Natural Resources Committee on May 9th, 2013

[Daniel Cloutier]

I just want to say that I did not expect to be answering these kinds of questions today.

Yes, the FTQ—just as the CSN and a number of other Quebec stakeholders—is against that budgetary measure. We feel that a mistake is being made and that the tax credit generates much more money than it costs the government.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

You also mentioned Shell's facilities. Unless I am mistaken, the facilities are already being dismantled. Could you tell us about the employees still on site?

[Daniel Cloutier]

Shell's refinery as such is being dismantled. However, large parts of the refinery are still in place. Some units could even be started up again because they have not yet been affected. I cannot tell you how many jobs are involved in that decontamination and dismantling phase at the refinery.

However, the terminal is still there. For the time being, about 20 employees and perhaps 5 or 6 managers are on site managing and operating the terminal.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Let's talk about the seminar the FTQ held on natural resources and energy policy last May, in Trois-Rivières. A number of worthwhile ideas were put forward. I know that the FTQ research service produced an excellent report on the issue.

Could you submit the report to the committee, so we can look at it during our study?

[Daniel Cloutier]

Yes.

I do not have it on hand, but I can certainly send it to you if the committee wants a copy.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you.

[Daniel Cloutier]

No problem.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

I have had an opportunity to read the report. I know that, even though it mostly talks about the Government of Quebec, it does suggest maximizing domestic processing in order to create jobs. You mentioned that in your presentation. The report also suggests investing in the workforce and ensuring that the regions are not left behind. Those are all fundamental values shared by Quebec progressists.

What kind of a role should the federal government play in this area? What types of projects should the government support?

[Daniel Cloutier]

That is a very broad question.

The Quebec unions—including the FTQ and the CEP—strongly favour effective and sustainable management of our natural resources. They believe that the primary, secondary and tertiary stages of processing of those resources should take place in Canada. They also think that a workforce should be developed to help acquire leading-edge expertise in order to be able to export finished value-added products.

We think finished wood products should be exported rather than two-by-fours. Plastics, gasoline and pharmaceuticals should be exported instead of crude oil. Steel, beams and other finished products should be exported rather than iron ore. That is our line of thought.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you.

I will now go to Mr. Harrison.

Thank you for joining us.

You have eight years of experience as a research officer at the National Research Council Canada. Innovation consists in encouraging scientific discoveries in the area of renewable and green energies. Innovation is akin to building a home one brick at a time. Often, people realize further down the road that certain discoveries that cannot be applied right now do have a use. In my opinion, the Conservative government has a poor understanding of how innovation works.

What do you think about the National Research Council's reform that was announced a few days ago?

[Dr. Stephen Harrison]

With respect, I'm a university professor and I conduct research. I get funding from various sources. Like most engineering faculties, I work closely with industry, and I work with our national bodies, the Natural Science and Engineering Research Council. I worked for the National Research Council in Ottawa for eight years.

In general, I think Canada has to maintain a strong research base and it has to promote innovation. I believe it's certainly well known that if we don't maintain a base level of innovation and basic research, in effect we will pay for it in later decades, not only in the energy sector but in other sectors as well.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Harrison. Thank you, Ms. Liu.

I would remind members, again, to make sure they relate their questions to the actual topic we're dealing with today, which is diversification of markets in the energy sector of the Canadian economy.

We go next to Mr. Trost, followed by Monsieur Gravelle, and then Mr. Leef.

Mr. Trost, go ahead, for about five minutes.

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

Thank you, Mr. Chair.

Following up with the propane association on the question by my colleague Mike Allen, you were talking about Atlantic Canada.

We have previously done studies on the north. Is there a particular reason why the north would be more difficult to switch off from diesel to propane? Is it infrastructure, shipping up there, or storage? Is there any way that propane could actually help them with their diesel and electricity and heating, and various things of that nature?

[Jim Facette]

In terms of the logistics of switching off of diesel and the locations of the communities in northern New Brunswick, the answer is no.

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

I'm talking about northern Canada in total.

[Jim Facette]

Yes. It's absolutely the same question. I think the western premiers have identified about 300 or so communities across the country that need to switch off the diesel. As someone once said, “logistics win the war”. When you talk about remote communities, logistics become the challenge.

In terms of the technology itself and switching out, there are no impediments. Logistics do become a bit of an issue. If they are that remote—you're talking ice roads, perhaps—you want to make sure you can service what you install.

The other reality, though, is that when you're switching out from diesel, you have to look at what you use to heat your homes right now. Is it baseboard heating, so there's no central heating? If you're installing central systems, that gets costly. You may have to do some mingling. You can actually mingle propane with diesel in generating power, so you have to look at that as well.

In terms of storage of the propane on these sites, there are no impediments whatsoever. We can store them quite safely. We can grid off the large storage going into homes or businesses, so that you do not see propane tanks anywhere. You could walk into your home and you would swear it was just like here in the south.

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

Am I getting this right?

The biggest challenge you guys have is that the infrastructure for the houses is already in place. Say there are new projects, like the Baker Lake gold mine. If there are new mines go in, in those situations you're going to be much better positioned to go in there because the houses are being built brand new and there's nothing there that has to be displaced. It's that underlying infrastructure—which the savings from the changeover to propane won't always pay for—that's the biggest problem.

[Jim Facette]

I wouldn't necessarily say that infrastructure is an issue at all, because in fact infrastructure is actually an advantage for us, because we need it to set up the propane and you don't have to pipe the propane in. You can rail it in, you can truck it in, you can supply a certain amount of propane for a designated number of homes or businesses in a smaller area. Infrastructure costs are actually quite low.

The challenge becomes if you are going into an existing facility, existing homes, existing communities, that are that remote. What does the existing homes look like? Do they have central heating, are they baseboard, those kinds of things? Then it becomes a bit of an issue.

By and large, infrastructure actually works to our advantage.

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

Is transportation up there not a problem, if you're going up to one of the more remote communities in Nunavut?

[Jim Facette]

It's not a problem as long as we have access by truck or rail. If we have to truck it in, we can truck it in.

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

Or by boat...? All that some of those communities have are airports and water, and that's it.

[Jim Facette]

We were actually talking to the B.C. government about those various challenges. Yes, you can barge up propane cylinders if you need to. In some very remote areas, Transport Canada will in fact give you a permit to actually fly up propane, in certain sizes of cylinders. That is permissible, and is done right now out of Winnipeg, for example. It's one area that does it on a regular basis.

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

I have a question for Mr. Cloutier.

One of the things that has been pointed out about shipping western Canadian oil east is that the refineries in eastern Canada are not quite as set up for the grades that are likely to dominate in the pipelines, and that the refineries down in the southern U.S. would be in better shape.

Can you address that concern, as far as how that may or may not affect the refinery you speak for and the other refineries in eastern Canada, as much as you can?

[Daniel Cloutier]

Eastern Canadian refineries are clearly not yet equipped to handle large-scale processing of western crude oil—bitumen. They receive synthetic crude, but also conventional crude, from the west. However, the profit margin established when crude oil is imported—if it is available—justifies the investments required to develop infrastructure for large-scale processing.

As I was saying earlier, in Suncor's case, we are talking about several hundred million dollars of additional annual profits. That more than justifies spending a few hundred million dollars to bring a unit up to standards or to build a new unit. Currently, the projects that are the most likely to be carried out quickly are Isomax and the crude unit. That existing unit will be adapted, and its capacity will be increased so that it can process crude oil. There are two crude units. The smaller one will be dismantled in order to build a larger one that will be able to process western crude oil. It is projected that those investments could be recouped within three or four years, at the most. So that is very profitable for the industry.

[The Chair, Conservative, Leon Benoit]

Merci.

Thank you, Mr. Trost.

We go now to Mr. Gravelle for up to five minutes.