Natural Resources Committee on March 27th, 2014

[The Chair, Conservative, Leon Benoit]

Good morning, everyone. We're still trying to connect by video conference with some of the witnesses for today, but we will start the meeting. We're here today to continue our study of the cross-country benefits of the oil and gas sectors of the Canadian economy.

Before we get started, I just want to mention that for any members of the committee who are interested in hooking up to the paperless committee system—I had it installed on my computer—we had a chat about this before. It's up to each individual whether or not they want to take part in that. All of the paper is still available for those who want it. Those who want can just chat.... We have a gentleman at the back whom you would deal with to get your iPad set up for that. Then you will have all the documents pertaining to the committee available to you at any time.

Let's get started now with the business of our meeting today. We have several witnesses with us today.

We have with us, as an individual, Pierre Desrochers, associate professor, University of Toronto, geography department. Welcome to you, sir. From Pond Biofuels, we have David Holm, chief executive officer. Welcome to you, sir. We have by video conference from Fort McMurray, Alberta, from the Athabasca Chipewyan First Nation, Chief Allan Adam. He isn't here yet by video conference. We have from Calgary, Alberta, from the Pembina Institute, Sarah Dobson, economist, Alberta and the north. We have from Ferus Natural Gas Fuels, Blaire Lancaster, director, government and public affairs. Again, she isn't connected yet. I will introduce them as they come on and as we finish with previous witnesses.

We'll have the witnesses present in the order that they're on the agenda and in the order I've just read. Witnesses, I would ask that you keep your comments to seven minutes; otherwise it drags a bit too long.

Perhaps you could go ahead, please, Mr. Desrochers, with your presentation for up to seven minutes.

[Dr. Pierre Desrochers, Associate Professor, University of Toronto, Geography Department, As an Individual]

Thanks for inviting me.

I sent you a PDF file with a few pictures and images. I intend to follow them. I'll go quickly.

The few comments I will make now are based on the two policy papers I wrote in the last couple of years. They're freely available online.

One paper covers the history of the petroleum industry and innovation throughout the history of petroleum. Why was it that petroleum was developed in the first place? Why did it create fewer problems than things that existed before? What new possibilities were created? How did the industry become spontaneously cleaner over time? I stretch that history all the way to the Alberta oil sands and discuss innovations there.

The other paper deals with the petroleum refining industry in this country, the economics, the changing markets, and where the industry stands today.

Both papers have plenty of statistics that should be of interest to this committee, but really that's not what I wanted to emphasize this morning. If you look at the second page, at the slide that follows, these are just refinery statistics. They're widely available. Again, they might be useful, but that's not what I want to do.

My sense of the document that was sent to me is that a lot of the benefits of oil and gas are taken for granted, and a lot of people tend to forget that because these resources are not renewable, they need to be developed over time. The emphasis that I want to put on this today is simply to show the environmental, economical, and social benefits that petroleum and natural gas gave us historically.

There are two slides that follow that essentially show subsistence farmers in Europe. I just showed them to you to show you how miserable people were before carbon fuels came along. The first is from Finland; the other is from Germany. By and large, at the beginning of the 19th century, these people had the standards of living of subsistence farmers in the third world today. It's about a dollar a day in terms of standard of living, a chance in three of being malnourished, a life expectancy in the early thirties, and of course when you rely on nature for everything, you take what you need. You can then scroll down to an image that I like a lot, of Dutch whalers going north of Norway to kill everything that they see, charismatic species like polar bears, whales, and stuff. When you don't have carbon fuel products, you take what you need from nature. I like this image so much that I have it in my office.

Then in the early 19th century, something wonderful happened for humanity. Carbon fuels came along. In the next image you'll see that life expectancy in advanced economies in the year 1800 was about 33 years of age. Around 1900 it was about 45 to 47 years of age. Today, as you know, we're pushing on 80 years of age. It's not only that we're living longer, but there are about seven times more of us.

Our bodies have also changed more in the last 150 years than in the previous tens of thousands of years before.

These are statistics that are widely known by people who do historical demography. We're much taller, we live a lot longer, and we're less susceptible to disease than our ancestors were. That's why I use the expression super-human. I mean, our ancestors would be shocked if they were here today to see not only how fat we are, but how big we are and how healthy we are overall. Of course there were no miracles behind that.

The next slide shows you how little energy was available to human beings before carbon fuels came along. Then coal, natural gas, and petroleum came and suddenly humans could do all these things that gave us our modern standards of living.

The next image is about the fact that we're born surrounded by plastic, and we die surrounded by plastic and other petroleum products, and we're so much better off for it.

The image in the bottom right corner is an African woman carrying a big jug of water on her head. If you're not familiar with the history behind that, those big plastic jugs are viewed as nothing short of a minor miracle in less advanced economies, because of course, the alternatives were big clay pots. Plastic came along and it made life better in countless ways.

But the real emphasis, the real benefit, is long-distance transportation. On the next slide, the white lines are the trade routes that were possible in the age of sail when you had to rely on wind patterns and ocean currents. Then fossil fuels came along and globalization really began in the 19th century.

What were some of the benefits of long-distance trade for the first time in human history? We put an end to famine, because regions that had bad years could rely on regions that had good years. We could concentrate food production in the best locations, so food became a lot more abundant and lot cheaper than before. People could move out of the countryside and into cities. Once we got people off of the farm, they could become medical scientists, they could become engineers, they could become all sorts of other useful things.

And nature benefited in the process.

The next image is a cartoon from 1861, a bunch of whales celebrating the development of the oil industry, because kerosene is putting an end to the massacre of whales about a century and a half before Greenpeace came along.

The following slide is probably the most interesting. I'm a geographer; I like to show maps, as you saw. You see four maps of the United States. The dark areas are the extent of the forest covering the United States. The top left corner is 1620, and then people began to move in. The top right corner is 1850; people are still living along the coastlines and rivers. The low point is 1920. I don't know if you can see the transition from 1920 to 1992. People left the farm. We produced a lot more food on a lot less land than before. The forest made a huge comeback in all advanced economies. Every economy that is at the level of development of Chile and above, so about $5,000 a year per capita, has seen a huge extension of its forest cover, and it's largely because of fossil fuels.

In the next image you see kids playing next to a dead horse, urine, dung, but cars that are so despised were a huge benefit in terms of public health.

The most controversial point, though, is the next slide, which is climate change. We've had a lot of climate change in the last 150 years. Things warmed up from roughly 1850 to the 1940s, and then they cooled down from the 1940s to the 1970s, and then they warmed up again, until about 15 years ago. We've had basically no warming for 15 years. Throughout all of that, because of increased wealth, our capacity to deal with extreme weather has improved dramatically over time. Wealthier is not only healthier, but it's also much better in dealing with climate change. I could expand on that later on, but the statistics are pretty clear. So today climate change is not really a problem.

The last one I want to show is that there were alternatives all along. You see an image of someone advertising the fact that you could pump your water for free a century ago. Why buy gasoline? Henry Ford wanted the first Model T to run on ethanol. Electric cars were around a century ago. Fossil fuels defeated them because they were better: more energy density and they created fewer problems than those that were solved.

My final message is that a lot of people today complain about our addiction to fossil fuels, but the case I want to make is that when you look at the data in the broad historical context, fossil fuels are more like a nutritious food. Saying we're addicted to fossil fuels is like saying we're addicted to whole wheat bread, and I don't think addiction is the proper word in that context.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much for a very interesting perspective, which I must admit I hadn't heard before, and I thought it was fascinating.

We will go to our second witness now. From Pond Biofuels, we have David Holm, chief executive officer. Welcome to you, sir. You have up to seven minutes for your presentation.

[David Holm, Chief Executive Officer, Pond Biofuels Inc.]

Thank you. I'll try to hit the seven-minute mark.

My background really is in the energy industry. I've been a counsel in that industry, a banker in that industry, and I've served as an executive. I also serve on boards in the energy industry, including international companies, E and P companies, cross-border pipeline companies, power companies, and service companies within the energy industry.

That said, I am here on behalf of Pond Biofuels, which is a Markham-based company. It also has an office in Calgary, Alberta. I am headquartered in Calgary, and I think that ties the link of our company to the energy marketplace.

At Pond we've developed a technology with international application. We are a development-stage company. Our technology is to convert raw smokestack gas—the carbon dioxide, the NOx, SOx, and all the particulates in the smokestack—to organic biomass. That is a unique process historically; there's a lot of work going on in this area across the world, but people are using pure carbon rather than smokestack gas. The first thing our company successfully approved was that in fact raw smokestack gas emissions were a fine fuel for organic biomass.

We do combine patent pending control-system technology, the technology taking the gas off the smokestack and feeding it to a photo-bioreactor, to grow micro-algae biomass from smokestack emissions. The applications for our technology are clearly in the oil and gas area: power generation plants, steel mills, chemical plants, mineral plants, i.e. cement kilns, pulp and paper, and other manufacturing industries.

We do have a unique Canadian basis to our knowledge, our expertise, and our circumstances. In Canada we have a 50-year history of growing algae, and that's through the National Research Council facilities in Halifax. We also have a unique Canadian expertise in photonics, or light. That goes to the University of Toronto, and it goes to companies like JDS Uniphase and Nortel. There are a lot of light experts. A lot of the work you're seeing globally in that area comes from Canada. Part of our secret sauce is to use that unique Canadian expertise in our photo-bioreactor.

We are targeting large-scale industrial facilities with significant emissions. Our strategy is to work with the industry and government to reduce greenhouse gas emissions and carbon footprints and to create valuable organic products. We have proven the concept on a test-scale basis, and we've done that in different industrial environments. Those industrial environments are in Ontario, at St Marys Cement, and we now have a facility operating at a U.S. Steel facility. We intend to build a pilot-scale facility of 100,000 litres, which would be phase one of a commercial facility. The operations that we've considered for that facility are in the oil sands and in Ontario in the cement industry.

It is interesting to understand where we've been funded. The original funding came from typical high-tech venture capital funding, government sources, and strategic investors who understood our technology, but the recent capital has come from the energy industry, from people who typically invest in the early-stage and later-stage companies in the energy industry, together with government sources. I think it's telling that the energy investment community understands the application and the global concerns respecting greenhouse gases and companies' licences to operate. Our commercial success will depend on a variety of factors, but clearly, industry support is one of those key factors.

The energy industry is a natural target for the application of our technology. In North America, oil and gas facilities rank overall as the third highest emitters of greenhouse gases. In Canada, the oil and gas industry is the second highest emitter, and in terms of scale is very close to power generation in terms of greenhouse gas emissions. That's a function of the large-scale processing, upgrading refinery, and petrochemical facilities we find in Canada.

We think there is a market, because we think international investors in particular, outside of government sources, expect increased greenhouse gas disclosure and that industry participants must address the risk and mitigation strategies. We've seen articles, as recently as two days ago in the Globe and Mail, that say that very thing.

As well, there are synergies with our product and with the products produced by the energy industry. Those include biofuels, soil nutrients, and those kinds of things that could be used in reclamation for things like oil sands operations. So there are good synergies with energy operations.

Our industry will create jobs, and it will create jobs in support of energy development.

Our team is a highly educated Ontario-based team. It includes photonic scientists, botanists, engineers, engineering techs, and other professionals, so we're talking about high-skilled jobs.

Ontario has provided our company with a deep talent pool of portable skills, and a lot of that comes from the auto industry.

Commercial development will have a significant multiplier effect on our ability to hire. It will increase our need for internal resources. We're already pressed for internal resources, and we will have to engage significant internal resources. Those would include engineering firms, construction firms, manufacturers to build our tanks, and professional advisers.

We do think there's a global application for our products in the energy sector.

There is global interest in Pond, and my sense of the world is that generally global interest in Pond and its technology is really coming from international companies. They do understand our technological leadership in what we're doing, and they do understand the reality of greenhouse gas mitigation, because they see it in multiple countries around the world.

Our experience in the Canadian energy sector shows us that clearly, cost pressures and cost uncertainty are major concerns. Operational concerns are significant. Adoption of the technology, which is non-core to primary operations, faces institutional challenges within the industry. I don't think that's unusual, but they are hurdles to be overcome.

We do think the government policy is something that can help balance and direct beneficial technologies such as ours. We think in terms of incentives to help industry move with technological innovation. We do think to support those types of initiatives you also need strong emissions policies, and I think there's a need to continue to support Canadian innovation. The government has been very helpful to our company.

We want to lead the industrial evolution, picking up on Pierre's theme about evolution. We do think Canadian technology can be key in reducing greenhouse gas emissions. We are in a global race to do so, and we do have unique Canadian talent and expertise to lead that global race.

Our current expectation from where we are seeing the world commercially is that international companies tend to be the early adopters of our technology.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much for your presentation, and thanks again for being here today.

We go now to our witnesses by video conference.

The next to present is Chief Allan Adam of the Athabasca Chipewyan First Nation.

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

[Chief Allan Adam, Chief, Athabasca Chipewyan First Nation]

What was the question that was asked before? What do you want me to talk about? I missed the first presentation about what it was about.

[The Chair, Conservative, Leon Benoit]

This is about the cross-country benefits of the oil and gas sector of the Canadian economy.

[Chief Allan Adam]

I could speak on behalf of the Athabasca Chipewyan First Nation, ACFN. Basically, we're in the Athabasca region north of Fort McMurray.

Over the years, what we have experienced in regard to oil and gas operations is that we find it hard to truly maximize the benefits from the oil sands reserve here in Alberta because industry makes it complicated for first nations when making impact benefit agreements on their traditional territories. That's mainly because of the high rate of lobbying that continues to happen daily with both federal and provincial government officials, in which industry says that first nations are being a burden in regard to extraction of the natural resources in the area concerned. In more ways than one, whatever Canada has been doing in the last little while in regard to first nations becoming self-sufficient and moving on an economic platform, they tend to widen the gap in regard to how difficult it is for us to make these agreements with industry. It's mainly because industry wants to control and is lobbying both levels of government to have control over first nations traditional territories.

I don't think it's right, in more ways than one, that Canada, along with the provincial government, continues to deregulate the regulatory system to make it easy for industry to go into our traditional territories. Our traditional territories existed long before European descendants came into our traditional territories. ACFN has always recognized that we are here to protect and to be stewards of the land.

Through our IBAs, impact and benefit agreements, we're starting to implement some of the agreements we have in place. We make sure that in the implementation there are grounds for protection of water, air, land, and animals in the area. If anything were to go wrong for any of the developers with whom we make an IBA, we have implementation clauses in the agreement whereby they are subject to penalties if anything occurs on their sites.

We need a good understanding between the first nations and government with respect to where they're going. I truly believe that industry continues to lobby at a rate such that government continues to give in to them.

We all know for a fact that economic development is a key component in building this country, but we also have to look at the other portion of this whole thing. Whatever happens in our area, the community of Fort Chipewyan, has a drastic effect on our health system. Our ecosystem is in jeopardy; our water system is in question right now because of the uncertainty regarding all of the effluent that is being pumped into the Athabasca River. With the continuous breaches with respect to how the regulatory system is failing us, this situation needs to be looked at in more ways than one.

If the Athabasca River is deemed to be one of the protected rivers in Canada, why wasn't that protection enforced when the Obed Sherritt mine had a breach up around Hinton, Alberta, when the whole coal mine tailings pond leaked into the Athabasca River? No criminal charges have been laid against the perpetrators in that area.

In our way of looking at things, we need to come up with a strategy whereby first nations people are heavily engaged in the process of developing a regulatory process for protecting the ecosystem and yet can continue to build an economic platform.

For as long as those tools are not in place, the Athabasca Chipewyan First Nation will continue to put pressure on the oil and gas industry in this region until we come to these conclusions.

We are using our rights and we cannot continue to allow industry to lobby government officials to let our treaty rights deteriorate. Our treaty rights are enshrined in and entrusted to the Canadian Constitution. We make this a lot easier if it becomes known that we as first nations people will work at a government-to-government level with both the feds and the provincial government. I don't think that at this point in time industry has anything to say about it.

[The Chair, Conservative, Leon Benoit]

Excuse me, Chief Adam, you still have a minute left, but the scope of the study is about the benefits across the country of the oil and gas sector of the Canadian economy. Are there any benefits of the industry to you and your people that you would like to talk about?

[Chief Allan Adam]

Well, that's what I'm getting at. Some of the benefits that rely on it include economic development, but the other component is that it is those who have IBAs, the impact benefit agreements, are having a hard time because industry continues to lobby government, and government is putting pressure on industry to cut back on the IBAs that industry has given out to the first nations.

We continue to live in poor conditions. Our housing portfolio has maxed out. We can't even build any more housing in our area, because benefits are not increasing enough for the first nation to sustain itself. We are therefore having problems in that area. Social programs are also becoming an issue and are deteriorating.

But we continue to move forward and we're trying to put everything together to try to make industry understand that the benefits coming from development are not maximizing the need for the first nations in the area.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Chief Adam. I'm sure you'll have some questions later.

We go now to our next presenter. From the Pembina Institute, we have Sarah Dobson, economist to Alberta and the north.

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

[Dr. Sarah Dobson, Economist, Alberta and the North, Pembina Institute]

Thank you to the chair and the members of the committee for the opportunity to present here this morning.

The Pembina Institute is Canada’s sustainable energy think tank. We advance energy solutions through research, education, consulting, and advocacy.

My work focuses on economic issues related to oil sands development. For that reason most of my comments today will focus on the contribution of the oil sands to Canada's economy.

While Statistics Canada does not track the oil sands specifically, GDP data shows the unconventional oil and gas sector, which consists primarily of oil sands, contributed 2% to the national GDP in 2013. So the oil sands are important, but far less important than informal polling suggests Canadians believe.

Since 2007 the oil sands have grown at an annualized rate of 8.4% per year. This is rapid growth, but from a small enough base that it remains a long stretch to argue that the oil sands are driving the rest of Canada’s economy.

Looking at jobs, in 2012 the oil sands provided direct employment to 0.2% of Canada's full-time workforce. Looking at the entire oil and gas sector, direct employment increased to 1.4% of Canada's full-time workforce. For comparison, the retail sales sector provided 3.9% of Canada's full-time jobs in 2012 and the manufacturing sector provided 5.4%.

Last, turning to federal government revenues, in 2012 the oil and gas sector paid $1.3 billion in federal corporate income taxes, representing 0.5% of total federal government revenues.

These are significant numbers, but perhaps less significant than industry advertising or government prioritization would lead one to believe.

These numbers provide an overview of what the oil and gas sector is contributing to Canada’s economy today. Arguably, the more relevant question, though, is where the oil and gas sector is heading in the future, which will in large part be determined by what happens to the oil sands.

In 2011, the Canadian Energy Research Institute, CERI, published a study looking at the impact of future oil sands development on Canada’s economy. In CERI's most optimistic scenario, oil sands export capacity increases to just shy of six million barrels per day by 2035. In this scenario the oil sands are expected to contribute $4.9 trillion in GDP contributions from 2010 to 2035. Direct and indirect employment is expected to reach just over one million jobs in 2035, and total federal and provincial and municipal tax receipts are expected to average nearly $30 billion per year.

These appear to be attractive numbers, but we need to ask some fundamental questions about them. Is that scenario achievable? Is it environmentally responsible? What risks would the pursuit of these benefits pose to Canadians and to the long-term competitiveness of Canada's economy?

Looking ahead, the Canadian Association of Petroleum Producers is forecasting 5.2 million barrels per day of oil sands production by 2030. The National Energy Board’s 2013 outlook pegs oil sands production at five million barrels per day in 2035. Relative to current production levels of just over two million barrels per day, this represents a minimum 150% increase in oil sands production by 2035.

Notably missing from these forecasts are strong data to support the implicit assumption that future demand for the oil sands will be high enough to support supply increases at that scale. The reality is that laws and regulations in the energy sector are changing. Jurisdictions around the world are increasingly taking action to address climate change and the assumption that demand for a high-cost, high-carbon fuel like oil sands bitumen will remain high enough to realize industry’s expansion plans is weak at best.

Along with virtually every country in the world, Canada has agreed to take action to limit the rise in global average temperatures to 2°C or less. The International Energy Agency, IEA, models a scenario every year that is designed to give the world a fair chance at staying below the 2°C threshold. Under this scenario, global demand for oil peaks in 2020 and falls thereafter. In 2010, the IEA published production estimates for the oil sands specifically under this scenario and found that while oil sands production continued to grow, it reached just 3.3 million barrels per day in 2035, far below the 5.2 million barrels per day that CAPP estimates by 2030. The IEA's finding is not the result of a specific government policy to limit oil sands growth, but a natural consequence of lower demand for oil, which in turn leads to lower oil prices and thus less production in the high-cost, high-carbon oil sands sector.

What does this mean? The projections of expected oil sands production are based on future market conditions that correspond to a global failure to address climate change. In a world where we take action to address climate change, oil sands production grows far more slowly than industry currently predicts.

[The Chair, Conservative, Leon Benoit]

Excuse me, Ms. Dobson.

You do have about two minutes left, but again, I would like to remind you that the focus of this study is the cross-country benefits of the oil and gas sector of the Canadian economy. If you could try to get to that at some time, it would be very much appreciated.

Go ahead for another up to two minutes.

[Dr. Sarah Dobson]

Thank you.

The scenario of lower oil demand and thus lower oil prices coupled with fast-growing demand for clean energy needs to be acknowledged by the Government of Canada in its policy choices and economic planning. By shifting our focus towards investing in sectors such as clean energy, we can build the kind of diversified economy we need to be competitive in a global low-carbon economy.

In your discussions around the benefits of developing the oil and gas industry, I encourage you to consider the following policies that will help guard against the risks that I have identified and will ensure that future development is responsible and maximizes longer-term benefits for Canadians.

First, introduce regulations on greenhouse gas emissions for the oil and gas sector that are strong enough to get Canada on track to achieve its national 2020 climate target. Knowing the rules of the game would allow companies to make investments, particularly in innovative technologies, to reduce emissions with greater confidence.

Second, provide greater support for energy efficiency and the clean energy sector. A reinvestment in energy efficiency retrofits for homes and commercial spaces, for example, is win-win-win: reducing Canada’s emissions, creating jobs across the country, and saving money for Canadians. Similarly, programs such as production tax credits for clean energy encourage investment in a sector of growing global importance.

Finally, complete the phase-out of all tax preferences and subsidies to the fossil fuel sector by 2020. This government has made real progress in reducing tax breaks to fossil fuel producers, but Canada’s two largest subsidies, the Canadian development expense and the Canadian exploration expense, still remain on the books. These subsidies are costing the government and Canadians hundreds of millions of dollars in forgone revenue every year and are providing the wrong incentives to industry to over-invest in high-carbon fossil fuels.

Thank you for the opportunity to share these thoughts with you today and I welcome any questions.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Dobson, for your presentation. I am certain you will have questions directed to you later.

We go now to the final presenter. From Ferus Natural Gas Fuels Incorporated, we have Blaire Lancaster, director, government and public affairs.

Please go ahead with your presentation, Ms. Lancaster.

[Blaire Lancaster, Director, Government and Public Affairs, Ferus Natural Gas Fuels Inc.]

Good morning. Thank you for this opportunity to provide remarks contributing to the Standing Committee on Natural Resources' cross-Canada benefits study of the Canadian oil and gas sector.

Ferus is a North American energy services company with headquarters in Calgary. Within the Ferus portfolio are two companies delivering integrated solutions to the energy industry for well stimulation, well completion, enhanced oil recovery, and natural gas fuelling solutions. Ferus's product lines include liquid carbon dioxide, liquid nitrogen, liquefied natural gas, LNG, and compressed natural gas, CNG, as well as the related logistical services.

In terms of our Canadian operations, Ferus employs 215 people. We own and operate three nitrogen plants and three CO₂ plants in Alberta and British Columbia, as well as a fleet of 75 tractors and 135 specialized trailers and storage equipment to transport and store our products. Furthermore, we are about to commission the first Canadian merchant LNG liquefaction facility in northeastern Alberta in the town of Elmworth.

I will begin by briefly talking about our nitrogen and carbon dioxide business, and then move on to our natural gas fuelling business.

Nitrogen and/or carbon dioxide is injected into the well to generate better production and economics with lower environmental impact for conventional and unconventional gas and oil wells. In addition to improving well results, using N₂ and CO₂ benefits the environment through reduced water use, reduced disposal of recovered water, reduced well-pad size, reduced chemical usage and reduced CO₂ emissions into the atmosphere. Our CO₂ processing facilities recover waste CO₂ from natural gas processing plants that previously would have been vented to the atmosphere. In all, Ferus CO₂ facilities are capable of processing over 300,000 tonnes of CO₂ per year. When carbon dioxide is used, approximately 30% is permanently sequestered underground, thus capturing a significant amount of this greenhouse gas.

Ferus's liquid nitrogen is produced by a simple physical process whereby air is cooled to a point where it turns into a liquid. The harmless byproducts from this process, oxygen and argon, are vented back into the atmosphere.

Ferus also has an emerging natural gas fuelling business with significant potential for growth across Canada. We provide end-to-end LNG and CNG fuelling services, including production, transportation, storage, and delivery to our customers in the oil and gas, mining, marine, and trucking industries.

Ferus was the first company in Alberta to integrate natural gas powered trucks into our fleet, and, as mentioned, we are nearing completion of the first Canadian merchant LNG production facility in northeast Alberta. The first phase of this facility will produce 50,000 gallons of LNG per day, which will be used primarily to fuel drilling rigs, pressure pumpers, and heavy-duty service trucks in the area. As demand grows, we will move into phases two and three of the project, ultimately producing 250,000 gallons per day of LNG. This represents a total investment of up to $100 million.

Ferus has also signed a joint venture agreement with ENN Canada, the Canadian subsidiary of China's ENN Group, to build two LNG liquefaction plants, one in Edmonton, Alberta, and the other in Chilliwack, British Columbia, each representing an investment of $200 million. These will primarily service the on-road trucking market, but also other high-horsepower applications.

Also relevant to Canada is our CNG joint venture with General Electric, whereby we are capturing flare gas, compressing it, and using it to fuel the operators' drilling rigs. This reduces wasteful flaring, saves money, and cuts greenhouse gas pollution. While this is a U.S. joint venture now, we see significant opportunity to apply this technology and initiative in Canada and are working now on making that a reality.

The key benefits of fuelling with natural gas are economic and environmental in nature. The significant price difference between natural gas and crude oil translates into a savings of 20% to 40% to the end user when using LNG or CNG in place of diesel fuel.

As a lower carbon emitting and cleaner burning engine fuel, natural gas produces 20% to 30% fewer greenhouse gas emissions and almost zero particulate emissions, contributing to significantly improved local air quality.

Furthermore, the natural gas fuelling industry represents a promising new market for Canada's abundant natural gas resource and reduces dependency on foreign [Technical Difficulty—Editor]

[The Chair, Conservative, Leon Benoit]

We have lost the witness, obviously, and I don't believe there would be a video connection either, so we'll have to allow her to complete the last two minutes of her presentation after.

We'll go directly now to questions and comments. Go ahead, please, Mr. Trost, for up to seven minutes.

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

Thank you.

[The Chair, Conservative, Leon Benoit]

Unfortunately, if you had questions directed at the witnesses who were here by video conference, we can't make that work. It's a bit awkward. Maybe we should see if we can get reconnected in a couple of minutes. I think we'd better, otherwise the witnesses don't hear what's being said here.

I apologize for the break, we'll suspend just until we get the video back.

[The Chair, Conservative, Leon Benoit]

We'll reconvene the meeting.

I apologize for the loss of the video conference. We just held up the proceedings until we got you reconnected.

Ms. Lancaster, you have about two minutes left in your presentation. I apologize for the disruption. Carry on for the last two minutes, please.

[Blaire Lancaster]

Thank you. I'm trying to remember exactly where I was when we lost the connection.

Did you hear me talk about the key benefits of fuelling with natural gas being price and environmental in nature?

[The Chair, Conservative, Leon Benoit]

Yes.

[Blaire Lancaster]

I think I went on to say that the main challenges to widespread adoption of natural gas vehicles and engines include conversion costs and lack of infrastructure. It's a chicken-and-egg problem, whereby potential customers are unwilling to invest the capital required to convert to natural gas engines if there's no supply or fuelling infrastructure, while potential suppliers are hesitant to build the necessary infrastructure if there is no demand.

Ferus is creatively solving this problem by entering into joint venture partnerships, whereby both parties are able to commit to the minimum demand required to get final investment decision on building LNG liquefaction facilities.

Once a secure source of supply is available, we believe widespread conversion will take place across Canada which will have significant economic and environmental impact. These investments utilize Canadian natural gas to create Canadian liquefied natural gas, which in many cases fuels engines to find and produce more Canadian natural gas. This represents the creation of a virtuous cycle and value creation within the country.

The Ferus business model is a Canadian success story. Our nitrogen and carbon dioxide business has grown significantly, and while the large west coast LNG export projects attract the bulk of media attention, our smaller-scale domestic LNG facilities are a successful model that will have real economic and environmental impacts long before the first LNG export terminal is up and running and will result in a significant new market for Canada's abundant natural gas resource.

All told, Ferus has invested over $220 million in Canada, and as we build our businesses, that number will significantly increase.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much for your presentation, Ms. Lancaster. It was extremely interesting.

We'll go to Mr. Trost for questioning for up to seven minutes.

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

Thank you, Mr. Chair.

I found your remarks pretty interesting, Dr. Desrochers, because you took a look at this issue from a macro perspective and because of the nature of who we tend to get as witnesses, most witnesses tend to look at their very specific area; they have a more localized look at this.

What I took away from what you were saying was that the use of fossil fuels has created an environmental benefit for the whole world.

Could you work it more toward a Canadian situation? Do you have Canadian data? I looked at some of the American data. How have fossil fuels helped the Canadian environment? Where specifically, as it comes to a more localized sense, do we see benefits across Canada from an environmental perspective, be it technology spreading, or be it environmental, that impacts Canadians? People get the world picture, but I'm trying to draw your macro picture to a more manageable level.