:
We have a couple of items on the agenda to deal with today, motions that were carried forward from the previous meeting. At this point, and after brief discussions, it occurs to me that the presenter of the motion is not yet here. We have witnesses scheduled and in place, so I'm going to ask the committee its indulgence to proceed with the witnesses. If there is time at the end of the meeting we will deal with the motions of Mr. Cullen, should he arrive.
Do we have agreement? Thank you.
I also want to advise the committee that at the Liaison Committee this morning the budgets were approved, including a budget for a visit by the committee to the oil sands in Alberta on November 18 and 19.
If there's any further discussion we can probably defer that. I won't keep the witnesses any longer.
Let me welcome Hassan Hamza and Howard Brown. Also joining us is Kevin Cliffe, who is the director of the oil division, petroleum resources branch. Welcome.
We will allow you to make an initial presentation. It's going to be a little different this time because we are simply seeking information today.
Mr. Brown, are you going to begin?
At your leave, go ahead, and then when you have completed that, we'll go to questioning.
Mr. Brown, perhaps I could ask you to begin.
:
Thanks very much, Mr. Chairman. It's a pleasure to be back here in front of the committee.
The oil sands is an area that has obviously attracted a huge amount of interest recently, and that's not surprising, given the scale of the investment that's being talked about there, given what's happened to crude oil prices, and given the political instability in some oil-producing parts of the world.
There are also some big and difficult issues connected with the oil sands, and my colleagues and I would be happy to shed as much light as we can on these issues. I don't want to disappoint you, and particularly not in advance, but there are a couple of areas where we won't be able to help you out.
As you noted, Mr. Chairman, we're here to provide information. Policy questions we'd have to refer to the relevant ministers. And questions about the Clean Air Act, which may well have important implications for the oil sands, I'd also have to pass on, simply because I'm not qualified to really answer those questions. With those constraints, we'd be happy to provide as much information as we can.
Mr. Chairman, we've circulated a deck. I think it's gone out to the committee in both official languages. I could take ten minutes or so to go through it quickly and provide background information, or we could just go directly to the questions, as you would prefer.
Starting on page 2, we note that this natural resource is not only important in economic terms but indeed is strategic, given its position in a politically stable part of the world. Established reserves are estimated at 174.5 billion barrels, but in fact the ultimate resource is likely to be significantly larger than that. Just to put that in context, 174.5 billion would make these the second-largest reserves in the world, after Saudi Arabia.
As I mentioned at the start, there are some important issues raised by the development of the oil sands--perhaps most importantly, the environmental footprint, but also what it might mean for natural gas markets, and whether the pipeline capacity is adequate, whether there is enough labour, and so on.
Slide 3 shows you the scale of the oil sands deposits. It really is enormous. It takes in roughly half of northern Alberta. There are oil sands deposits in other countries. I am told that upwards of 70 countries have oil sands deposits. The largest are in Canada and Venezuela. Canada is the only area in the world where these reserves are being commercially exploited.
I think there is some interest in Saskatchewan, where there are also oil sands reserves. I believe there is actually exploration going on there. It's a matter of great interest to the Government of Saskatchewan.
Here I do want to acknowledge--I don't think I need to do this, but I want to for the record--that it is of course the Province of Alberta that owns the resource. Since the government of Mr. Mulroney dismantled the national energy program, respect for jurisdiction has been a very important principle underlying the energy policy of all governments. That certainly continues today.
Slide 4 tells you that the big area we saw on the previous slide is 141,000 square kilometres, or about twice the size of New Brunswick; so we now know how big New Brunswick is. They're reserves of different deposits. The ones that were exploited first were the ones that could be mined, the ones closest to the surface, but there is work going on now on some of the deeper stuff. There's interest in the kind of middle area in between, where I think we don't yet have the technologies but where a large part of the deposit lies.
Slide 5 explains a little bit about the physical properties of the resource. I am now going to exhaust my knowledge of chemistry by saying that the deposits there are bitumen, very long chains of hydrocarbons, which means a lot of carbon and not too much hydrogen. That presents some challenges. In addition, it's mixed with sand. So there are really two sets of challenges that need to be overcome.
On page 6 we have a picture of the trucks that bring out the six-year-old in all of us. Initially long conveyor belts were used in the mines, but it was found that the trucks were more efficient and more reliable. There are commercial developments going on now using what they call steam-assisted gravity drainage. That technology injects steam to liquefy the bitumen and make it flow, and then it's pumped out and exploited. There are other technologies being experimented with. Toe-to-heel air injection actually involves underground combustion to generate heat to make it flow. Vapex involves the injection of chemical diluents.
Slide 7 is a representative projection. I think this one actually came from the Canadian Association of Petroleum Producers...or no, from the oil sands technology program. But no matter which projection you look at, whether it's from us or from industry or from the National Energy Board, people would see synthetic crude and bitumen from the oil sands growing in importance in terms of Canada's oil production. By 2030, perhaps as much as 5 million barrels a day could be extracted from the oil sands. In context, that's about twice Canada's total production at the moment.
On slide 8 we can see the very large number of projects proposed, some of them from very well-financed companies with very solid engineering behind them, and others perhaps more speculative. The total investment announced for between now and 2015 is $125 billion.
I think most observers would not expect all of that investment to actually happen. Some of it's quite speculative, and some of it may be deferred as a result of cost increases and so on. Nonetheless, an extremely large amount is going to be invested.
Slide 9 talks a bit about what our responsibility is. I mentioned that the provincial government has ownership of the resource, but the federal government has important environmental responsibilities as a result of our responsibilities for navigable waters and fisheries. And there's certainly an interest in Ottawa in making those processes no less effective, but perhaps more efficient, than they currently are. The federal government has important responsibilities in terms of the overall policy framework, including the macro-economic policy framework ensuring a stable place to invest. And we do have a long-standing involvement in technology development in the oil sands and other areas of energy. Dr. Hamza can tell you a bit more about those.
Slide 10 goes one level below that and talks about our role. We're the centre of expertise under the Canadian Environmental Assessment Act and we have, much to my surprise, responsibility under the Explosives Act. But I would say that perhaps our key involvement in the oil sands is through Dr. Hamza's institution, the Canada Energy Technology Centre in Devon, Alberta, just south of Edmonton.
Slide 11 recapitulates some of the issues we flagged earlier: what does expanded production mean and what issues or problems need to be solved? As you can see, market access is certainly an issue, as are natural gas availability and pricing, and pipeline capacity, and so on.
So if we turn to those, the first question is whether there are markets out there for bitumen. The answer to that is undoubtedly yes. The United States is of course the world's largest market for energy in general, and crude oil in particular. There are near-term capacity constraint questions about whether the pipelines will get the crude to the areas where it needs to go. Because of those constraints, and because bitumen and synthetic crude tend to be marketed in a limited area, they often do trade at quite a significant discount to west Texas intermediate, which is the benchmark, of course.
Slide 13 asks the question, what about natural gas? As most people are aware, natural gas is used to fuel the oil sands production. People sometimes overestimate the importance of Fort McMurray and the oil sands in terms of North American consumption. The oil sands today represent about 1% of total North American consumption, and that's projected to remain pretty much stable over the next 15 years or so. So 1% is a non-trivial amount of North American product, but it isn't an amount that makes or breaks the natural gas market. I think it's also clear that going forward, there will be much more interest in other fuels, in particular in gasifying what they call the bottoms, the very sticky residue, turning that into a synthetic natural gas and using that for fuelling.
Slide 14 shows you the key links in the North American pipeline network. At the moment, most of our bitumen and synthetic crude are marketed in Chicago and to a lesser extent in Colorado and Washington State. For this to be economic and the producers to reap the maximum economic return, the market needs to be diversified a bit within the United States. So new pipelines are probably needed. There are a very large number of pipeline projects on the drawing board that have been announced. They will not all get built, because if they were, pipeline capacity would be something in the order of twice as much the amount of marketable bitumen synthetic crude available. So some of those will fall out for competitive reasons.
On refinery capacity, I think this is not an issue per se, but there is an issue about whether the refineries are equipped to handle bitumen and synthetic crude. There are some projects under way in the United States at the moment, and perhaps will be in Canada in the future, to convert the refineries to be capable of carrying more and ensure they are able to handle larger amounts of product from the oil sands.
Labour availability is probably the biggest problem facing the oil sands in the short term. Canada as a whole is probably at full employment—and you have to work pretty hard to be unemployed in western Canada at the moment. So this is not a problem unique to the oil sands, but you tend to see it more directly there because of the very large numbers of people involved in very large projects. The federal government is doing what it can to help. For example, the Department of Citizenship and Immigration has opened what they call “temporary foreign worker units” in Calgary and Vancouver, as a pilot project to help ease those constraints.
Certainly it is true that at the moment there aren't the skilled people needed to do all the jobs that have to be done.
We have talked a bit about technology, and I'm sure there'll be questions on this. CETC, the western research centre in Devon, has been a major player in this for a long time. It currently has a number of projects under way to improve the economics and reduce the environmental footprint of oil sands production.
In conclusion, this is a resource of great strategic importance to North America. It's hugely important to the economics of Canada. It's been a benefit not just to Alberta, but to all Canadians. Certainly, there are some short-term challenges that we and the Government of Alberta are working with industry to overcome.
Those are my introductory remarks, and I'll be happy to take questions.
:
Thank you very much for your presentation.
Page 2 of the document you submitted to us provides an overview of the oil sands and problem issues. We share your analysis of the issues.
What surprises me, Mr. Brown, is that you spoke about the labour issue separately from all social problems. However, members are increasingly being made aware of social problems. It is true that labour is a problem, but you still have to house, feed and care for employees. It seems this aspect is somewhat absent from your presentation. That's my first comment.
The purpose of my other comment is more to congratulate you. In the first point on page 10, I see that Natural Resources Canada's role is to see to the development of a Canadian energy policy for sustainable development. I'm pleased that a deputy minister has filed a document that clearly states that.
I attended a briefing session yesterday. The official referred to the responsible development of natural resources. I suppose that can be attributed to the lack of time given them. We far prefer the expression you use in your capacity as deputy minister: “sustainable development”. So I congratulate you, and I think that expression has the force of law. I'm going to cross out the word “responsible” in my briefing document.
Mr. Brown, can you tell me how much money is allocated to oil and oil sands research, and what percentage of that amount is allocated to research and technological development? In other words, what is the overall budget and what percentage is allocated to oil sands and oil? That's my first question.
Perhaps Mr. Hamza could answer. After the answer, I'll ask you another related question.
If you would permit me an anecdote, I have a son who was working in construction in B.C., and he thought for a time about going to work in the oil sands. The advice from his friends who had worked there was “If you go to Fort McMurray, get religion and keep to yourself.” I think that was a reference to the social temptations that might be in the way of a 20-year-old making a lot of money in Fort McMurray.
I think you're clearly right that there are social issues. I would put those in the category of labour issues, because at some point it's going to be impossible to attract people. One of the reasons wages are high is because housing is so costly due to a supply problem. To some extent the market is going to work that out.
There is clearly a role for government. I'm not a constitutional expert, but I do believe these issues would be the responsibility of the provincial government. As I mentioned, respect for the jurisdiction of the provinces on energy policy has been a cornerstone of Canada's energy policy under both Liberal and Conservative governments. It's not an area in which we would have an opinion or wish to intrude in any way.
There is a federal role in labour supply in immigration, and there are certainly measures under way with respect to training and the promotion of workers, etc.
As to your question about spending on research and development, I have numbers here, and I'd be happy to give them to you in writing, because they're fairly detailed. But the total amount of money spent on research and development within Natural Resources Canada for 2005-06 was $212.9 million, of which $81.7 million was spent by the two energy sectors. That means about 40% of the total spending on research and development was on energy. There would be small amounts from other sectors that apply to energy, but that would be roughly correct.
:
A couple of comments, if I could.
Large amounts of steam are needed for these underground, as opposed to the mining.... Well, mines need steam too. When you make steam, you can make electricity for nothing. One way in which people are looking to be more economically efficient but also more environmentally sustainable is to put cogeneration plants in place so you use that free electricity and feed that into the grid. That's an important potential future technology.
Whether natural gas continues to be used is fundamentally an economic question. The economics of it will reflect future regulation, how tight regulated caps on emissions might be. That would change the economic equation.
Whether nuclear is attractive or not is an interesting question. At the moment, I believe the Government of Alberta is opposed, and so long as the Government of Alberta is opposed, it's not really a live question. There are some challenges in using nuclear, in that there are limits to how far you can send steam by pipe. It's very hard to move a nuclear plant once you've constructed it, so this is an issue people would need to solve.
One of the most interesting developments is the gasification of the guck that's left over. It's got no other use, and it is technically possible to turn that into a synthetic natural gas, talking about our natural gas supplies in North America, and make the economics better.
A final comment I'd make on this is that in thinking ahead, if you talk to energy experts, and I'm not one, if you talk to the International Energy Agency or you talk to big oil companies or you talk to the Energy Information Administration, everybody sees hydrocarbons, oil and gas, as being the dominant source of energy supply for as far as you can see. At the same time, government today presented a goal of a very significant absolute reduction of greenhouse gas emissions by the middle of the century, and it seems to me that a very important way of meeting those two seemingly contradictory objectives is to capture the carbon dioxide and store it underground. And there is no better place in the world to capture and store carbon dioxide than the western Canada sedimentary basin. This is an area where there's been considerable interest to us, both on the research and development side and the policy side.
:
Mr. Brown, I'd like to go back a bit to what you told me earlier.
You told me that the growth, control and development of the oil sands are a provincial jurisdiction and that the federal government is not entitled to tell Alberta how to develop its natural resource. I entirely agree with you.
However, the emissions issue concerns all of Canada, the entire planet. And your responsibility, and that of the federal government, is environmental, and it can compel the oil companies, by regulation, to reduce their greenhouse gas emissions and, as a result, combat climate change.
I'd like you to comment on that because earlier you told me that quite briefly. We can't tell Alberta how to do things, but, since the government is concerned with sustainable development and wants to fight climate change, it is up to Environment Canada to compel the oil companies, through laws and regulations, to reduce their greenhouse gas emissions.
Is what I just said true, Mr. Brown?
:
Yes, and thank you, Mr. Chair.
I think the motion is in front of everybody. I'll start with the EnerGuide motion. I'm not going to read it, as I think everybody has it in front of them, but I'd like to spend a few moments giving the background as to why I'm bringing this motion forward.
We're mostly familiar now with the subject matter. The EnerGuide for houses and EnerGuide for low-income houses programs were just two of the many programs that were put on hold or scrapped. At the time, the Minister of Natural Resources defended the decision by claiming that 50% of the money went into administration, but when we had the deputy minister here, he clarified that and indicated that only 12¢ out of every dollar went to administration and the other 38¢ was involved in pre- and post-audits of the program.
In spite of very clear advice from the department officials—and I have obtained, by the way, under access to information, the briefing note on that if anyone would like to review it—the minister and the government decided to scrap the EnerGuide program. The decision to do so seems to be based not on the advice from the department, but on some other factors.
[Translation]
Mr. Chair, that's an error that should be corrected. I invite the parliamentary secretary to admit that error in his observations. There's no shame in that, and it's clear to everyone in this case that a mistake has been made. Clifford Maynes, Executive Director of Green Communities Canada, has stated that the cancellation of the EnerGuide Program “could set back residential energy efficiency at least 10 years.”
On average, that program made it possible to achieve 30% energy savings, and its cost of $75 million from October 2003 to March 2005 resulted in $975 million in energy savings over the duration of investments for energy efficient upgrades.
[English]
It's clear that the department knew it was a mistake. NGOs and environmental experts who have come out strongly against this decision have said it was a mistake, and we in this committee, like all Canadians, understand that it was a mistake. Therefore, with the support of colleagues around this table and in the interests of sound public policy, we need to demand that the minister reinstate this program immediately for the benefit of all Canadians.
That's all I have to say, really. I tried to keep my remarks brief on the EnerGuide program. The wind power we'll deal with secondly.
:
If I may enter the debate here, out of common courtesy, all parties should be recognized in debate. If the NDP is going to have a problem.... Let's face it, as members, we all have lives. It's getting to be the top of the hour, and we'll want to do things.
We can stay here all night and work this out. Ultimately, though, whether we do it now and make it all inconvenient for ourselves, or wait until next Tuesday and do things in a more proper order and not wear ourselves out, that's a situation in which I think common sense should dictate a little bit more. Ultimately, if all the opposition parties do want this motion to go through, it will go through on Tuesday rather than today.
And if I may give some advice to the opposition parties, Tuesdays, Wednesdays, and Thursdays are better media days than are Fridays. If you guys want this to get in the press, maybe you should let us all go home and have a little bit of a rest, and we can come back to it next Tuesday. We all know what we're going to get ourselves into here, so let's just have some respect.
We're going to go at it Tuesday again. Unless there's some surprise from the opposition, the government will lose the vote on Tuesday and things will roll on. I think everyone knows we're all prepared for that.
It is 5:30, and I don't want to spend another couple of hours here talking in circles. I can do that. I'm starting to do that right now, and I can keep going for a whole lot longer, but I think that would be practical.
May I just make one other comment in this regard? On deciding whether or not we carry on tonight until 11:30—at which point we would have to adjourn until Tuesday in any event—or, by a point of order or a tabling, move it to Tuesday, I just wanted to speak of Tuesday.
We have engaged witnesses to appear on Tuesday. They are coming in from the National Energy Board in Calgary, and also from the Canadian Energy Research Institute. Those arrangements have been made, and it would be rather inconvenient to stand them down.
I appreciated the courtesy of the committee today to allow us to hear the witnesses who were in front of us.
There are two reasons I raise this. One is that this clerk, who is familiar with the current motions and has ruled on them before in terms of their correctness, will, as I understand it, not be here on Tuesday. Also, I have been advised that one of our key witnesses for Thursday has called today and is unable to attend.
I only raise that from a logistical point of view. Could we perhaps come to some consensus that, rather than defer it to Tuesday, we defer it to Thursday? If we could have perhaps some sense that we might come to agreement Thursday, I think that might encourage others to put it off the Tuesday, presuming we could deal with the matter on Thursday instead.
Mr. Tonks.