation and access to diversify it in a safe, clean way?

[Greg Stringham]

I'll answer quickly as well. I think that technology is the answer. I think technology is the answer that has unlocked a lot of these resources, be it shale gas or tight oil or even the oil sands. Technology is also the answer to the environmental challenges that we face as well. We've seen that in particular on climate change issues. The industry has really worked hard to try to reduce its greenhouse gas footprint on that, as well as its water consumption. But it's technology that's the driver.

On that perspective, the latest technology out there is for Imperial's Kearl project that's coming on right now, for example. It's just starting this week. It actually has its greenhouse gas emissions on a life-cycle basis down to 2% within the U.S. average, and that's because of new technologies, the way they're developing it. That's only that one project. It's a big project. We still have a lot of historical work to work on, but it does give us the promise that we can continue to drive that down through technology.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Leef.

Ms. Crockatt, you have up to five minutes.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Thank you very much.

Thank you all for coming. I really appreciate the expertise that we have here today.

I'll pick up where Ryan left off and ask a little bit more about that Kearl project, because I know that the petroleum industry has taken the need for a social licence to operate very seriously as something that is required in order to get international market access. I just heard you say that the industry is really taking this seriously. I think Don Martin on CTV yesterday said that the oil sands have cleaned up their act dramatically. I don't know that the public understands that or even understands what the 2% life-cycle average is. Could you explain that? What does the public need to know about how you've changed practices, particularly with regard to GHGs and maybe specifically Kearl, if you like?

[Greg Stringham]

What we found in talking to Canadians in general—I think there are two aspects of what we've been doing—is first of all, you have to perform. You have to improve your performance. It's not just a matter of going out and talking about it. You actually have to do that and put the technologies in place. But you need to do both. It's performance plus communication that we see as affecting our reputation.

We've been working hard on both of those aspects, but you need to make sure that performance is leading. These new technologies for environmental improvements are things that we've been talking to the public about in saying that we need to address the issues that they have raised, such as water use, land use, and greenhouse gas emissions, in a way that they know we're committed to it and we're moving forward on those areas. That has been a big part of the new technologies at Imperial and the new technologies that are being applied on the water use as well. It's both doing it first and then making sure that its awareness is out there.