Natural Resources Committee on April 11th, 2017

[Thomas Mueller]

From our perspective, from the building sector, once the carbon price is at $50, it might have an impact, not necessarily on individual homeowners, but more on owners of a portfolio of buildings.

There's one example I can give you from British Columbia, which has had a carbon tax for a number of years that is now at $30. As an individual homeowner, when you heat with gas, it's a fairly small amount that you have to pay in carbon tax, but the University of British Columbia, for example, was paying about $2 million a year, so they were really taking strides to reduce that carbon tax, particularly in terms of transportation. Also, they invested in buildings to reduce the carbon tax it had to pay, by investing in more efficient and lower-carbon buildings.

I think it's really a matter of price. I think it will have an impact on portfolio owners, but not on individual building owners, because the carbon price will not be high enough. It would have to be at maybe $100 plus, where people stop looking at the energy cost and shift the cost strictly on the price of carbon.

[Denis Lemieux, Liberal, Chicoutimi—Le Fjord, QC]

Mr. Spady, do you want to respond?

[Cameron Spady]

I'm not sure we have much to offer on the subject of the price of carbon. Basically, we stand by our assertion that the pipelines are the best way. Our business is legacy pipelines. Old pipelines are our bread and butter. It's silo technology. Pipelines being the most efficient way to move product is where we stand.

[Denis Lemieux, Liberal, Chicoutimi—Le Fjord, QC]

Mr. Kresic?

[Walter Kresic]

As a very large company that has an impact on communities, we recognize the engagement required with communities. We of course support the climate goals and we support the new carbon pricing policies that were adopted. Our position is that carbon pricing mechanisms can drive economically efficient environmental solutions by providing incentives for businesses to invest in conservation and technology that reduces greenhouse gas emissions. We see this as a way for organizations to drive efficiency.

[The Chair, Liberal, James Maloney]

Thank you.

Ms. Stubbs.

[Shannon Stubbs, Conservative, Lakeland, AB]

Thanks, Mr. Chair.

I thank all of our witnesses for being here. My only regret is that we won't have more time to have exchanges with you in questions and comments. I appreciate all of your presentations.

The thing I enjoyed most about the discussion today is the very clear presentations that outline the ways in which Canadian conventional oil and gas, oil sands, and pipeline developers are also major investors in clean tech and in the development of alternative and renewable energies. It is often not expressed enough by Canadians, and certainly by politicians, that Canadian companies are world leaders and that Canadian oil, gas, and pipeline developers are major investors in innovation and technology for alternative and renewable energies. These things are not mutually exclusive. They are, in fact, a continuum of the same culture of innovation, of ingenuity, of private sector investment that is driven by a goal to do the right thing, to increase energy efficiency and reduce costs. That has happened mostly quite apart from punitive government tools or in some cases in the absence of government incentives. I appreciate your pointing out the $2-billion investment in the natural resources sector overall, the vast majority of which is coming from oil sands and oil and gas companies.

In terms of Enbridge, thank you for pointing out that it is the second largest investor in wind and solar technologies in Canada. I note Enbridge has invested in 17 wind farms, four solar energy operations, five waste heat recovery facilities, a geothermal project, and a hydroelectric facility. I think that's something all Canadians can be proud of and should know about, and that elected representatives in Canada should say often and unapologetically right across the country and on the world stage.

To that end, Alex and Walter, I'd invite you to expand on specific examples you'd like to highlight in terms of the advancements in clean tech and innovation and technology development in Canada's oil and gas sector.

[Walter Kresic]

Sure. There are a number of examples.

Of course we run a large R and D portfolio, and we work very closely with universities, small operators, and large operators from within Canada and around the world.

We have a recent example of one where we've teamed up with a company that provides some equipment for our storage tankage. Our storage tankage can result in vapours coming off and quite a bit of release from oil vapours. We've developed a technology with this company that helps us measure the contents of the tank and the position of some of the equipment. This particular equipment is going to be used across many other organizations in Canada. We think it will flourish broadly.

For those of you not too familiar with the kinds of infrastructure I'm talking about, some of these tanks are about 300 feet in diameter. They're massive vessels that hold hundreds of thousands of barrels of oil. We have hundreds of these sorts of tanks across Canada and the United States. If you measure the total volume of emissions, it's quite impressive. If we can bring the volume down by even a marginal amount, then the value from that becomes huge.

We have many instances like that where we've worked with companies. Our pump systems.... In Saskatchewan when we had a very busy expansion program, we were known as being the number one and the number two users of the most power in Saskatchewan over a period of time. Number one was from the usage of our pumps to power our pipeline system across Saskatchewan. Number two was for the development of pipe steel through EVRAZ. They have a huge plant in Regina. We purchase most of our pipeline steel from EVRAZ.

We look at those initiatives very closely. We look at things like more efficient pump systems and the motors on those pumps. The reduction of electricity required on systems like that have a large effect.

We work with companies like EVRAZ to recycle steel, to find ways to reduce the amount of raw materials that are required.

We could go on and on. We look at the full supply chain of our actions. hat's the effort that's ongoing for us.

[Shannon Stubbs, Conservative, Lakeland, AB]

Alex, would you like to expand?

[Alex Ferguson]

Sure. I'll just add a few points.

I'm sure everyone is aware of the COSIA story, but there are a few points that I want to emphasize. I want to remind everyone yet again about the effort we've put through the XPRIZE at COSIA, looking for commercial installations for getting some value out of a carbon stream. Those things are live. It's the largest XPRIZE ever set up globally since the beginning of the XPRIZE.

In 2016, just to give you a highlight, 119 projects were completed through the COSIA umbrella on innovation outputs to the tune of $219 million, which I mentioned before. Currently, 76 additional projects were initiated in 2016.

I just want to give you the impression that there's a massive amount of energy that goes into setting up the innovation. I certainly don't want to miss the opportunity, though, to talk about our non-oil sands side of the sector. Again, I mentioned that this is just the upstream, what we call the Petroleum Technology Alliance of Canada, all the members participate in that. Those are the investments that go into non-oil sands operations, whether it's methane reduction technologies or any kind of operational requirements on that side of the business.

I want to point out that the number one oil and gas company investing in research and development in 2015, which is the only number I have, ranked in the top 100, fifth in Canada. Canadian Natural Resources Limited in 2015 spent $527 million on research and development in all its operations. There's a company that's balanced between oil sands and non-oil sands in 2015.

That's a picture of some of the things that are going on there.

I want to point out as well the linkages I talked about. Sitting here and meeting Thomas for the first time, it reminded me that years ago when I worked in British Columbia as the provincial regulator for oil and gas, I was with the first crown corporation in British Columbia to build two LEED platinum buildings under the auspices of his organization. So there are connections all the way through the system.

[Shannon Stubbs, Conservative, Lakeland, AB]

How much time do I have, Chair?

[The Chair, Liberal, James Maloney]

About 10 seconds.

[Shannon Stubbs, Conservative, Lakeland, AB]

I'll just thank all of you for being here today.

[The Chair, Liberal, James Maloney]

Mr. Cannings.

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

Thank you.

Thank you for being here today.

I'm going to start with Mr. Mueller.

You have a page in your presentation about building as a solution to climate change, what we could do that would bring Canada's GHG emissions down by 44%, meeting our 2030 targets.

I wonder if you could comment on the practicality of doing this by 2030. Do you think that's achievable—I assume you do—or is this a longer-term type of project?

[Thomas Mueller]

That's a very good question.

When we established those targets, we were modelling what it would take to reduce carbon emissions from the building sector by 2030. That was our target. I'm not talking about homes, but larger buildings over 25,000 square feet. We looked at approaches and technologies, particularly in the existing building sector, that would take us to that goal. With the net-zero carbon buildings I talked about earlier, that's a kind of an additional reduction that's possible.

What we found is that there are really four strategies. One is to recommission buildings, which is operational. The second one is deeper retrofits. When a building is being retrofitted, you have a deeper retrofit of a building. Then, it's the renewable energy used. Then there's fuel switching, when you go from a fossil fuel to put, let's say, a whole building on hydroelectricity, which is very clean in Canada, in British Columbia, Quebec, and so on.

We modelled that, and it would take 100,000 buildings that are over 25,000 square feet—that's the size of the buildings—and you would have to do recommission work to 80% in deep retrofit to build 60% of those buildings over the next 14 to 15 years. It's possible, but it requires investment. This is already happening, but it requires investment. Without the retrofit of existing buildings, we are not going to achieve our carbon reductions.

If you look at the carbon curves, where we're currently going and where we need to go in a very short period of time, there is quite a significant gap. Without saying that this is invoking a sense of high urgency, I think it is a case where we need to take very targeted action to reduce carbon emissions, not just from buildings, but from the transportation sector, from the production of energy, from the industrial sector.

However, without the existing buildings and paying attention to that, there's not an opportunity to reach that target. It's a sizeable amount of carbon that's emitted from current buildings. That doesn't even include our 12 million or 13 million homes that we have in Canada on top of that.

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

So this is a real—

[Thomas Mueller]

This is a real scenario that we continue to refine now, because there are also the job opportunities as well. These are great jobs, great demand for services, and so on. There's a business case for it too. You actually do save money. There is a good return on investment.

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

In terms of new construction, you have some other figures there.

I was at the Council of Forest Industries meeting in Vancouver last week. One of the big themes was building large buildings out of wood, all-wood buildings. The architect Michael Green gave the keynote address.

I want to get your take on how a move toward building large buildings, buildings over 25,000 square feet, out of wood, where you are literally incorporating the carbon into the building, would help to enhance these scenarios and help to perhaps speed up some of the targets.

[Thomas Mueller]

It certainly would. I would say in terms of reducing carbons, we shouldn't just rely on one strategy or two strategies. We need to use the whole arsenal of approaches and opportunities that we have. What we focused on was mainly operational energy, or carbon. When you look at buildings, over 35% of carbon emissions in Canada come from building operations such as lighting, cooling, and heating. That's 35% even without clean electricity. If you take the materials that we use to build our buildings, it's another 10% to 15%, depending on the estimate, so overall, it's about 50%.

Building taller buildings with wood is certainly something that's an opportunity to reduce the embodied carbon in a building. It makes a lot of sense. Even the cement industry is starting now to look at the lower carbon solutions available. Other barriers to wood buildings are the perception of people being in 18-storey or 20-storey wood buildings, concerns about fire ratings and those types of things. There is an opportunity for buildings maybe six to 10 storeys. You don't have to go 18 or 20 storeys, but it would require investment in the technology of these massive timber buildings. There is a significant amount of engineering involved and significant skills and precision to get these buildings built.

A final thought is that material selection is very important, but the operational carbon to operate the building over its lifetime would many times outstrip any materials that you use. So, given the time frame and the urgency you have, that would be my first focus.

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

Okay, but it's one area in which I understand Canada is ahead of the game in the world, in the design and construction of these buildings.

[Thomas Mueller]

It's a great opportunity for Canada because we are a forest nation. It's a great opportunity. There are a couple of European countries that are really innovating. Austria is one of them, and Switzerland in the alpine region, but that's a great opportunity for Canada, absolutely.

[The Chair, Liberal, James Maloney]

You have 30 seconds.

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

Quickly, Mr. Ferguson, where are we in getting those money costs and the greenhouse gas costs of the oil sands down to being competitive with regular, normal oil production? You talked about the in situ things in terms of the overall cost of Canadian oil.

[Alex Ferguson]

Certainly on the carbon side, it is a continuing challenge, but when you look at the institutions that are investing, there is certainly a pathway there.

I would say the other side of that coin is around our ability to develop our resources and to attract the investment we need in the country to really breathe life into both sides of that equation. On the significant challenges and uncertainties, as I mentioned, some of those geopolitical and south of us kind of issues right now are weighing heavily on our ability to perform on the investment attraction piece. There are challenges.