Natural Resources Committee on April 13th, 2017

[The Chair, Liberal, James Maloney]

We are set to resume.

Good afternoon to our witnesses. Thank you very much for joining us today, particularly on a Thursday leading into a long weekend.

The format for the day is that we'll open the floor and each of you will be given up to 10 minutes to make a presentation. After all three of you are done presenting, we'll open the floor to questions from around the table. We do have rules with respect to timing for questions, not only for presentations.

I would encourage you to use your earpiece if you are not proficient in both official languages, because you will be asked questions in French and English. Of course, you are free to answer questions and provide your remarks in either official language.

I will open it up to whichever one of you looks most ready to go. Mr. Scholz, why don't you lead us off?

[Mark Scholz, President, Canadian Association of Oilwell Drilling Contractors]

Thank you very much, Mr. Chair and the rest of the committee. Thank you for inviting me.

Canada's oil and gas industry is the envy of the world, and for good reason. We are innovators, early adopters, and natural conservationists. The women and men who work in our industry also raise the families who make up our urban and rural communities. From young biologists tasked with protecting the boreal forest to senior engineers with over 50 years of experience at home and abroad, these are the Canadians whose values and hard work have made our oil and gas industry the most responsible and ethical of its kind anywhere in the world.

CAODC members often operate in the most remote locations of the country—natural outdoorsmen, so to speak. Clayton Byrt, whose company is 99% first nations-owned and operated and a member of our service rig division, is fond of saying, "We recognize the need to develop our resources responsibly with consideration of future generations".

With this in mind, I am here to speak about some of the innovations found in the drilling and service rig industry, which has lowered emissions and placed them at the cutting edge of environmental performance. I will also make some suggestions about how government and industry can coordinate in order to ensure that Canada's oil and gas sector can continue to lead the world in environmental performance.

Our association's focus has always been on making the industry safer for people and the environment. For nearly 70 years, we have been finding efficiencies in reducing emissions, fuel usage, and land disturbance. From our modern walking rigs to horizontal drilling techniques, the industry is home to hundreds of innovations that have redefined how we drill, and we have improved our rig productivity and environmental performance over the years.

Superior rig productivity translates into being able to develop petroleum products faster, at lower prices, and with less impact on the environment. In fact, the amount of oil and associated gas that can be brought out of the ground from one rig has increased about six-fold since 2012 in Canada. This means that more petroleum products can be produced using less energy and resources. It means lower costs and more revenue for Canadian companies competing for global market share. It means less GHGs and more tax revenues for government.

Take, for example, the Cardium formation in west central Alberta. Light, low-carbon oils are being extracted with rising rig productivities, comparable to what's being recorded in plays south of the border. Back in 2012, a rig working in the region for one month could add 200 barrels of oil equivalent per day of average production. Four years later, the output from one drilling rig was over 1,200 BOE per day, or six times the production. On the natural gas side, the Montney play, which spans northwestern Alberta and northeastern British Columbia, is challenging leading American plays like the Marcellus and Utica with similar increases in productivity.

The reasons for the productivity improvements are as follows: drilling faster and more accurately; employing new-age alternating-current, or AC, electric rigs; migrating to multi-well pads and batch drilling techniques; using rigs that "walk" and move quickly from one location to the next; high-grading resource prospects to the best areas; and realizing learning-curve effects.

Simply put, a modern rig today can drill more wells in a month, and each well can produce more oil and gas than in the recent past. This is a good thing for business, and it's a good thing for the environment. While some industry innovations arise from the co-operative efforts of industry, the academic world, and government, most of these advancements are made by people who care about their environment and the safety of their workers.

One of my favourite technologies being deployed in the field today is the bi-fuel engine technology, where up to 70% of the diesel to operate our engines can be replaced with clean-burning natural gas, which can often be sourced directly from the wellhead. This means we can significantly reduce our carbon footprint, reduce trucking and transportation resources, and preserve the lifespan of our engines.

It's important to remember that GHGs are generated across the full life cycle of fossil fuel production and consumption. Only 10% is generated at the upstream production stage, while over 80% is generated by the end-user, such as when a car's ignition is turned on, when a jet engine fires up, or when a diesel locomotive pulls heavy freight down the track. Identifying where emissions are generated across the life cycle of fossil fuels is a useful framework for evaluating the effectiveness of proposed solutions in reducing GHG emissions.

While technology on the production side is essential, the world is unlikely to achieve meaningful reductions in CO₂ unless the underappreciated issue of end-use consumption is acknowledged. The bottom line is that we all want to ensure that the country our kids and grandkids inherit is as ecologically healthy as the one we enjoy today. Most every Canadian can get behind that.

Many industries approach government seeking financial incentives to improve their operations. That is not so in the oil and gas industry in Canada. Why do we innovate without the promise of government subsidies? It's because efficiency runs both ways: what is good for business is usually good for the environment. Profits are the most significant drivers of innovation. Moreover, Canada must innovate to stay competitive with U.S. producers, especially in this price market.

I've tried to capture some of the things our members have been doing for years with respect to how you've defined your clean tech categories and the risks you've described.

The first category, clean technology, is described as “any product, process or service designed with the primary purpose of contributing to remediating or preventing any type of environmental damage.” The second category is any “product or service that is less polluting or more resource-efficient than equivalent normal products that furnish” a similar industry.

I think my examples have made it clear that both types of clean tech are not only inherent in our businesses but are providing meaningful competitive advantages within the context of today's marketplace.

Regarding the risks in your study, we believe that the free-market system in which our industry has traditionally operated addresses them in the following ways.

The first two risks, whether the technology will perform as expected and whether it is compatible with existing technologies and processes, we believe are borne by industry, because they must be overcome for our industry to be successful. Technologies not performing as advertised or unable to integrate cannot be sold for profit, so, as mentioned, the industry's best interest becomes the environment's best interest.

The last risk, a lack of capital and a stagnant industry, therefore becomes, arguably, the most important risk to the adoption of clean tech. We feel that this risk can be successfully mitigated in two ways.

The first is by facilitating a strong Canadian oil and gas industry. A successful industry can afford to invest. Over the years, billions of private equity dollars have been invested in clean technology. There are many examples within individual businesses, such as the ones I mentioned earlier, but there are also successful groups, such as the Canada's Oil Sands Innovation Alliance. For those of you unfamiliar with COSIA, it is a group of companies that combined forces and funding to improve environmental efficiencies, and it has shown fantastic results. COSIA's algae project, for example, is a project designed to process CO₂ , waste heat, and waste water resulting from oil sands production with algae in a photobioreactor to produce biodiesel or bio jet fuel and other products, such as livestock feed and fertilizer.

This type of development, however, can only be done if there is enough money for research and development. While COSIA has mitigated some of the costs by combining efforts, if each individual COSIA member were struggling to survive, or worse, went out of business, neither the group nor the clean tech would exist.

Second, a lack of capital to invest in clean tech begins with lower profits due to higher operating costs. Where higher costs are due to government policy, they can be controlled by better understanding the far-reaching, cumulative, and sometimes hard-to-see relationship between the two.

Clearly, there is a role for government in ensuring that our world-class resource industries do their due diligence in terms of conservation, but on a macro level, it is important to remember that a robust oil and gas sector, and well-thought-out policies sensitive to the cumulative cost implications, is the best provider of the innovations that have allowed Canada to carve out a place among the world's top 10 countries in green technology investment.

In short, the greatest threat to innovation in Canada's oil and gas industry is an uncompetitive market environment. If governments at all levels keep this in mind, the industry will continue to be one Canadians can be proud of.

With that in mind, I'd be happy to address any of your questions with respect to clean technology in the drilling and service rig industry, and I look forward to the other panellists' comments.

[The Chair, Liberal, James Maloney]

Thank you very much.

Mr. Belzile, perhaps you can go next.

[Germain Belzile, Economist, Montreal Economic Institute]

Thank you very much.

My name is Germain Belzile. I'm a senior associate researcher with the Montreal Economic Institute. I'm also on the faculty of the Université de Montréal business school, HEC Montréal, in economics.

I would like to thank the Standing Committee on Natural Resources for the invitation issued to the Montreal Economic Institute. Our organization is devoted to economic research and education. We are an independent, non-partisan, and non-profit group. We accept no government financing, and we are very proud of that.

First of all, I'll talk a bit about natural resource firms and the environment. Canada is an important producer of natural resources. They represent a very large part of Canada's exports. Canada, with a highly diversified energy portfolio, is a major oil producer and exporter. Oil production is important for the Canadian economy and for ensuring a high standard of living and well-paid jobs for its inhabitants. Moreover, 41% of Canadian energy consumption consists of oil products.

Canadian natural resource firms spend billions of dollars each year to minimize the environmental effects of the exploitation and transport of their products. These investments include money spent on research and development, on building infrastructure and maintaining it, on making sure the day-to-day processes are working well, and in satisfying regulatory authorities.

Canadian firms face clear incentives to abide by the rules and to make sure people potentially affected by their activities are listened to, as well as to make sure scientific information circulates widely. Their own interest is to make sure everything runs smoothly and that the best technologies are used to minimize environmental problems. They have every reason to minimize environmental degradations for which they would ultimately be held responsible by the governments, by the courts, or by public opinion.

Research and development are costly and risky. They involve risk because the firms that engage in them are never sure in advance of the result. Any factor that makes an activity costlier or riskier will reduce this activity, including innovation. Therefore, reducing needless risks surrounding innovation in the environment should lead to more innovation.

Now, as for the factors complicating the adoption of the right environmental technologies, some risk is inherent in R and D, innovation, and investment, but some types of risk could be minimized by enlightened public policy. Among the problems that can be addressed by the government, we will mention four: the temptation to pick winners, the rise of the concept of social licence, the increasing complications surrounding official environmental assessments, and the effects of changing fiscal and regulatory environments.

First, on the temptation to pick winners, the role of government in a market economy is to make sure the rules of the game are clear and followed by all, not to pick winners in the market for ideas. In fact, no individual or group knows which innovation will be chosen as a winner by the market.

Trying to do this means trying to predict the future. Examples of bad choices by government abound. If the government decides to push for the adoption of a certain technoloy—by using subsidies, for example—the following problems may arise: a bad technology might be chosen, which will eventually be costly for all; the risk that companies did not want to take is not eliminated but simply transferred to taxpayers; and, finally, too much risk might be undertaken, which is a problem called “moral hazard”.

Trying to choose the winners de-risks innovation for companies, but increases it for society. Let us add that having the government actively deciding which technologies will be favoured probably reduces private R and D, as firms simply wait for the government to decide which technology to use.

Second, the rise of the concept of social licence has increased the risks involved in many innovations and investments that could lead to better environmental outcomes. Social licence is a concept that is ill-defined. In fact, its meaning varies from one individual to another, and Canada's laws and regulations make no reference to it. Taking into account such a fuzzy concept when deciding which projects will be allowed by regulatory institutions opens the door to arbitrary decisions and threatens the rule of law. This is clearly an investment killer.

Third, environmental assessment processes have become unduly long, complicated, costly, and uncertain. This increases the risks involved in investing in better ways of doing things and could lead to many abandoned projects, even if they are worthy of consideration. As an example, trying to replace the railway transport of oil by a safer alternative such as pipelines has become close to a nightmare.

Finally, a firm that commits to a major investment, whether in infrastructure or innovation, expects a return on its investment. The calculated return is always hypothetical, as the future is unknown. One of the determinants of return is the cost of regulation and taxation. A volatile regulation and tax environment discourages investment, as it creates uncertainty.

Now for our suggestions on what the federal government can do. The Montreal Economic Institute believes the Canadian government could help to de-risk the adoption of clean technologies in Canada's natural resources sectors in six ways. First, the Canadian government should not push for the adoption of technologies that may not be market-ready. Second, the government should not favour some technologies over others, by which I mean choosing prospective winners. Canada has largely abandoned the idea of an industrial policy, which involves picking winners in industry and we should not let this bad idea make a comeback by choosing which technologies will win in the future. Third, the Canadian government should make sure social licence aspects are addressed early on and in a way that does not run against the rule of law. Fourth, the government should streamline and guarantee a fixed duration for the process of environmental assessments. Fifth, the government should reinforce and make more credible the existing institutions such as the NEB. Sixth, the government should create a stable fiscal and regulatory environment.

I will now be pleased to talk with committee members.

Thank you.

[The Chair, Liberal, James Maloney]

Thank you very much.

Ms. Labrie.

[Marie-Hélène Labrie, Senior Vice-President, Government Affairs and Communications, Enerkem]

Good afternoon.

Thank you very much for inviting me.

I am pleased to be here to speak to you about a topic which is at the heart of Enerkem's mission.

Enerkem is a Canadian clean tech private company operating in Quebec and Alberta. The company uses its proprietary clean technology to convert non-recyclable and non-compostable municipal solid waste and other residues into low-carbon transportation fuels and green chemicals such as ethanol and methanol.

We currently operate two plants in Canada: an innovation centre in Westbury, Quebec, and the world's first commercial-scale waste biofuels and chemicals plant in Edmonton, Alberta.

Our next plant will be located in Varennes, close to Montreal. We will be using construction wood residues and other residual urban matter to produce biofuels. We are also working on projects to export our technology throughout the world, in partnership with industrial groups.

Enerkem designs and delivers biorefineries with a standardized modular build process, which means that every Enerkem facility brings growth to the Canadian manufacturing sector.

Enerkem has raised more than $400 million in capital in order to develop and bring its industrial revolutionary technology from the lab to commercial scale, and to prepare the company for commercial growth. The majority of the financing comes from private sources. Enerkem has generated significant intellectual property with 96 patents for its breakthrough technology and process. The company currently employs 200 people.

Clean tech companies like Enerkem generate economic benefits while solving environmental issues. We create value-added products out of waste and residue. We therefore replace the use of fossil sources with the use of waste for the production of fuels and chemicals. We provide synergy with our natural resources sector by offering the possibility of using forest residue, residue from pulp and paper processing, and residue from the agricultural sector. Many of the skills needed to build and operate our biorefineries are similar to those of the petrochemical industry, as well as those of the pulp and paper industry.

We produce clean energy for transportation. Each Enerkem facility can produce enough biofuels to fuel 400,000 cars annually on a 5% ethanol blend. By displacing gasoline and avoiding waste landfilling, Enerkem's facilities can reduce greenhouse gas emissions by over 60%.

We produce renewable chemicals to make our everyday products greener. Chemicals are used in many everyday products—textiles, plastics, paint, etc.—and today we can make those chemicals using waste, instead of only limiting ourselves to producing them from fossil sources.

We also create high-quality jobs. Enerkem started as a family business and grew out of the labs of the Université de Sherbrooke. We now employ 200 people, as I said. Nearly 70 of our people are engineers, and many others hold professional positions. Many young families benefit from Enerkem's jobs.

In addition, each Enerkem facility generates 600 direct and indirect jobs during construction and, once in operation, generates 150 direct and indirect jobs.

Our facilities stimulate regional economies. Based on an independent study, they increase spending across Canada by $200 million during construction, and $65 million per year during operation.

We also open the door to more high-tech exports, thereby increasing and diversifying Canada's export activities. Enerkem is currently developing a project in the Netherlands with industrial partners such as the world leader, AkzoNobel, and Air Liquide. This will generate significant export revenue from technology licensing, engineering services, and the sale of Canadian-made, specialized equipment, as we have built our modular manufacturing infrastructure here in Canada.

A research project on clean innovation undertaken by the Smart Prosperity Institute found that Canada does fairly well at R and D but poorly at the commercialization and deployment of clean innovation, which are the stages where most wealth and jobs are created.

I'd like to present some of the recommendations for policy mix that are required to fix this. In our opinion, the priority should be put on growth capital support for companies that are ready to develop commercial-scale clean tech projects. The deployment of these innovations requires a long development cycle compared to that for other high tech sectors and therefore more capital.

Enerkem has reached a stage in its growth trajectory in which there is a void of available private capital in Canada. To compound the problem, public financing programs are not accessible given that Enerkem is considered to be a late-stage start-up.

Second, another key ingredient is market access. For Enerkem, Canada's renewable fuel standard, RFS, and the clean fuel standard currently in development are important for any enabling access to the fuels market and to stimulate private investment as they send the right market signal. To strengthen these policies, we recommend that the RFS be increased to 10% ethanol in the gasoline fuel pool up from 5% today as we already blend an average of 7%. So we're already over-compliant.

A third recommendation is about eco fiscal measures that further help attract private capital. For example, exempting cellulosic biofuels from the federal fuel excise tax, an exemption that is already applied to natural gas and propane used in transportation and that was used in the past to encourage uptake of first-generation ethanol, would drive more private investment into biofuels produced from forest residues, agriculture waste, and municipal solid waste.

Timing is of the essence. Canada's clean tech advantage is unique but Canada is falling behind in this global growth sector. If urgent action is not taken, Canadians will forfeit the jobs and economic growth that should be generated by our country's clean tech advantage. In fact, research by Analytica Advisors, whose president, Céline Bak, appeared in front of this committee last month I believe, shows that Canada has lost 41% of its global clean tech market share since 2005.

Promised new innovation and clean tech programming may address the needs of such companies that are ready for commercial scale-up, but the urgency of these opportunities does not allow many of these companies to wait until the budget and all of the programs are implemented at the end of 2017.

To date, no program is available to allow Enerkem to maintain its current growth trajectory, including the ones offered by BDC and EDC. We look forward to learning the details of the recently announced $1.4 billion that the Government of Canada will allocate to BDC and EDC over three years for clean tech commercial growth.

We are equally eager to learn how this commitment will add new resources and capital and broaden the mandates of BDC and EDC for clean tech. We hope that these agencies will now be equipped to support large-scale clean tech commercial growth. Growing Canada's clean tech sector begins with retaining and growing the ambitious companies that have built strong IP here in Canada and can diversify our economies, stimulate our manufacturing sector, and generate greater value from natural resources.

Thank you very much.

[The Chair, Liberal, James Maloney]

Thank you to all three of you.

I can honestly say that's the first time we've had three witnesses who all came in under time. There must be some long-weekend effect here, for which we're very grateful, and I appreciate that.

Mr. Lemieux, you're first up.

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

Thank you, Mr. Chair.

I thank our three witnesses for their excellent presentations.

Unfortunately I missed part of Ms. Labrie's presentation because an interpretation problem. She raised some good topics.

My first question is for Mr. Belzile.

Mr. Belzile, why is Montreal so reluctant to agree to the Energy East Pipeline project, despite already having several oil pipelines on its territory that function well, such as those from Portland, Maine, and others from Ontario?

[Germain Belzile]

I'm going to answer in French.

I think more quickly in French than in English.

General de Gaulle once said about something else: “What a wide-ranging program!”. The expression continues to be associated with him. I would say to you: “What a wide-ranging question!”.

I think that there are several hypotheses. The first is that a lot of Montrealers do not understand the importance of natural resources for our prosperity in general. I think they have the impression that this only generates wealth in the west, and that they do not profit from this general prosperity.

I also think that to a certain extent there is an almost religious element at play for a large number of Quebeckers. The environment seems to have replaced Catholicism in a way. I think there are a lot of reasons for that.

We have some very important work to do to educate and convince our fellow citizens, especially those in Montreal, of the advantage of developing our natural resources in an environmentally viable way, and I would even go so far as to say that we have the strictest environmental standards in the world.

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

That is very interesting, Mr. Belzile.

Are you familiar with the oil production technologies used in the Canadian west? They use on-site technologies that are able to capture CO₂ in the ground. Do you know that the western Canadian oil production technologies have one of the smallest carbon footprints in the world? Do you think that if these facts were known in Quebec, this would improve the social acceptability of projects such as the Energy East Pipeline?

[Germain Belzile]

I believe it would. Some surveys, particularly those of the Montreal Economic Institute, show that the facts are not well known at all. When we explain to people that Canadian environmental regulations, for instance, are a lot stricter that those in many other countries, and that Quebec imports a lot of oil from Algeria, Venezuela or other countries where the environmental regulations are much more lax, we see that Quebeckers become much more favourable to the production of oil in the west. When they find out that there are a lot of innovations in the field to reduce greenhouse gas emissions and other negative effects, they become much more agreeable to the concept.

Let me reiterate that I think we have a great deal of work to do to educate our fellow citizens who are not aware of most of these facts.

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

It could thus be said that the reputation western oil has of being dirty oil is unfair, and that it nevertheless persists in Montreal and elsewhere in Quebec.

[Germain Belzile]

I agree with you.

About two years ago, we commissioned a survey. We asked Quebeckers what they thought of the pipelines that carry western oil. A clear majority of people were opposed to them. But when the survey explained to Quebeckers that most of our oil is imported from other countries—the survey provided a list of those countries—we asked the same question again and the figures changed markedly. In fact, most Quebeckers prefer to consume Canadian oil rather than foreign oil.

I am not a protectionist, and I think that international trade is a very good thing. However, we have to improve the way in which facts are presented to Quebeckers. Quebeckers are as a rule rather moderate and reasonable. When they become aware of the facts, I think it is quite possible that they will change their opinion on western oil, which is subject to some extraordinarily strict standards.

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

I have another question for you, even though it is somewhat hypothetical. We spoke to the representatives of the Canadian oil industry.

Do you think that a major new oil refinery project to be located in Quebec, using crude oil delivered by pipeline from Alberta and destined to international markets for refined petroleum products, might be supported by Quebeckers, because of its economic benefits and the thousands of jobs it would create?

[Germain Belzile]

Quite possibly.

The results of the surveys are quite clear. When we explain to Quebeckers that there are refineries in Montreal that would be jeopardized if low-cost Canadian oil were no longer available, they revise their position and become more favourable to western oil. I think that if Quebeckers saw more advantages to petroleum development, without saying that this would be a game changer, many of them would probably change their attitude.

That said, there may be a certain percentage of Quebeckers, perhaps 15% or 20%, that we will not convince; they are opposed to oil on principle, even if they use a lot of it themselves in their daily lives. If there were more oil development in Quebec, I think that this would change Quebeckers' attitudes.

In this respect, I am disappointed that small oil development projects in Quebec, for instance those on Anticosti Island and in Gaspé, do not seem to be moving forward currently. I think that when we start to produce oil in Quebec, this will change things completely.

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

Because of that reason, and not because it's taking a long time?

[The Chair, Liberal, James Maloney]

Thank you. We're going to have to stop there and move on.

Mr. Strahl.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Thank you to the witnesses for your presentations.

I want to talk to Mr. Scholz. As you just heard in the questioning back and forth, there is still a lot of work to do to convince some folks that our oil and gas industry deserves respect. I want to salute you for the work that you've done with Oil Respect, which defends Canadian oil and gas and tries to get some facts out to people about what it does for our economy, what it's all about, who the women and men who work in it are, and to dispel some of those myths. I thank you for that. I might give you an opportunity to talk about that in a minute.

I did want to talk about what you said. The government is very fond of saying—it's a great catchphrase—that the environment and the economy go hand in hand. I liked what you had to say, that profitability and research and development also go hand in hand, that if you are struggling to make payroll, you're probably not dumping a lot of money into R and D, or if your company is going bankrupt, you're not investing in this country, or if companies are moving their entire operations to a different country, that's where the research and development will take place.

We're very concerned on this side about competitiveness, about the cumulative effect of government policy, be it provincial or federal, and we've seen the impact on some of the major players and heard rumours of Statoil, Shell, ConocoPhillips, Total, and Chevron all divesting their Canadian assets and moving to the United States or to other places where, quite frankly, there isn't the same level of regulatory burden, or the tax structure is different.

What has the impact been on smaller drilling companies that perhaps you represent? Are we competitive still? Are you seeing this impact in the industry at your level? We're not talking now about the multinational companies, but about the Canadian small to middle-sized companies. How are we doing in terms of our competitiveness?

[Mark Scholz]

I think in the short term that's a difficult question to answer. From a medium- to long-term perspective, in terms of some of the capital that we're seeing pulled out, that certainly will have huge implications for the activity of my members and their ability to have a larger customer base to ultimately put their people to work and their equipment to work.

Let me just start by saying that the oil and gas industry is a highly specialized, highly segregated business. I represent drilling rig contractors and service rig contractors. Our customers are the producers. Producers like Shell, Suncor, and Statoil are the folks who ultimately are making the high-level business decisions as to where they want to allocate capital. From an international perspective, what we're seeing is that some companies go back to their boardrooms and make some calculations as to where they are going to get the highest returns for their investment. When they make that analysis and they ultimately decide to put more dollars into the Permian Basin, that impacts Canadian families, restaurants, and hotels, the folks who indirectly and directly depend on that type of investment.

What I would say is that we are absolutely in a highly global, competitive environment. From a technology perspective, a lot of this technology is starting to be proven during the downturn. That's where we see the true companies, the companies that have an idea and are taking a risk to put it into place in order to lower their costs of operation. In the past two to three years, we've seen significant developments in the use of different downhole tools that have increased productivity. In my membership, most of the high-spec rigs—the $50-million rigs, the walking rigs with operating systems that have sensors all over the rig, that understand penetration rates in order to drill in the most effective way—are working right now.

Oil is certainly not commanding the price that it used to back in 2014. But what I'm saying is that at a time like this, where it is so competitive, producers are at a stage where they have to use the best, most efficient, most high-tech equipment in order to lower their costs, and that's going to make us a better industry down the road. Government policy certainly matters, and Canada is not alone in saying that anything we do is not going to have a consequence or an impact on investment. When we've seen some fairly dramatic signals from the United States in terms of lowering the burdens of business, lowering corporate taxes, cutting red tape, we have to be very sensitive to what that is going to mean to our industry.

I'll just make one other point. You have to look at signals in the market, and where investments are being made. I represent small mom-and-pop drillers all the way up to international drillers, and if you look in any of the MD&As or the analysis of these companies, look at where they're upgrading their equipment. Canadian companies are investing millions of dollars in upgrading rigs. They're doing it in Canada, but they're doing that at a more exponential rate in the United States, to go after the Permian and the Eagle Ford basins, those sorts of plays, because that's where they see the market moving.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Thank you.

[The Chair, Liberal, James Maloney]

Go ahead, Mr. Cannings.

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

Thank you all for being here today.

I just wanted to start with Ms. Labrie. You mentioned that Enerkem's process reduces GHGs by 60%. I assume that if you throw a tonne of stuff into the landfill versus if you put a tonne of stuff through your process, that's where that 60% difference is.

[Marie-Hélène Labrie]

I can explain that. This is based on the recognized life cycle model to calculate a reduction in the biofuel section. In the case of Enerkem, not only do we reduce the GHG emissions when the ethanol is burned in the gasoline, in the engine, but also there's a factor where we avoid the methane emissions from landfills. Of course, that can vary if there is already a methane capture system, but it's never 100%. So we get both benefits from a greenhouse gas emission standpoint.

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

Right.

Has Enerkem done the big-picture calculations on this? If there was an Enerkem plant at every big landfill in Canada, how would that affect Canada's efforts to reduce greenhouse gases? What kind of impact would that have on that battle?

[Marie-Hélène Labrie]

We haven't done that type of calculation. I think emissions from waste in Canada are below 10%. I may have the Quebec number in mind, but it's not the largest one. I think transportation is a bigger one.

In terms of volume, yes, it's probably at least 100,000 tonnes per facility, so you need to scale up. There's enough feedstock in residues and waste generated to build a lot of facilities across Canada. We could target the large urban cities, but we could also target rural areas with forest residues, agriculture waste, etc.