Natural Resources Committee on March 7th, 2017

[The Chair, Liberal, James Maloney]

Thank you.

Go ahead, Mr. Barlow and/or Mr. Weber.

[John Barlow, Conservative, Foothills, AB]

Thank you very much, Mr. Chair. I'm going to split my time with my colleague from Calgary.

I want to pick up where Mr. Tan had started. I've talked about this before.

Mr. Bateman, you talked about the potential of solar energy. I don't argue that fact. I think there is potential somewhere down the road, but I think it's a long way off. You talked about how much the costs have come down, but for the costs as of right now, I just checked Gridwatch for Ontario. It's 0.3% of Ontario's power source as of right now. It's 10 times more expensive than nuclear and more than 100 times more expensive than hydro.

What is the timeline in terms of getting it to be...? How is it going to help us when we continue to pour billions of dollars into it in Ontario? What is the timeline for solar to became an affordable, reliable option as a Canadian energy source?

[Patrick Bateman]

At the utility scale, the largest scale, we see a time in the next few years when it will be competitive on costs with new natural gas and new wind, for example. Literally it's as good as here now, today.

At smaller scales, we're a few years out for commercial and maybe five, seven, or eight years for residential, depending on which province we're looking at.

When we look at more distributed forms of generation, it becomes increasingly difficult to compare on a levelized cost—the price on your bill to the price on your roof—because when it's on your roof, you don't have to pay for any of the wires to transmit it and so on, so it's a little bit of a different value proposition.

To make a long story short, it's becoming increasingly more cost-competitive than I think anybody would have imagined several years ago. Because the time at which it is so cost competitive is so close, it's really time to start preparing with our utilities, with our power infrastructure, and so on, so we don't end up with redundant infrastructure that's not appropriate for the supply mix of the future.

[John Barlow, Conservative, Foothills, AB]

Thank you.

I'm going to give Mr. Webber as much time as possible.

Thank you, Mr. Chair.

[Len Webber, Conservative, Calgary Confederation, AB]

Thank you, Mr. Chair.

Thank you for your presentations today. It's an honour to be here; my first time on this committee. I tried to get on this committee, but I ended up on health, which is just as nice, but this is sort of my background. I was the parliamentary assistant for energy for a number of years in the Alberta government. Sitting here with my two colleagues from Alberta, we're very familiar with SAGD, in situ, diluent, and things like that, but I'm really quite interested in this solid oil.

Mr. Broder, you passed around the bitumen. Of course that is something that needs diluent to push through the pipelines. The fact that you don't need a pipeline to transport it is very interesting. It's something that is apparently environmentally okay. If there were a spill, it wouldn't kill the fish. It's easy to clean up.

I just need a little bit more detail and clarification on what exactly.... Maybe you can share with us. You have a way of turning this into a solid oil, and Mr. Tan asked about the costs and environmental impact. You say there are zero emissions from converting this to a solid oil. Maybe you could just clarify a little bit more with respect to the process of going from bitumen to solid oil and then back to bitumen again at the other end.

[Cal Broder]

Thank you, Mr. Webber. Thank you, Mr. Chair.

The process has been used for 130 years. It's a distillation process of hydrocarbon, pure and simple. It was invented by the Rockefellers. We take hydrocarbon and we boil it. We add heat to it and we pull off hydrocarbons, light carbons.

What we have found is a way to do it much more efficiently, with no emissions. That process they invented 130 years ago is, for all intents and purposes, being used today. They take hydrocarbon, use natural gas to heat up water, boil the water to create steam, heat up the bitumen or heavy oil, and drive off light product.

We have a process not a whole lot different from that, because ours wouldn't look any different, ultimately, except you wouldn't see anything being burned. We don't burn any gas. We use an electricity form and take our heavy oil and focus on our diluted bitumen, the one that's going through the pipeline. All we need to do—and they do that to a certain extent right now—is pull off the light ends, what's called diluent, the highly volatile chemicals, the light hydrocarbons that are essentially a carbon chain of five or less, pentanes and stuff like that. That product is what creates the problem of transportation, because we have to add so much of it to a barrel. We have to watch out for it when it goes into a tank car.

What we've done is taken a process that was invented 130 years ago and put some New Age technology to it. That New Age technology is strictly 100% electricity. That electricity creates the energy to drive off the light products, which we collect. It's contained within a vessel, so we don't need to lose anything to the environment and we don't need to burn anything in order to make it happen. We're relying on people who are creating that energy for us, and it doesn't matter to us who it comes from. It should be coming from clean sources, because then it will reduce the footprint for us all, but the process was invented 130 years ago.

Mr. Webber, we have really focused on the transportation now. I'll give you an analogy I like to use. You take a pound of butter out of the fridge. You want to use it, so you cut off a piece, melt it, and do whatever you want with it. If you take that piece that you just melted and either put it back into the fridge or back onto the counter, you'll find it goes back to a solid. That butter really is a liquid or a solid.

That's what our products are from Alberta. They've chosen to take a different approach and make them totally liquid all the time. In my opinion, that's wrong, but that's just my opinion. We focus on the product, which is a solid in the ground, and keep it a solid above the ground and for transportation and storage and only turn it into a liquid when we need to put it into a liquid—like that butter—at the refinery.

With that whole transportation nightmare we have right now of moving liquid hydrocarbon, I don't care whose hydrocarbon it is and whose pipeline, there is the potential for a leak, and we have to recognize that. It's the risk that they've taken. However, do we need to take the risk when we have this different product? This is a different product, and it can be a safer product, and we've shown that it is a safer—

[Len Webber, Conservative, Calgary Confederation, AB]

Mr. Broder, what is your barrier, then, to the next stage, to commercialization?

[Cal Broder]

Commercialization is a challenge for us because we're a small entity, a small organization. As alluded to by one of the speakers, small and medium-sized enterprises have been the backbone of our economy. They are the growth, but we face different and unique challenges. For instance, you heard from MEG, which is—

[The Chair, Liberal, James Maloney]

I'm going to have to ask you to wrap up very quickly.

[Cal Broder]

Sure.

You heard from MEG, which has the funds to be able to fund these things, and they can utilize and set aside the funds within the SDTCs and the Western Economic Diversifications. Small firms cannot. We can't do that, so we have a different challenge. Our biggest challenge is funding, bar none.

[The Chair, Liberal, James Maloney]

Thank you.

Mr. Cannings is next.

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

Thank you all for being here.

I would perhaps let Mr. Broder continue a bit. It strikes me that there is some inertia in the industry because we're used to liquid oil, so that's how we move it and that's how we refine it. Where is the inertia the biggest? Is it in the process when we take it out of the ground, in the transportation, at the refinery, or is it all of the above?

[Cal Broder]

I think it's a combination. The biggest inertia is we have innovation and we have change, and they're really the same word for the same thing, but the industry I'm trying to get into, the oil and gas industry, is not receptive to change. Change is frightening to people, and that's in all industries. That's where the inertia resides in showing something new.

It was no different from 1903 when the Wright Brothers said they were going to fly tomorrow and everybody said no, they weren't going to. That's the challenge. It's change, and that's what we face, and they do. Everybody faces challenge.

In my speech I alerted you that we have within our government the necessary resources to deal with this. The biggest challenge that we have, and anybody has, is getting through the door to verify and validate our processes. Then once we're through the door, it's how we manage the technology from a security and a protection standpoint, and then how we demonstrate it.

Those are the three challenges we have, and those are the only three challenges I see. Once we can step through some of those doors, the whole thing starts to work. What we face, and probably other industries do, is that getting through the doors to be able to have the conversations on a more intimate and drawn-out basis is difficult, and until we get to that point, we're not going to see the advances and the de-risking that we hope to see as an innovator.

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

Okay, thank you.

Mr. Bateman, you talked about the grid and how we needed to plan for the future in how we build that grid.

This government is all about infrastructure. I'm wondering if you could perhaps comment quickly on how this government should be working toward a better grid for the future that could include solar and wind and those types of energy.

[Patrick Bateman]

Thank you, Mr. Cannings.

I think to make it brief, a lot of investments in our electricity distribution infrastructure are heavily regulated with the public interest in mind. Quite frequently that leads to managing costs in the short term, potentially at the risk and expense of longer-term costs.

I think a role for the federal government could be to use your convening powers and potentially some investment to help to bridge that gap in the near term and to demonstrate some of this unfamiliar technology and demonstrate some of the operability that will be required with more renewables on the grid to help to bring us to the next stage. The cost of sensors in the Internet of things has come down equally or more than solar technology costs in recent years. In terms of cost-effectiveness, we're there today, but taking the next step and forming the partnerships to deliver it, I think, could be the most important next step.

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

You mentioned some disadvantages we had in Canada in a North American context. I think it was tax structures or other measures.

[Patrick Bateman]

That's correct, Mr. Cannings.

Canada had a number of tax measures intended to attract investment in renewable energy, including accelerated depreciation and other ways for junior development companies to offset development expenses. They pale in contrast to what is in existence south of the border. For a decade, they've had an investment tax credit for solar and a production tax credit for wind. They were recently extended for several years as well, and as a result, while companies are taking advantage and while there is some limited success from the existing measures here, they pale in comparison to what's south of the border.

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

Ms. Petrevan, you talked about procurement and what the government could do in that regard. We've heard from others about how easy it would be to make strides in energy efficiency in new buildings and in retrofitting buildings. Could you perhaps expand on that idea of how the government could become more efficient when it is building new buildings or using its stock of buildings right now?

[Sarah Petrevan]

The government has made one notable commitment to greening its operations. When we're talking about it in a carbon framework, it's slightly different from just a general greening, because the government has had a policy on greening procurement for a number of years, I believe since 2006. It's mostly applied to operational procurements, the supplies that government takes in, such as paper, etc., just for its daily operation. However, you can look at buildings and the ability to apply energy efficiency and clean technologies in buildings. You can essentially do it through procurement.

You can say building X. Pick a building on Sparks Street or wherever and say you want to make this building as efficient as possible. You can set out some requirements around budgeting and a few other things. Then you can ask the marketplace to tell you the most effective way to do this. The marketplace will come back to you and say that if your objective is to reduce GHGs in this building as much as possible, they believe it can be done by using these technologies, and this is how much it's going to cost. In that way government can be a demonstration case for new technologies, and if you do it by allowing SMEs to play a role in the procurement process, chances are you will also be capturing a lot of those technologies as Canadian.

When I talk about public procurement, a question that I often get asked about SMEs is if it is trade compliant, and it is. On a number of occasions, both the OECD and the WTO have done presentations on how doing an SME set-aside or allowing them to participate is a great trade-compliant way to spur domestic participation.

I hope that answers your question.

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

Yes. Thank you.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Cannings.

I believe we have Mr. Harvey and/or Mr. McLeod.

Mr. McLeod, you only have a few minutes left anyway.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair. I do have a couple of questions.

Thank you for your presentations.

I had a couple of questions pop up when listening to your presentations. The first one is to Mr. Bateman, regarding your comment that additional investments from the federal government are required.

In our last budget, I think we had over $350 million earmarked for this area. Could you give us a general idea of what you think should be the actual number that needs to be included to top up this budget?

[Patrick Bateman]

Thank you for the question, Mr. McLeod.

I would follow up with the committee with further information on that. My comments in my opening remarks were largely with reference to the need to work with industry to focus on programs, design, and implementation. I'd be pleased to bring back some ideas on that front, and also what the associated costs to the federal government would be.

[Michael McLeod, Liberal, Northwest Territories, NT]

What emerging technologies show the most potential for natural resource development in the future, and for what applications?

[Patrick Bateman]

Within solar industry, we're seeing continued refinements of its existing technologies, driving down manufacturing costs and improving performance. A lot of potential exists within improving what we already have.

A number of new photovoltaic materials are in the early stages of development. These are things that, for instance, can be made into paints or can be printed with 3-D printers. These things hold a great deal of potential but are several years away from being commercialized. Those are both with regard to power conversion or power harnessing.

Also there's power electronics, which forms the interface between the generation, the grid, and the network. We've got things like energy storage, which can lend a lot of services to the grid, and then other technologies that do voltage regulation, frequency regulation, grid stability. They take what currently is a generation technology and make it an integral part of how the grid operates and provide services that are required today, even in the absence of these technologies.