Natural Resources Committee on Sept. 29th, 2016

[Dale Austin]

Fair enough.

People come to us sometimes and ask how we do this, what's the magic sauce or the silver bullet? We say to governments and other companies that there isn't one. It's long-term relationship building and a level of trust with the communities in which we operate. We benefit from the fact that our mines are in place and operate for a very long time. It allows us the opportunity to build relationships with our local communities, with indigenous leaders.

We do annual polling. We have 80% support in northern Saskatchewan for our operations.

There is no silver bullet, unfortunately. It does take time and significant effort.

[The Chair, Liberal, James Maloney]

Thank you.

Mr. Cannings.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you both for coming here today.

Mr. Beaty, you talked about energy efficiency and renewable energy. You mentioned that you had experience in the renewable energy field as well as in mining. I wonder if you could expand on that theme and talk about what mining could be doing in that regard.

[Ross Beaty]

Sure. Thank you very much.

Mining can do a lot in the campaign that we all have to make to move away from a fossil fuel-based economy to a more sustainable clean energy economy. One of the problems of mining is that it requires baseload energy. That means energy 24/7. Typically wind and solar, for example, are intermittent forms of energy, so renewable energy isn't ideally suited to mining operations. However, it can be an adjunct, especially in places where mines rely on diesel power, which is typically imported from far away. It is expensive power. You can decrease the cost of that using the new reality of renewable energy, which is that it's competitive with almost every other form of electricity generation.

Costs are coming down quickly in those businesses, and this is just good business. Almost every mine that I know of is looking at putting in renewable energy as an adjunct to their existing forms of energy generation, electricity generation. It's just good business to do it. It decreases your costs. To the extent that Canada and other countries impose a price on carbon, it will make it even better business to do. Most companies understand that's likely to happen in the future and are taking action now to try to reduce their carbon footprint across the board.

One big way to do that is to bring in wind power, solar power, and hydro power to the extent it's around and available, as well as other forms of electricity generation. They are also trying to reduce the use of energy, which requires more innovation. These sorts of innovations are driven in part by government policy. If Canada imposes a price on carbon, you're going to see a lot of innovation by companies to find ways to reduce their energy footprint, and alternative forms of energy that don't use carbon.

This is one of the direct results that will come from that kind of policy.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

To follow up on that, you didn't mention geothermal. I read that you have some experience in geothermal and I know there is some interest here now in using such things as spent oil wells as a broad source of geothermal energy. Is that something we could be tapping into?

[Ross Beaty]

Mr. Chair, and members of the committee, I also run a clean energy company and we're the largest producer of geothermal power in Canada. Geothermal takes the earth's heat and either makes electricity from it, which needs very high heat pools in the earth, or makes space heat to heat rooms like this, which requires much lower temperature earth heat resources.

We produce electricity in Iceland and the United States from geothermal heat. You need really hot temperatures. You need all kinds of things to work together. It's a very risky, very high-cost business. Typically it doesn't work in Canada. We just don't have the right resources in Canada to make geothermal electricity. However, geothermal heat can and will be used as a core part of our low-carbon future across the country, taking advantage of the fact that if you drill a hole 100 feet down in the earth, everywhere it will generate heat that can be used to heat buildings and mines and communities. Over time, it's going to be a growing source of energy generation in Canada for space heat, which is a big chunk of our energy requirements. It's a slow business, but I see that it will definitely increase in use.

As for geothermal electricity, I think we should forget about it. It's just not economic today. I can tell you that from a lot of experience at the school of hard knocks and a lot of bruises I got. I blew a lot of money in that business before I came to that realization.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Okay. I have another question for you about environmental assessments. You talked about how important it was for mines to be environmentally responsible, especially since we are, as was mentioned previously, in the process of changing the environmental assessment process in Canada. I just wanted to know what your comments on that might be.

[Ross Beaty]

I'll try to be brief.

The trade-off for government and the trade-off for everybody is how to balance regulation with business. How do you make an environmental regulation functional, so that it doesn't waste time and it doesn't waste money, with the relevant things and unimportant things, and it really focuses on the stuff that's important? As I said, style of management is really important. That has to be super-stressed. As we go into the future, things that are invisible but are very threatening to human existence, such as carbon pollution, loss of biodiversity, are things that we have to think of more and more and build into the environmental regulations, because they're critical for human existence; they're existential threats.

Looking after water management is increasingly important. I think Canada has recognized it's an area that we have to look after. Applying some infrastructure spending to things that can help with this, and can help the mining industry plus communities along the way are good things to work on. It's a question of how you get the mix right, how you really look after the environment. As I said, you can't rely on companies by themselves to do it. They just cannot do it. As well meaning as companies are, there's simply too much tendency to drive to the lowest-cost solution. That's not always the right solution.

I think Dale's comment that we can't throw the baby out with the bathwater, we can't have too big an infrastructure of environmental regulation is true, but we also have to get it right. I know the federal government is working hard to do that. I have faith in the system. It has worked in Canada. We just have to be vigilant that we don't make the rules too tough, complicated, or in the wrong direction to hurt the industry where it doesn't need to be hurt.

On reclamation management, I think we can beef that up, particularly in some areas which have a really big impact. I'm concerned, for example, at the end of a mine life.... What happens typically is that a mine comes to an end, either because the reserves are depleted or economic conditions change. When economic conditions change, when there's a downturn, companies close mines when they can least afford it. Often they have, in many cases in Canadian history, gone bankrupt without having the capacity to reclaim the operations.

Government management, environmental rules that require reclamation as the mine goes, or bonding properly to avoid the problem with bankruptcy are ways.... It's kind of like the Canada pension plan. These are ways that you can deal now with the problem that you know is going to come at you sometime in the future. Perhaps we need to change the way we currently think of reclamation management.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Beaty. I hate to keep doing this, but we have time constraints that we have to abide by.

Mr. Tan.

[Geng Tan, Liberal, Don Valley North, ON]

Thank you, gentlemen.

I want to ask a few questions. I know Cameco is the largest uranium producer in the world. Actually, the first time I saw yellowcake is about 10 years ago, in Chalk River. Since then, gradually I have come to understand and have learned that the nuclear industry can provide society with very stable, reliable and clean energy.

Right now, the uranium market worldwide is experiencing a very serious downturn in price. I had a quick look at your second quarter financial report and found the company had a loss of about $57 million for the second quarter only.

In your opinion, how do you see the price of uranium trending in the near future? With such historically low commodity prices, how can the company survive? That's probably a typical question for most mining companies. What is the near-term solution for the company? Do you want to lower your production, or do you want to cut jobs, or do you want to identify some investors with fresh capital?

On investment, in your opinion, what will the tipping point be at which investors will show interest to begin investing in your company or the mining industry?

[Dale Austin]

In terms of the uranium market, we certainly believe that we are in an environment of a lower price for a longer period of time. We certainly had expected the price to rebound by now, but certain global conditions are making that challenging. There is a glut in the global supply of uranium right now that is holding prices low, partially because of the situation in Japan with the number of Japanese reactors that are no longer in operation, and also the decision in Germany to get out of nuclear power.

We certainly see the long-term fundamentals of the market being much stronger. One of the interesting things about our industry is that we are looking 10 to 20 years into the future in terms of contracting requirements. There is a significant number of new-build nuclear reactors occurring around the world. China has 24 reactors, new builds, under way. India has six. There are other places where there are new reactors being built. We also see, certainly, the potential for a number of those Japanese nuclear power plants to come back online. The long-term fundamentals of the industry we certainly believe are strong.

In terms of our own situation, we are a financially stable company. We continue to look for efficiencies given, as I said, the lower for longer situation that we are in.

[Geng Tan, Liberal, Don Valley North, ON]

You talked about Germany. I'm not sure, but I guess that Germany may mostly use Areva reactors. I don't think that they purchase too much uranium from Canada.

Also, on August 11, your company released its sustainable development report for 2016. Maybe you could share some highlights with the committee.

[Dale Austin]

Certainly.

Cameco this year was again named Canada's most sustainable company by Corporate Knights. We're very proud of that designation. We spend a lot of time and effort on sustainable development, both in terms of environmental assessments and in terms of environmental monitoring, which we do in co-operation with our northern communities.

Basically, if you delve into our sustainable development report, you will find that Cameco is one of Canada's leading mining companies when it comes to sustainable development.

[Geng Tan, Liberal, Don Valley North, ON]

We're talking about assistance from the federal government. From your point of view, what is the most effective way for the government to get involved? Are you asking for policy change, a tax credit, or a significant injection of capital? Which would be the most effective way for your company?

[Dale Austin]

The most effective way for our company would be for the government to be in a position to approve projects where they have the support of local communities and the business makes sense. From our point of view, as I said, the mining sector in Canada is a very strong sector. We do have projects that we are interested in within Canada, and we are looking for ways to have those projects approved.

The concern for us these days is that the projects that are producing now, the mines that are producing now, were based on decisions that were made sometimes decades ago. With the amount of time that it takes to get a new mine into production and the amount of time that it takes in order to get approvals, you're looking at no new mines coming online for another 10 or 15 years. We're concerned that there may be a production gap between the approval of new mines and the ability of our legacy assets to continue producing.

I guess my one request of the government would be to look at ways to have approvals for new projects that have the support of communities and sound market fundamentals.

[The Chair, Liberal, James Maloney]

Thank you. That's your time.

Mr. Barlow, you have five minutes.

[John Barlow, Conservative, Foothills, AB]

Thank you, Mr. Chair. I appreciate it.

Thank you very much, Mr. Beaty and Mr. Austin, for being here today. This is some great information, and it's much appreciated.

There is one thing I wanted to ask Mr. Austin about. We've talked a lot today about the price on carbon and those types of things. Saskatchewan does not have a provincial carbon tax, and the Liberal government announced earlier this month that it would impose a carbon tax in the provinces, whether they liked it or not, if they didn't meet certain emission targets. If the provincial government does not want to go that route, maybe they want to go a different route on the price on carbon. I believe that is their responsibility.

Can you tell me about the impact that would have on your Saskatchewan operations? What impact would it have on Cameco if you had a carbon tax imposed on your operation?

[Dale Austin]

Thank you for the question.

It would certainly have an impact. It would drive up some of our costs. One of the things about the uranium mining industry in northern Saskatchewan is that we are a very low carbon emitter. A recent study from the University of Saskatchewan, which I think was released a couple of weeks ago, demonstrates that our emissions are very low. If you look at the life cycle of GHG emissions in the nuclear sector, you'll see that, not surprisingly, they are very low.

One of the areas where we do have a particular interest is the impact we have on global climate change. As I am sure committee members are aware, climate change is an atmospheric challenge. It doesn't really matter where the emission reductions are taken, the impact is the same. As I said, with chemical uranium, about 2.5 billion tonnes of carbon are taken out of the atmosphere every year from electricity generation, if that electricity is generated from nuclear and not using fossil fuels. We are obviously interested in the global impact we have, and whether that may be taken into account as the federal government is looking to work with the provinces on their climate change strategy. What does that look like? Is there any opportunity for us to garner some credit for the impact we have globally?

[John Barlow, Conservative, Foothills, AB]

What was that number again?

[Dale Austin]

It's about 2.5 billion tonnes of carbon annually. Let me just refer to my notes.

[John Barlow, Conservative, Foothills, AB]

Bill Bennett, somebody we know well, mentioned to me that every time you take one coal-fired power plant offline in China, it makes B.C.'s GHG emissions neutral. I think that's a vison we have to take, more of a global vision, whether it's LNG or uranium. The impact we have globally is something that I think we should have as an idea as well.

Mr. Beaty, did you want to add to that?

[Ross Beaty]

Yes. Let's remember that the oil price has gone from $110 a barrel to $45 a barrel. That is a very profound benefit to every single user of oil in Canada. The offset against a very small increase in a carbon tax, for example, is minimal compared to that. There has been this huge benefit to every single user of fossil fuels, and a carbon tax hardly changes that in terms of driving costs.

The second thing is that, for export industries in Canada such as mining companies, there should be some kind of offset to a carbon tax that makes the products more competitive internationally in places where there are no carbon taxes.

The third thing is that increasing the cost of something like energy input creates innovation that reduces that cost. That's really what drives innovation, companies trying to reduce their costs, trying to find better ways to do things. That is why Canada has such a strong mining industry and some core advantages, because we are good at doing that. We respond to these forces, and we find better solutions. I think what we are going to get to is a really strong, innovative clean tech industry coming out of something like a carbon tax.

[John Barlow, Conservative, Foothills, AB]

Mr. Beaty, you were talking about the burden of the regulatory regime and that it can be a deterrent to mining. I noticed that Pan American Silver doesn't have any operations in Canada. Is this a reason? I know we are not a huge silver—

[Ross Beaty]

No.

[John Barlow, Conservative, Foothills, AB]

—not even in the top 10.