Natural Resources Committee on May 21st, 2013

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Is that the case, then, on page 10, was it the presidential permits that affected your international power line projects, which you say were “pending completion [and] suffered serious setbacks in the project timeline...[with there being] ill-defined and out-of-date parameters around project reviews and scoping periods, particularly under the U.S. framework”.

[Jim Burpee]

That's only one part, but it's the same issue. Yes, there were presidential permits, then each state might have its own requirements. Then even within the U.S. federal government, each department has its own review that it has done, depending on what territory the power line crosses. The same way that we dealt with omnibus legislation last year to streamline environmental regulations, the U.S. needs to do exactly the same thing.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Is that playing a role, or will it? Do you see that impeding our ability to potentially increase our exports of electricity?

[Jim Burpee]

You will have to plan a long, long, time ahead and stick with it.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

What are the lead times in some of these permitting processes?

[Jim Burpee]

Oh, they can be up to 12 to 14 years. In fact, this was a U.S. only project, but it's indicative. A power line that crossed two states, some 150 miles or something like that, took 14 years of permitting and one-and-a-half years to build.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Okay. I'm glad that we did what we did last year.

As companies and large manufacturers go to more renewable types of energy and maybe displace electricity, and even from some of the things we changed in the tax code with respect to the accelerated CCA for renewable equipment, will it provide an opportunity for businesses to cut down on electricity usage and at the same time create an environment where we have more electricity to export to the U.S.?

[Jim Burpee]

There's no question that increased overall efficient use of electricity creates available electricity for other uses. Whether it's in electrifying transportation within Canadian cities or U.S. cities, our whole approach to electricity is that it's a North American grid, a North American business. We have many members with assets in the U.S. We have many members that sell a lot of electricity into the U.S., so we take a North American approach.

There's no question that as our own businesses become more efficient, there's a huge market still in the U.S.

The other thing to keep in mind is that if you look at North America, by 2050, outside of our own hydroelectric assets, pretty well every generating station operating today will likely be life-expired and have to be replaced. There are a few new ones that have come on since then, but there's a huge opportunity coming up on the North American and U.S. scale for increased exports from Canada into the U.S., if we continue building our infrastructure.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Picking up on the comment about expired assets and running out, we have a generating station in Mactaquac, New Brunswick, that is an example of a hydro station coming to an end-of-life decision. There's a big debate going on about returning the river to its normal state as opposed to maybe putting new generation on the other side, which I think is a no-brainer, because we need to do it.

How are some of the utilities in your group facing those types of issues?

[Jim Burpee]

There's no one who would every consider decommissioning the dam and returning it. It has happened in a few small cases in the U.S., but it's pretty unique. By and large, once you have the dam the value of being able to store water does not go away—especially as when you increase the number of wind and other non-dispatchable sources, such as solar, you need somewhere to store that excess energy from time to time. You can't beat hydroelectric. So in the case of Mactaquac or any other hydro, occasionally you have to replace the rotating equipment, upgrade the turbines, and replace the generators within the plant itself, but the dam lasts a very long time and we should never even consider decommissioning the dam.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

I agree.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Allen.

Mr. Nicholls, for up to five minutes.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

I would like to thank our witnesses for being here. My first questions are for Mr. Brunelle.

If I understand correctly, the only polyester chain we have in Canada is located in Montreal. Is that what you said?

[André Brunelle]

That is correct.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

If we lose this polyester chain because of the loss of public confidence, government administrative deficiencies and a completely botched environmental process thanks to the legislation adopted last year, we will lose the ability to replace imports with purely Canadian products, such as polyester clothing that is manufactured here from start to finish. Is that what you are saying? If we lose the polyester chain, it is game over for the PET product manufactured here?

[André Brunelle]

When we say that it is game over, it is important to keep in mind that this is the only polyester production chain in Canada. As I said a little earlier, and as you probably see in the document, we represent 1% of world production. All that will happen is that, in the future, we will continue to buy clothing made of synthetic fleece and packaging made out of PET, but it will be someone else in the world who will be very happy to sell it to us. At that point, we will have lost the value added.

I was just talking about the olefin chain. People were producing polyethylene. I keep using the analogy that we continue to buy bleach water in polyethylene bottles, but they are produced abroad. People will continue using this product. Therefore it is more a question of losing value added, because we are able to do these things well. Unfortunately, Canadians will lose out on the value added.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

If a project like line 9 is not accepted due to public complaints, you are saying that this will affect the profitability of your industry. You need the cost difference between Canadian crude and foreign crude?

[André Brunelle]

Obviously the raw material used to make polyester comes from a refinery. Right now we are lucky to have two refineries in Quebec. It is clear that if these refineries don't have the option of accessing oil from out west and they then become less competitive, this will create additional pressure on their choices of raw materials for the polyester chain.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

A number of my fellow citizens who are in favour of using Alberta's oil and refining it in order to have value added in Montreal are not convinced that the government is responsible enough to manage this project along with the National Energy Board. They have questions about the project's safety. In this respect, I don't think that the government has paved the way for marketing this project to the population. I do hope however that someone will come out and say that the rules will be respected.

My next question is for Mr. Burpee and it's about the smart grid. You said that implementing the smart grid would take a dialogue with the provinces, but it really goes far beyond that doesn't it?

The federal government does have a role to play. Different agencies of the government— CMHC, NRCan, NEB, and different R and D programs—could help lift up this idea of smart grid and promote it. In my riding alone we had something called the net zero energy home. I'm not sure if you're familiar with it, but one of the studies on this home said that regulations can act as a catalyst to create new market sectors. So right now something like the net energy home would be too expensive for most people to build, but it could open up all these different sectors in the market, and the end result would be greater job creation, greater market products linked to energy efficiency in the electricity sector.

Could you address both the smart grid question and the idea of energy efficiency as a market driver and job creator.

[Jim Burpee]

In terms of smart grid, the federal government is playing a role in certain areas through support, say, for Sustainable Development Technology Canada and some of the investments they have. As well, we work with the Standards Council of Canada in trying to harmonize standards per smart grid equipment.

There are a number of areas. NRCan is supporting it as well, recognizing that energy, in this case in electricity specifically, is with the provinces. It can be a bit of a challenge to bring everyone together, but I would say that the smart grid in general is an area where there is a lot of cooperation and a lot of movement, and where people are learning from each other.

The issue of the smart-zero or net-zero home usually means that they have some form of solar in there as well, which produces more than what they use in a year, but not every time they need electricity. It still needs a grid to support it and it's still at a cost well above what conventional programs or conventional generation can produce.

One of the challenges overall is that the price of electricity, the price of energy, notwithstanding what the manufacturers all think, is actually relatively cheap, which makes it more difficult sometimes for energy efficiency, although I would say that my experience is that all the manufacturers, all the industrial facilities, really put in a lot of effort to be efficient.

It tends to be when we get to some commercial buildings, although even they are moving.... But individual people and their houses and how energy efficient they are when it.... You know, to save a few kilowatt hours doesn't really cost that much. The average cost of electricity per day for a residential user is anywhere from $3 to $6 per day.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Nicholls.

Continuing the five-minute round, we'll have Ms. Crockatt, followed by Ms. Liu and then Mr. Calkins.

Go ahead please, Mr. Crockatt. You have up to five minutes.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Thank you very much.

I just wanted to pick up where you left off, Mr. Chair, and talk a little about the urgency of market access, which is I think something that we haven't perhaps touched on as much. We've heard a little bit about how the world situation, with regard to both tight oil and tight gas, has dramatically changed, so I wanted to ask a couple of you this question.

Maybe I'll start with you, Mr. Lavoie. With the U.S. on the verge of becoming self-sufficient in natural gas and Australia also potentially beating us out to other international markets for our products, what would you say about the urgency of developing our international market access right now?

[Martin Lavoie]

I'm not sure about “urgency”, but if there's a market window, there's a market window. If you can get a price that makes economic sense, you have to take advantage of it.

We know from the past that natural resources in general are quite cyclical. What is new now is the innovation that comes with these new and unconventional sources of natural gas, for example. I guess if you're not in front of using the innovative methods, right in front, I think there could be an argument made about how you are going to catch up later on with these new innovative ways of extracting or transporting the resource.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Okay.

Mr. Telford, maybe you could just address that. The CIBC also came out with a recent study saying that we're losing $75 million a day in Canada because we only have access to one market for oil and gas. Are you concerned about either the loss of funds right now or the potential loss of future markets because we are not acting quickly enough? Or are you not?

[John Telford]

Yes. We're very concerned about the bottlenecking that's going on right now. It's not just in Alberta, but that seems to have been the hot topic for the last four or five years. We have to move some product. If we don't get some product moving very soon....

We've already lost the Suncor Voyageur project. That project has been restarted three times. It's a massive mining project. I think it's 600,000 barrels a day. It has now been shelved again. Kearl Lake, too, is now shelved. ConocoPhillips is pulling back on a project.

I'd like to make a point here. Maybe it's away from your question, but if I could, I'd like to make a point. We do a lot of maintenance in northern Alberta, with six-week, eight-week, and 10-week shutdowns. The timing on them is critical. We hit them with huge amounts of men and we work for 10 weeks. It's okay for a journeyman to pick up three of those a year; he can make a living. I need capital projects for apprenticeship. I can't expect apprentices to go to work for six weeks, then be off for three months, and then go back for six weeks. That's not an apprenticeship.

We need capital projects. We need Kearl Lake too. We need Voyageur. We need ConocoPhillips. We need Syncrude to go ahead with their major expansion. If we can't get some of this oil out of Alberta, they're not going to go ahead. I'm sorry, but that's just the way it's going to be.

My perfect world is Keystone XL first. It's the closest one that we could export oil with. The next one would be west-east to help out our friends in Sarnia, Montreal, Quebec, and especially New Brunswick, who dying for help. After that, we could work on getting Gateway and Kinder Morgan online.