Natural Resources Committee on Feb. 21st, 2017

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

Okay, thanks.

[The Chair, Liberal, James Maloney]

Mr. Harvey.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

Thank you, Mr. Des Rosiers, for being here.

I want to focus my area of questions on the valley of death, I guess you'd call it. I'm going to draw my remarks to agriculture just because that's the industry I know quite well. But I think the same premise could be applied to the forestry sector, mining, or oil and gas across the country. The concerns that I hear from contractors or farmers is how does government do a good job in ensuring that a billion dollars of investment in clean technology doesn't just go to the secondary processor or end-user, so that the adaptation of that technology and the funding possibilities going along with it actually trickle down to the primary producer or the source producer if it's in a different commodity?

I'll give two examples. Richard mentioned forestry. The new Ponsse processor would be half a million dollars. Say a forestry producer, a source producer, purchased a new processor two years ago. They're expected to try to adapt that new technology and take that on in order to better their operation. How does that producer reap those benefits as opposed to somebody in the manufacturing business who's taking that wood and turning it into lumber and adding value to it? They can adopt technology a lot more easily because the revenue that's attached to secondary production a lot of times is a lot greater than the revenue attached to the source production.

It's the same in agriculture. When you look at the emissions around agriculture, the majority of the emissions are from the primary production. If John Deere comes out with a new electric tractor—they announced one three or four months ago—it will be $300,000 for a 180-horsepower tractor equivalent. If a producer buys that tractor, how do we ensure that the producer sees some of the benefit from that? If he just adapts the new technology at a higher cost and doesn't see an end benefit from it, then he's at a competitive disadvantage. So how does government help facilitate that and ensure that they're not disadvantaged by the technology, that, in fact, they're able to embrace that new technology and receive their fair share of the positive benefits that come from it?

[Julie Sunday, Director General, Policy and Planning Branch, Innovation and Energy Technology, Department of Natural Resources]

One of the things that came out very clearly in our consultation process was the particularities around the sectors that are dominated by smaller operators, or SMEs. In agriculture there were some examples of that, and in fisheries as well. In these sectors, there's an increased need for measures to support adoption of new technologies because of the prohibitive cost at times of implementing them and the risks associated with that. We saw a broad risk across all resource sectors in terms of adoption, particularly in their first commercial use, and a role for government in helping to mitigate that risk. Certainly that cut across all resource sectors, but in the sectors where smaller operators dominated, there was certainly attention given to the particular needs.

Also in terms of the broad clean-tech producer space, we noted a considerable need to better link the end users with the clean-tech producer space. Oftentimes we heard from resource sector companies that the clean-tech producers weren't actually developing solutions that worked in their particular sectors. So government's convening of conversations between the producers of the clean technologies and the larger industrial players was also a gap that we noted, and one that could certainly be bridged.

The final thing I would say, in terms of clean tech across the resource sectors, is that we looked a lot at outcome-oriented approaches. What are the big outcomes in each of those sectors that we as a country would want to see achieved, and then how do we, without predetermining technical pathways, figure out how best to get there? That also creates a broader dialogue across the clean-tech producer space, because, while there are particularities to each of these sectors, there were also a number of opportunities for applications in, say, energy to be applied to mining, as Frank noted. They weren't necessarily technological advances, but rather sort of redeployment in different sectors, and then there are some issues that are common across all sectors around energy use and different areas. It's not a one-size-fits-all approach, but there's also a lot of potential for sharing best practices across each of the sectors to fuel greater adoption across the sector, which has been a challenge.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

Mr. Serré has a question that he wants to ask, so I'm going to turn over the rest of my time to him.

I thank you for that answer.

[The Chair, Liberal, James Maloney]

You have about a minute and a half.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you, Mr. Harvey.

I would like to raise two points.

First of all, Mr. Des Rosiers, your report mentions five natural resource sectors in Canada. Could you put together a table that shows Canada's relationship with the U.S., in terms of jobs and revenues, in the five sectors? It would be useful to see the interdependencies between Canada and the U.S. in the sectors. We would very much appreciate it if you could provide the committee with that information.

Second, we'd also like to know the status of clean technology in the five sectors as regards Canada's relationship with the U.S. We are looking for more information on our connection to the U.S. as far as clean technology in those five natural resource sectors is concerned. Would it be possible to get us that information?

[Frank Des Rosiers]

We would certainly be pleased to provide that to the committee. The only concern I have is that the data are still flawed, and we recognize that from the outset. We are working with Statistics Canada to improve the data on the sector. Nevertheless, we can definitely share what we have with the committee.

[Marc Serré, Liberal, Nickel Belt, ON]

That's great.

I have one last question for you. I don't know what the term is in French, but I am referring to

mining tailing ponds

The Vale Living with Lakes Centre at Laurentian University and private sector companies have approached me on the issue, because it would seem that solutions do exist. It's a major problem. British Columbia has experienced leaks, as have northern Ontario and other parts of the country. Who in your department is the point person for these types of problems? Can you send us more information on R and D in the area?

[Frank Des Rosiers]

Absolutely. We will see to it that the committee receives all the information on tailing ponds.

[Marc Serré, Liberal, Nickel Belt, ON]

Wonderful. Thank you.

[The Chair, Liberal, James Maloney]

Thank you.

Ms. Stubbs.

[Shannon Stubbs, Conservative, Lakeland, AB]

Thank you, Mr. Chair.

Thanks to both of you for being here. We appreciate having your testimony as we kick off this study.

Both my colleagues across the table and to you, I want to start by commending the work that the government's doing on the one-window approach. As a person who worked in the oil sands business unit in the Government of Alberta years ago, and then later for a polytechnic institute in Alberta, concerns around a one-window approach, both on the regulatory side as well as in terms of fiscal partnerships with government, are heard across sectors. In a show of co-operation and non-partisanship, I want to acknowledge the work you're doing on that. I think it is an important priority.

My questions are around Canada's role in the world on a couple of fronts, and maybe either or both of you could speak to them as you can.

My colleague mentioned your comments on around this issue of codes and standards and defending Canada's best interests, and the sense that maybe we've been too nice in the past. I wonder if you could elaborate on what you mean specifically, or any highlights you want to give on that issue, and then also around bridging the valley of death in the commercialization and deployment of clean technologies.

Could you elaborate on any specific policy directions you think will help? Could you also highlight the countries with the best practices and policy frameworks, and where Canada fits into that whole picture?

[Frank Des Rosiers]

Maybe I'll start with the codes and standards issue. It sounds like a pretty technical and not so sexy topic, but it's mighty important. We've seen and heard countless stories about some of our competitors—who will remain nameless—who very deliberately made sure that their heat pump standards were mimicking the global standards. This makes it rather difficult for our local manufacturers to penetrate those markets.

Again, it's a global game. Those partners are very deliberate, and we have to make sure that we are equally forceful, not just looking at our own codes and standards in Canada, but also playing a more active role in the global arena to make sure that we help define those global codes so that, at the very least, our firms can sell their gear and are not excluded right off the bat before they can even get to the marketplace.

It really calls for us to work between our manufacturers and our codes and standards colleagues to make sure that we are there to defend more actively, in various global forums.... Some of those discussions are very technical, and you have to dispatch engineers to go through these, but unless you're willing to invest that time and effort, you're going to be shut out from those markets.

Once the codes and standards are established, it's pretty hard to change them. They're typically there for years, if not decades, and then the market is just taken away from those firms. So being attentive to this, I think certainly deserves clearer attention.

On your question regarding the valley of death and what to do on that, the two things I can probably focus most attention on are around demonstration projects. We heard from our consultation in the pan-Canadian framework that this is a clear area where there is a lack of funds. Those things cost a pretty penny.

You mentioned your involvement in the oil and gas sector, Mr. Chair. Having a demonstration project in that space typically costs $20 million, $50 million, $75 million, or $100 million a pop. There are many technologies there that need to be demonstrated, so it is a significant commitment on the part of the firms sponsoring this and the potential adopters. Often they're reluctant to jump in unless governments are willing to shoulder the cost, especially for the first of a kind, because the technology risks are significant and delays are often occurring, so nobody wants to be first and everybody is waiting for one another. At the end of the day, our industry is not well served. That's certainly a priority area.

The other one I would flag is around risk capital for that kind of pre-commercial stage, where, again, financial institutions don't want to go there because there is still some hesitation about a new product or a new service. This is where they are looking for government assistance, and we do have some funding programs in this regard from SDTC, which has had a record of support in this area. It helps fill that void before a venture capitalist picks it up.

We don't have very deep capital markets for venture capital in Canada. It's just a fact. Our firms end up relying on other sources of funding, or they have to go to the U.S. to seek that capital. I was in San Francisco for a clean-tech event with Julie, and we saw a lot of our Canadian companies knocking on the doors of U.S. institutions and banks to fund them. It's the same in New York or Boston. Some might argue that it's not necessarily a bad thing, but it would be nice if the financial sector in Canada was able to stretch its funding envelope to help some of our firms here.

[The Chair, Liberal, James Maloney]

Thank you.

Mr. McLeod, go ahead.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you for your presentation.

Clean technology is about remediating or preventing environmental damage, or reducing the amount of pollution. It is not clear to me what by “de-risking” the adoption of clean technology means. Maybe you could answer that and expand it to what you think the federal government and industry's roles are.

[Frank Des Rosiers]

That's a very good question, because a billion dollars sounds like a lot of money, but there are a lot of firms and a lot of needs out there and we certainly don't want to spread ourselves so darned thin that we're not accomplishing the impact that we want. And we certainly don't want to substitute ourselves for what private firms ought to be doing.

I will look a bit at the risks that we're trying to address and try to summarize them in maybe four buckets. The first is technology risk. This is where firms should be driving this effort, but it's where market failure tends to occur, as I referenced earlier. Every government on this planet is providing some assistance to R and D, whether it's through tax measures or direct support, in conjunction with what the firms are trying to advance.

Then there is a second risk around business risk. As the name suggests, it's what a company would tend to bear in terms of whether or not the product is deemed to be safe or accomplishing the mission it is meant to do. There, one would expect that the companies would own much of that risk of whether the particular product would meet the marketplace's needs.

The third risk, which is not insignificant in this case, is the policy risk. It is both a positive and a negative risk. I can use the example of climate change. Over the course of the past year, and a bit in Canada and globally, there certainly has been a change in the policy landscape that has made the adoption of these clean technologies easier, whether through regulations, carbon pricing, or other measures that we are currently discussing. In this case, the policy environment became more supportive. But we could imagine circumstances whereby that policy risk would change toward the negative and make it less attractive or less easy for companies to advance their technology.

I don't know if this describes it in a useful, clear enough fashion, but that's how we tend to frame, at the macro level, the risks out there and who would tend to bear them.

[Michael McLeod, Liberal, Northwest Territories, NT]

Mr. Chairman, I'm curious, then. If the government should backstop the risk, does that mean we should also share potential revenues if there is a breakthrough in technology? Perhaps we invest in mechanical batteries or something and that really takes off and the government had backstopped it. I don't know if that's the way the industry looks at it, but certainly from a business perspective, I would think that would be the case.

I find it interesting that we're encouraging a lot of industry to do many different things for us, and the government has put some money towards it. In the north I watch communities really struggling to move away from diesel generation power. For example, we've had a community go to co-generation, using solar and diesel. They put in a new diesel system backed up by solar. But the reality is that if that weren't subsidized by the government or hadn't been paid for by the government, there is no way they could afford it. The cost, they tell me, is amortized over 10 years, but in 10 years everything has to be replaced.

I'm just wondering if we're seeing anything on that front of storage. Storage is the big issue. I like the whole concept of mechanical batteries. Is that being tested anywhere? Is there any new clean technology that's being de-risked for the north?

[Frank Des Rosiers]

I'd say two things. First, the cost of renewable power has certainly decreased significantly. Whether it's wind or solar, we've seen a very steady decline in costs over the past years, which makes those solutions for those communities more attractive.

On the battery or storage side, there are many storage technologies out there. You referenced flywheels, I imagine, when you talked about mechanical storage. There are heat exchangers that can also be used. Hydrogen could also be a mode, and batteries, obviously, and there are many pathways of research.

Are we there yet? No, but there certainly have been significant advances in recent years in Canada and globally, and we've been able to do a number of demonstration projects across communities to do a combination of those. You mentioned solar diesel.

Another one we're actively looking at is bioenergy, because many of those communities have plentiful resources nearby. It could also be a source of employment for those communities involved. It's a very steady, safe source of energy for them that could be combined with, say, solar or wind if it's appropriate.

There is not going to be one solution for it. It's typically a combination of technologies, and they have to be adapted to the needs of that community.

Maybe the last point I would convey, Mr. Chair, is around cost, yes, but also simplicity of operation and the robustness of it. It's not so easy to call the repairman or the engineer if you're living hours away from any close locations where you have such service, so we have to really make them robust and relatively simple to operate and fixable on the spot by local—

[Michael McLeod, Liberal, Northwest Territories, NT]

Mr. Chairman, our biggest costs in the north for any type of industry are the power supply, and bringing in any kind of food, products, or people to the site. For us, the biggest polluters are the aircraft, the huge jets that coming into the mine sites and the oil fields.

If we really wanted to reduce pollution in the north, we would just build more roads or expand the grid, because all these mine sites and communities are still generating power through diesel.

I wanted to quickly ask a question on the role of aboriginal people. You did mention aboriginal people.

What kind of opportunities are there for aboriginal people and how are you engaging them? You mentioned that you collaborate all over the world. Does that include indigenous engagement? As part of your mandate letter, are you required to do this? I'm interested to see how you're doing that.

[Frank Des Rosiers]

As the parliamentary secretary knows all too well, Minister Carr, the government overall, and the Prime Minister have certainly made it very clear throughout this past 15 months that there's a very strong commitment on that front.

We had very engaged partners right across the country when we had those discussions. From west to east, and everything in-between, they felt this was an area where they had a clear common interest. The remote communities topic was clearly the dominant one, but I would say that forestry and mining, where we have large employment of aboriginal people across the country, was also of keen interest.

The message conveyed was—and the committee members would know a lot more about this, so I have to be humble as I describe it—that they clearly saw a strong, collective or joint interest in advancing this. The message they conveyed to us was simply that they wanted to be part of that solution together. They want to work it out together.

Another reality that was certainly also conveyed was the need to have some support in terms of capacity, and to identify those opportunities in their communities. That's something we've been discussing with aboriginal organizations to see how we can use the existing capacity while trying to reach out to those communities, which are spread out around the country, so they are aware of what can be done in terms of solutions to lower their cost of energy, for instance.

[The Chair, Liberal, James Maloney]

Thank you.

We have three segments left, two more of five minutes and one of three minutes. We've gone a little over an hour now. I was going to suggest that maybe we do three minutes each and then wrap it up. Does anybody object to that?

No? Okay, so we'll have Mr. Barlow, followed by Mr. Serré, and then Mr. Cannings.

[John Barlow, Conservative, Foothills, AB]

Thank you, Mr. Chair.

You were talking, Mr. Des Rosiers, about both wind and solar energy. I know that we get painted with a different brush in Alberta sometimes, but in my riding I have one of the largest wind farms in the country. I have Canada's only solar powered community, Drake Landing in Okotoks. These have been great successes, to a point. Drake Landing has not been copied anywhere across Canada, and it's almost 15 years old now.

[Shannon Stubbs, Conservative, Lakeland, AB]

Are you ahead of the country?

[John Barlow, Conservative, Foothills, AB]

We're ahead of the country. I know. We should do a better job of talking about that.

I just checked on Gridwatch.ca and right now, wind and solar are less than 8% of the power supply of Ontario. In Alberta, despite having wind farms and these other things, it's less than 10%, usually.

My concern—and I think it might be a perception, which I would just like you to clarify—is that the vast majority of funding is going to technologies like wind and solar, whereas our more traditional energy sources, such as oil, gas, hydro, and nuclear energy are still far ahead.

I think there's an opportunity for them to stay ahead and become cleaner and more energy efficient. Are those opportunities still there?

Oil and gas is one of the most exposed sectors to competitive forces, whether it's low commodity prices or, now, carbon pricing. Are there still opportunities for those more traditional energy sources to be accessing NRCan grants? What are some of the initiatives you're putting in place to ensure that in this new low-carbon economy, these traditional sources that are supplying the vast majority of our energy are still able to be competitive?