Evidence of meeting #56 for Natural Resources in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was technology.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Nathan Neufeld  Chief Executive Officer, Evergreen Solutions Corp.
Jonathan Dueck  Vice-President Technology, Evergreen Solutions Corp.
Michael Binnion  Chairman, Quebec Oil and Gas Association

3:30 p.m.

Liberal

The Chair Liberal James Maloney

Good afternoon, everybody. Thank you for joining us today. We have an hour of witnesses and then for the second hour we have committee business scheduled, which shouldn't take too long.

Our witnesses are from Quebec Oil and Gas Association and Evergreen Solutions Corp.

Gentlemen, thank you for being here today. I know you came last week, and we apologize for the inconvenience. We're grateful that you were able to join us again today. The process is that we will open the floor to each group for up to 10 minutes for a presentation and then following that we open the floor to questions. You should have translation devices should you need them. You are welcome to and encouraged to speak in either official language because you will be almost certainly be asked questions in both languages.

I will open the floor to Evergreen first.

3:30 p.m.

Nathan Neufeld Chief Executive Officer, Evergreen Solutions Corp.

Thank you.

Good afternoon, honourable members of Parliament. My name is Nathan Neufeld, and this is my colleague Jonathan Dueck. We are from Evergreen Solutions, a smaller, mid-size green-chemistry innovation company located in southern Alberta in the lovely riding of Foothills. We're both extremely honoured and excited to be here today, participating in this most exciting process of advancing clean technology in Canada's natural resource sectors. Allow me to begin by sharing with you a little about who we are, beginning with our mission statement.

Evergreen Solutions creates and supplies practical working solutions with an unprecedented optimization of performance to industry, incorporating product, HS and E, and real value to the corporate bottom line. Our core focus at Evergreen Solutions is to create clean chemical technology for industry that outperforms conventional technology while being very much commercially viable. Evergreen Solutions has over 20 years of experience in developing clean chemical technology and currently supplies its products across Canada, the U.S., and throughout the world. Evergreen Solutions and its innovative products have received a very high level of acceptance in Canada's natural resource sectors.

We tackled the question, “How can the federal government effectively and efficiently influence the further advancement of clean technology within Canada's natural resource sectors?” We chose to focus on our past experiences around our efforts in developing clean technology and subsequent efforts to commercialize this technology within these sectors. More specifically, we would like to present four brief case studies, two of which we characterize as successes, meaning that we were able to achieve great commercial success. The final two case studies are characterized as misses; that is, we may have successfully developed the technology but were unsuccessful in gaining an acceptable level of commercial attraction.

In all four cases, as Jon shares them, he'll focus on where we found existing federal government policy instruments helpful in contributing to successful commercialization. We'll also share where we feel policy instruments or tools could have assisted in turning our misses into successes.

For our conclusion, we'll share four suggestions that we feel would be of great benefit to our organization and many others in the quest to de-risk the adoption of clean technology in Canada's natural resource sectors.

Jonathan.

3:35 p.m.

Jonathan Dueck Vice-President Technology, Evergreen Solutions Corp.

Thank you, Nathan.

The first case study we want to talk about is MegaSol. MegaSol was developed at the request of and with a lot of support from Suncor oil sands. They asked us to develop a new, cleaner degreaser that would work faster and have better EHS characteristics than what was currently available on the market. The development of MegaSol was during a period in our company when we were still quite small, without significant resources to invest, so the SR and ED credits were invaluable in allowing us to make the many blends that brought us to the final composition, and also financed the multiple trips to the site for test conditions in their wash base.

The resulting product reduced the amount of fresh water that was used in cleaning the trucks. It also reduced chemical employee sick days, due to the chemical, down to zero from however many they had before, and also reduced the energy consumption in the wash base. Most of the oil sands locations have also experienced greenhouse gas reduction emissions because they heat their wash water, and with less wash water they use less heat when washing with MegaSol.

Currently, all the mining oil sands operations are using MegaSol, but it's taken us 13 years to get the industry to fully adopt the product into their operations. We believe that a commercialization program that's tied in some manner to the SR and ED program would help to speed up the adoption of new clean technologies and will help the R and D projects that the government is already invested in to achieve full commercialization faster, resulting in quicker returns on investment for both the R and D company and the government through increased tax revenue.

The second product we wanted to discuss is called MudWash. For many years Evergreen Solutions has had a major share of the market for rig cleaners in western Canada and North Dakota. But during the downturn in the economy and the simultaneous drop in oil prices, we saw our position eroding very quickly by more hazardous, less effective, and low-cost solutions.... Initially we believed this was mostly due to low rig counts, but after a few meetings with some of our distributors they confirmed that on the few drilling rigs that were operating, they were going the least expensive option, without concern over how much product they had to use or whether the chemistry was clean or not. The rig operators said they still loved and preferred our products, but they were being given instructions to cut their costs on everything.

With that information in hand, and a target price, we quickly and relatively inexpensively developed MudWash 210 in a matter of a few weeks. We sent out the dozen or so pails of product to various rigs to get their feedback, and then based on that, we finalized a solution and proceeded to commercialize the product. Due to the nature of this market, to commercialize this product we had to supply a significant amount of product at no charge for distribution to the rigs, and in this case we had to invest much more heavily in marketing than we did in R and D in order to make this product a commercial success. We believe that incentives to help companies offset the sometimes significant costs of commercializing their new products would go a long way in de-risking efforts to bring new and clean technologies into the natural resources markets.

The first miss we wanted to talk about is AggreSol-CAP. Coal is shipped across North America by rail, and fugitive coal dust from the railcars poses not only a fire risk on the tracks, but also an unsightly environmental mess, especially in the winter. As a result, railcars loaded with coal must be sprayed with some type of capping solution that will bind the small dust particles to keep them in the railcars under extreme weather conditions and various dynamic stresses. This is typically a latex-based material that is very messy in its application, difficult to clean up, and hazardous to fish if it gets into the watershed.

We were working in southeast British Columbia to develop a lower cost, superior-performing capping agent for use on their railcars, and then expand that application to other locations across North America and globally. After significant R and D work, and development and testing in our own lab, the economics indicated a positive ROI, and we were ready to proceed with on-track testing. However, at about the same time coal prices collapsed and our customer pulled all their funding for this project. To this day, coal prices are still low, and we have not been able to get re-engaged in the project. We believe that if there were legislative guidance for adopting clean technologies when they are available, it would reduce the risk for the adopters and allow them to forge ahead even in difficult economic environments.

Finally, TerraSol was developed during the BP oil spill crisis in the Gulf of Mexico. We were approached by a U.S. company that was aware of our clean technologies. They were looking for a clean chemistry to help them clean up the soil contaminated by the spill. The product works very well, as you can see on the slide from the video, but it needs a mechanical component to really make it a commercially viable product for this type of application. We believe there should be some type of a trigger within the SR and ED program that automatically connects the SR and ED applicants with a technical adviser at the NRC to help connect compatible technology to companies.

3:40 p.m.

Chief Executive Officer, Evergreen Solutions Corp.

Nathan Neufeld

We'll conclude with our suggestions. First, we'd like to present the need for efforts aimed at reducing ambiguity in defining and qualifying clean technology. We address this first as we believe the other policy instrument suggestions we have are predicated on the necessity for existing and new innovations to be clearly categorized as clean technology in a scientific, objective, and non-biased manner. Government assistance in qualifying clean technology will also assist technology developers by providing additional legitimacy to our technology, something especially useful in foreign markets.

Second, we'd like to present the expansion of the current SR and ED program to include a special designation for a pre-qualified clean technology and then apply a nominal premium, perhaps 4% to 5%, to related SR and ED expenses. Not only would this provide incentive and assistance for the development of new clean technology initiatives, but it would effectively utilize an existing government policy instrument to promote and drive clean technology advancement.

We would like to ask this committee to consider the value of expanding the existing SR and ED program to include commercialization incentives. As we already know, SR and ED currently applies to investments related only to R and D. Tax incentives around investment in the commercialization of new clean technology would increase both the success and the speed of market adoption.

3:40 p.m.

Vice-President Technology, Evergreen Solutions Corp.

Jonathan Dueck

Third, while we prefer incentives rather than forcing behaviour through legislation, we believe the government can adopt further legislation that limits the use of hazardous products when clean technology is available. As an example, in the paving industry, companies used to spray diesel on their rubber tire rollers to prevent the asphalt from sticking to them as they changed direction. Ontario has banned the use of diesel in this application and our ReleaSol product and other release agents are now used across the province.

Finally, we recently discovered a program with the NRC that connects companies involved in the R and D process that have compatible technologies. Having some automatic link between the application for SR and ED credits and being assigned an NRC adviser could be very beneficial in moving technologies toward commercialization and adoption much faster by connecting firms and technologies that are compatible with each other.

3:40 p.m.

Chief Executive Officer, Evergreen Solutions Corp.

Nathan Neufeld

Thank you very much for listening to us this afternoon.

3:40 p.m.

Liberal

The Chair Liberal James Maloney

It is our pleasure, thank you.

Mr. Binnion, over to you.

3:40 p.m.

Michael Binnion Chairman, Quebec Oil and Gas Association

Thank you, Mr. Chair.

Thank you for inviting me for the second time to participate in your committee's work. This is a great honour for me.

My name is Michael Binnion, and I am the chairman of the Quebec Oil and Gas Association, QOGA. Our organization was created to encourage dialogue on the development of Quebec's oil and gas industry. QOGA represents about 20 regular, associate or affiliate members.

QOGA believes that it is possible to develop Quebec's energy resources in a safe and environmentally responsible manner, while contributing to the province's economic growth and social development.

Quebec's new energy policy includes local hydrocarbons and considers them to be part of the solution for the energy transition. It is clear that, since requirements regarding local hydrocarbons are more stringent than those applied to hydrocarbons from abroad, they have much lower emissions.

Therefore, we feel that a balanced energy diet is the best way to meet the numerous needs of the Quebec society.

Before I founded Questerre Energy and discovered one of the largest and one of the cleanest natural gas fields in North America, I was in international oil and gas, and even today I'm working in the Kingdom of Jordan and Papua New Guinea in addition to Quebec.

I've worked in more than a dozen different jurisdictions around the world. In particular, I've had the opportunity to work in the republic of Georgia, working with Eduard Shevardnadze and his government to implement a new oil and gas law just after the civil war.

Over the last few years I've worked successfully through the public consultation process on a new energy policy and a new hydrocarbon law in Quebec.

I had a career before oil and gas. As a very young Albertan, I was inspired by Pierre Elliott Trudeau's words that Canada should stop being hewers of wood and drawers of water for our cousins to the south. His message that Canada should embrace a new high-technology economy captivated me, so I resolved never to work in oil and gas, thinking we would soon run out of it anyway and it was yesterday's industry. I did keep to my word for 15 years.

My early career was as an R and D tax accountant in Toronto, and I graduated to public venture capital and angel investing in the high-tech sector. Along the way I published a peer-reviewed paper in an international geology journal, Marine and Petroleum Geology, and also published one of Canada's first economic research papers on carbon leakage and policy options.

Technology and public policy are my main interests, occupations, and avocations, which is a good thing because, in spite of my early resolve, I ended up in the oil and gas business.

What I've learned over the past 20 years is that oil and gas is more high tech than high tech, and more importantly, there is nothing wrong with being hewers of wood and drawers of water when you're the world's best at it, using world-leading technologies, though I still agree that Pierre Elliott Trudeau was right not to be captive suppliers to our cousins to the south.

This leads me at last today to the eight priority questions. The most important thing I've learned in my public policy experience is that it's far more important to have the right questions than the right answers.

The question on how to de-risk the adoption of clean technology in the natural resource sector implies that Canada's resource sector has not been successful at adopting clean technology. Well before I started in the industry...and our earlier two presenters showed some examples of adoption of technology. The question presumes that the risk of performance of clean technology is blocking resource companies that just aren't quite able to realize the obvious benefits, so the really smart people have to help them out.

This is just simply not true. To those Canadians who say we're not the best and most resourceful people in the world with the respect to creation of resources, I say speak for yourselves. Yet there are even people in our own industry who believe the outdated narrative of our resource industries being old tech and not clean tech.

An interesting story is the story of Imaginea. Ms. West is an inspiring figure. She had a dream to start a new kind of oil company. At first I was interviewed by a documentary filmmaker from California on how Ms. West and Imaginea were going to create the zero-emissions oil and gas company. I have a lot of time for Ms. West and her imagination, and you will understand why in a moment, but her dream ran into a problem. All good stories need a villain, and her villain was the fossilized thinking of oil and gas executives.

Well into her business plan she had implemented a dozen or so clean-tech initiatives on her route to a zero-emissions oil company. The problem was, as I mentioned to the documentary filmmaker, who I think in retrospect had cast me as the villain in his film, my junior company had already implemented every one of her initiatives in our own projects. We just hadn't put it on a web page or in a documentary film. I can tell you some of my junior peers are ahead of Questerre with the use of hydrogen fuel cells and solar automated PLC controls to reduce environmental impacts and increase efficiencies.

The big companies are even further ahead and have created a privately funded technology supercluster equivalent, with over $1 billion in research a year. It is truly progressive and leading thinking on clean tech to co-operate with your competitors on technologies good for the environment and the whole industry. It's why Ms. West has had to adjust her Imaginea story, because there is no fossilized old-tech villain to make her story captivating.

I've reviewed hundreds of high-tech business plans with a view to risking my own money, which I've made from successful investments and high-risk ideas. They all have a story of how people miss the obvious. Occasionally one of them is right, but most of them are not.

“I need help in de-risking” is often code for “I need someone else's money”. When we de-risk an exploration project at Questerre using amazing state-of-the-art technologies, we need a lot of money too. Government has no business doing resource exploration with taxpayers' money. It's too risky, and those with the expertise and experience in risking their own money will make better choices.

Back to the questions, some better questions might be these. First, how can the federal government within its jurisdiction ensure that Canada's resource sector remains the world leader in the adoption of clean technology? Second, what policy instruments have been most responsible for Canada's resource sector's world-leading performance with clean technology? Could other jurisdictions benefit from Canada's leading clean technology and expertise to improve their environmental performance? Third, what institutions have been most successful in furthering the adoption of clean technology, and can the Canadian government further leverage those institutions to enhance Canada's lead in the adoption of the new technology?

I feel the final question about what recommendations the committee should have was a fair and open-ended question without any a priori assumptions, so I chose to answer that one. Here are my recommendations.

First, don't screw it up. If in doubt, when you're the world's best, the best thing you can do is keep doing it.

Second, Mayor Nenshi in Calgary has raised my taxes 30% in three years and is still taking on debt. Nonetheless, he has done a first-class job telling the world that Canada is the best place in the world to live—or Calgary is. Could we ask our government in Ottawa to do the same and promote Canadians being proud of what we are indisputably the best at—resources? International benchmarking studies would assist in doing this.

Third, I think we should keep the R and D tax credit program but consider making small reforms to tighten up credits for what are routine business risks.

Fourth, we should create a high-tech flow-through share as we have in the resource industries, making it easier to find private investment for new clean technologies by being able to pass on the R and D tax credits to investors who take the risk.

Fifth, I recognize markets do fail sometimes and also that there are times for Manhattan projects. Both recent history and economic research have shown that evidence-based regulated targets that allow the market to choose and adapt the best solutions to attain them is the most efficient solution for these problems. Our prior presenters, I think, made a similar recommendation.

Sixth, please heed back to Jean Chrétien's words on the adoption of Kyoto. Canada already does a lot to reduce emissions in the rest of the world, and could have a bigger impact globally than at home. Canada has to look at the problem of carbon leakage as a huge priority and a global problem. There are only three countries in the OECD that are net exporters of high energy-intensive goods: Australia, Norway, and Canada.

Australia realized that Kyoto production-based accounting for carbon was bad for their exports with comparative advantages in carbon and opted out. Norway realized the same and reformed its fiscal terms for its resource sector to substitute carbon pricing for government take. Canada has not done the economic study. If the precautionary principle applies anywhere, it surely applies here.

In conclusion, I'd like to return to Imaginea. I realized in talking to Ms. West and her filmmaker that her dream was possible. She only needed a zero-emission source of electricity or energy. I had seen the fully electric rigs that the Soviets had used in Georgia, and I knew where there was a large economic natural gas discovery with access to zero-emissions electricity.

We are working now to make the Imaginea dream of an emissions-free oil and gas company a reality with Quebec clean gas 2030. Using existing technology, we can drill and produce natural gas in Quebec using emissions-free hydroelectricity. My recommendation is to do the carbon leakage study so policy-makers can understand how Quebec and Canada's carbon policies create emissions incentives to import natural gas from Pennsylvania versus develop cleaner gas locally.

As far as de-risking our Quebec clean gas 2030 project goes, we're really already on it, although reinstating the Canadian exploration expense deduction of 100% for exploration wouldn't hurt at all.

Thank you very much for your attention.

3:50 p.m.

Liberal

The Chair Liberal James Maloney

Thank you very much.

Ms. Ng, we'll move over to you.

May 11th, 2017 / 3:50 p.m.

Liberal

Mary Ng Liberal Markham—Thornhill, ON

Thank you, Chair.

Thank you to the presenters.

To Evergreen Solutions, you talked about the need to put forward legislation. Can you just talk a bit more about what that means? Is it legislation that is required? Are there other forms to encourage a greater take-up? Does it have to be legislation?

3:55 p.m.

Vice-President Technology, Evergreen Solutions Corp.

Jonathan Dueck

Thank you.

We believe that maybe it's not legislation but it's some way of encouraging companies so that when there is clean technology available, they are incentivized to move towards that clean technology. If it's something that levels the playing field for all the different companies, then there's no risk to them to make that investment to adopt the technology.

3:55 p.m.

Chief Executive Officer, Evergreen Solutions Corp.

Nathan Neufeld

Or less risk, anyway....

3:55 p.m.

Vice-President Technology, Evergreen Solutions Corp.

3:55 p.m.

Liberal

Mary Ng Liberal Markham—Thornhill, ON

Are there ideas for what those incentives could look like for users, to encourage a greater level of adoption of products like yours?

3:55 p.m.

Vice-President Technology, Evergreen Solutions Corp.

Jonathan Dueck

One idea could look something like the SR and ED credits for doctors. When there's a technology that's identified as a green or a clean technology, there would be some type of a credit, like a tax credit or something like that, towards adopting products that are identified as green technologies.

3:55 p.m.

Liberal

Mary Ng Liberal Markham—Thornhill, ON

You also talked about needing a better or broader definition for clean technology. Can you talk to us a bit more about what you mean by that?

3:55 p.m.

Vice-President Technology, Evergreen Solutions Corp.

Jonathan Dueck

I think that in order for any of the other recommendations we put forward to be adopted, there needs to be a pretty clear guideline as to what kinds of technologies would fall under that. Our thought was that in some way you would have an auditor, almost like in the work for the SR and ED credit, where they come back to you, double-check everything, and make sure you really qualify for that.

In order to do any kind of verification like that, there would have to be very clear definitions of what that would look like. Even in the request that was sent to us about appearing here, it stated a couple of key points in the definition. Basically, it's any product that remediates or prevents environmental damage or any product or service that is less polluting or more efficient, so a technology that is identified as one that would help us use our natural resources more efficiently would qualify for part of that definition. Then somebody would review that prior to agreeing that it qualifies for whatever credit—or anything like that—or for adoption or development.

3:55 p.m.

Liberal

Mary Ng Liberal Markham—Thornhill, ON

Good.

Thank you for your input. As practitioners, of course, it is always helpful for us as we consider what can be done.

Your company has been around for quite some time. Can you talk to us then about what some of the roadblocks might be and what a government role could look like that would help companies like yours?

3:55 p.m.

Chief Executive Officer, Evergreen Solutions Corp.

Nathan Neufeld

Yes. Certainly one of the issues we've found is that we often see companies that, for various reasons, are not willing to adopt the clean technology that we have, even though it's commercially viable. There's concern about the viability of the technology as it's developed, and I suppose that's where we brought in this idea that it would be good if we could engage the current SR and ED program to effectively be a tool to qualify clean technology and provide some level of legitimacy.

We're coming from the chemical industry, and there's a very wide range of terminology that's used, and a lot of variables in play, and I suppose that's where we've seen a lot of skepticism over the years. Certainly in the oil and gas industry we've faced it for many years, and when you start using the terms that we use to try to define clean technology, we find that things get very ambiguous and sometimes challenging. That's why we're looking in general for the government to come in and support that. That's why we talked about initially creating that role perhaps within the SR and ED program of a qualifier of clean technology.

If, for example, when we submit a file to SR and ED, assuming that it's technology, if we could in a sub-form claim this new technology or this new innovation that we've developed is in fact deemed as clean technology, even using the definition that your committee has posed.... If we're able to do that, that immediately creates additional credibility for us, and again, it's proved by potential auditors from the SR and ED program. For example, we would have a chemical engineer who would come and audit our file once every couple of years, and we'd be able to have that qualified and be able to better promote our technology based on the clarity that has now been brought into our world.

4 p.m.

Liberal

Mary Ng Liberal Markham—Thornhill, ON

That's very helpful. If I paraphrase—

4 p.m.

Liberal

The Chair Liberal James Maloney

I'm sorry. I'm going to have to stop you there.

Go ahead, Mr. Barlow.

4 p.m.

Conservative

John Barlow Conservative Foothills, AB

Thank you very much, Mr. Chair.

Thank you again to our witnesses for taking a second day to be with us, and I apologize for the gas leak last time. It's ironic that we're talking about clean technology and we have a gas leak in downtown Ottawa.

I'm going to start with Evergreen. You were talking about the focus and your emphasis on incentives, and incentivizing the industry. Certainly I know in Alberta we are feeling the impact of the energy downturn more than maybe other provinces, and I think we'd be naive to say that some of that, or a great deal of that, is not because of uncertainty in policy. However, things like a carbon tax, I would say, would be a punitive way to try to encourage innovation and technological advancement in the industry.

From your perspective, your company relies on the big companies being successful and having money to purchase your products. Why is your focus on incentives rather than other initiatives like a carbon tax? What do you see as the benefit of offering incentives to encourage innovation but also to apply that innovation?

4 p.m.

Vice-President Technology, Evergreen Solutions Corp.

Jonathan Dueck

I guess that's a little bit of our western mindset, maybe, but we just believe that when a company is allowed to make its decisions and then it gets a positive reinforcement rather than a negative reinforcement, it's going to make the right decisions to move forward and implement the things it needs to do in order to be a good steward of the environment, and also to do what's best for the company.

4 p.m.

Conservative

John Barlow Conservative Foothills, AB

Obviously, you guys have been successful, and companies have been purchasing your product without ever having a carbon tax in place. You've been doing this type of innovation for more than a decade, right?

4 p.m.

Vice-President Technology, Evergreen Solutions Corp.

Jonathan Dueck

It's been 13 years. Yes, they see the benefit. They realize there are greenhouse gas reductions. They realize there are benefits from an HSE perspective to their employees, and they realize that they can consume less water. Companies have a social licence too, and they realize that people want them to be environmentally responsible. They do what's best, and incentives just help them to do that and give them a better corporate balance sheet, too. It helps in that way too.