RNNR Committee Meeting
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CANADA
Standing Committee on Natural Resources
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EVIDENCE
Thursday, February 17, 2011
[Recorded by Electronic Apparatus]
[English]
I call the meeting to order.
Good afternoon, everyone. We're here today to continue our study on energy security in Canada and we're continuing on the topic of regional economic impacts.
We have two panels with us today. At the first panel, we welcome from Alberta Innovates - Energy and Environment Solutions, Dr. Eddy Isaacs, chief executive officer. From the Mackenzie Valley Aboriginal Pipeline LP, we welcome Robert Reid, president.
We will go to your presentations in the order you are listed on the agenda, for up to five minutes each, starting with Dr. Isaacs.
Thank you for the opportunity to address your committee and also to answer your questions. I hope I can add some value to the work of the committee. I have submitted a short brief to the committee on what I wanted to address, so I'll keep my comments fairly brief.
I'll introduce my organization, mention the importance of diversifying our markets, and then speak to responsible action on the environment and climate change, the critical importance of innovation, and how all of this ties into energy security.
First, our organization, Alberta Innovates - Energy and Environment Solutions, is one of four new provincial corporations launched by the Alberta government in January 2010 under the Alberta Innovates banner. We serve as the technology arm of the Alberta government in energy and environment. We're a successor to two previous organizations stretching for over 36 years. We've had a big presence in the area of energy and environment for some time now.
Our mandate is to position Alberta for the future in energy and environment. We do that by identifying, evaluating and selecting technologies and partners, and that's important. We've built the domain expertise and the competitive intelligence tools to be able to do that. We invest in or fund research and technology with industry, the federal government, and international collaborators.
A recent supplement in The Globe and Mail provides an example of the work we've been advancing. I'm going to table that supplement; I know it needs to be translated.
As well, I'm tabling our annual report, more than anything else to provide you with some idea of the work we're doing and further details on the impact of our work.
I want to discuss broader energy markets. I'll use the example of the forestry industry in B.C., which for a decade has been trying to move away from just the North American market. It has recently achieved a big breakthrough in penetrating the Chinese market. The demand in China was always there, but one had to be persistent and overcome the cultural barriers of using wood for building houses.
In Canada we have growing oil resources. In fact, we are the only developed country that can dramatically increase its oil production, not only from oil sands, but also increasingly from tight conventional oils, the so-called shale oil that's found in Manitoba, Saskatchewan, and Alberta. Production has already started in Manitoba and Saskatchewan, and in Alberta to some degree.
Unfortunately our only market is the United States. That market is reaching a saturation point and is forecast to stagnate as we move forward. It is crucial for Canada that we focus our efforts on diversifying our markets, with special emphasis on Asia, China, Korea, and Japan. Not only is this important; it is also becoming very urgent.
The second point I want to make is about responsible action for the environment. Societal expectations are such that when we're considering economic development, we do that with what is best for the environment. It's no longer just companies wanting that: society expects us to do it. In the oil sands, Canada is most vulnerable on the environment, and there are many organizations working hard to balance environmental stewardship with economic reality. For example, the Alberta Chamber of Resources, which I believe is next on your agenda, has led a comprehensive land use initiative that allows forestry companies and energy companies to work together side by side to integrate their operations so as to minimize the footprint on the land.
If we are to be successful on the environmental front, technology will be a key. I believe our future successes will come from what our past successes have come from, and that is a strong government and industry partnership based on a clear business case and a well-articulated implementation strategy.
New technology creates risks for companies in financial markets. I've provided a graphic representation showing the length of time—20 to 30 years—that it takes to bring new technology to market in the resource sector, much longer than in any other sectors. The time lag does create a high risk profile, and the financial commitment required to overcome these long periods is quite substantial.
We believe that the role of government is to work with industry to reduce the risk of adapting new technology, especially next-generation technology.
The final point on technology is that there is a need for significant investments in sectors where Canada has a natural advantage. These investments need to be focused and sustained over long periods of time because of the length of time it takes to bring what I've called “game-changing technologies” to market. We cannot achieve our environmental targets without changing the game.
My final point is on energy security. My bias, if you like, is that energy security cannot be separated from our energy resources, which are vast; our economy, which is heavily dependent on the energy sector and the resource sector; and our environment, which gives us the social licence to operate.
In all of these—energy, economy, and environment—technology is the glue if we are to be competitive, maximize the value of our resources, and mitigate environmental issues. I believe the government's role is to set the boundary condition and to intervene to ensure the technology is available in an acceptable and affordable manner.
Thank you.
Thank you very much for your presentation, Dr. Isaacs.
The second member of the panel here today is Robert Reid, president of the Mackenzie Valley Aboriginal Pipeline LP.
Go ahead, Mr. Reid, with your presentation. You have up to seven minutes.
Thank you, Mr. Chairman, and honourable members.
We appreciate the opportunity to appear before you today to highlight the importance of the Mackenzie gas project, not only to our northern stakeholders but to Canada as a whole.
There are two points that I want to leave with you today: first, the Mackenzie gas project is a vital component of Canada's energy mix; second, the project will provide an economic base for the aboriginal people of the Mackenzie Valley, allowing them to take a big step forward toward economic independence and self-sufficiency.
After a thorough six-year regulatory review, the project now awaits the release of the final step in the regulatory process, and that's the order in council. This is now critical in allowing us to move forward with the detailed engineering and preparatory field work in order to start construction before the expiry of the recently issued NEB certificate in December of 2015.
The first two slides in the handout provide you with an overview of the project. I'll allow you to read those at your leisure.
I'll start on the third slide.
APG is a unique alignment of aboriginal groups in the Mackenzie Valley, not only to support construction of the Mackenzie Valley pipeline but to be a part of it. Our mandate is to maximize the long-term financial return to the aboriginal groups of the Northwest Territories through ownership in the pipeline.
Our shareholders are the Inuvialuit Regional Corporation, the Gwich'in Tribal Council, and the Sahtu Pipeline Trust. The Mackenzie Valley pipeline is owned by APG, the Aboriginal Pipeline Group—we have a one-third share in the project—and our partners at the table are Imperial Oil, ConocoPhillips Canada, Shell Canada, and ExxonMobil Canada. Together they hold the remaining two-thirds.
A question I get asked frequently is whether we need northern gas. The short answer is, “Yes, but not today”. We will need northern gas by the latter part of this decade.
On the supply side of the equation, conventional production in North America is mature, with decline rates approaching 20% per year. In Canada alone, over three billion cubic feet a day of new production must be attached each and every year just to maintain current production, and we haven't been doing that.
On the demand side of the equation, natural gas is the most environmentally preferred of the fossil fuels, with emission rates one-third less than oil and fully one-half less than coal.
The power generation market is the fastest-growing market segment for natural gas. Last year, former minister Prentice announced that there were 33 coal-fired generating plants in Canada that will reach the end of their economic life by the year 2020. If those plants are fueled by natural gas, that will create an incremental demand of 1.2 Bcf/d, exactly equal to the throughput of the Mackenzie Valley pipeline.
The next slide is a chart that shows that even with the addition of shale gas and other unconventional gas, our total production in Canada continues to decline, and will continue to decline through to the year 2020.
Shale gas is an important addition to the supply mix, but is it sustainable? We know there are very high decline rates in the early years, up to 65%; there's a significant amount of water consumption associated with the production of shale gas, typically about 100 times that for a conventional well; and there are some environmental concerns that are cropping up, such as groundwater contamination.
The conclusion reached by Ziff Energy, the company we engaged to undertake a supply-demand study for us, is that shale gas and both northern pipelines will be required to meet the forecast demand requirements by the latter part of this decade.
The next slide shows the overall project schedule for the Mackenzie gas project. We just concluded a rather lengthy regulatory process last December.
We expect to resume our discussions on a fiscal framework with the federal government in the first quarter of this year, following receipt of the actual NEB certificate. That will allow us to restart the project, restaff the engineering team, and proceed with the detailed engineering field programs and about 7,000 site-specific permits. We hope to reach an owner's decision to construct by the year 2013, and the first gas will flow in the year 2018.
This is truly a nation-building project determined to be in the public interest by the National Energy Board. Other nation-building projects have received federal support. Examples include the St. Lawrence Seaway, Hibernia, the original TransCanada Pipeline, and, of course, the Trans-Canada Highway.
The United States government is providing an $18 billion loan guarantee for the Alaska Highway pipeline. There is a possible role for the federal government to offset regulatory costs and infrastructure costs and to provide a guarantee to lower the cost of capital. The cost of capital is the largest single component of the shipping toll.
This project provides huge economic benefits for the Mackenzie Valley, and they're outlined in this particular slide. There will be over 7,000 jobs at the peak of construction. It generates economic independence and self-sufficiency, displacing the present dependence of aboriginal communities on government programs.
The final slide highlights the significant benefits of this project to Canada as a whole, including the creation of over 100,000 jobs right across Canada. This is truly an all-Canadian project that will deliver the clean energy we need in an environmentally responsible manner while creating jobs and economic opportunities for all of Canada.
Thank you.
Thank you very much, Mr. Reid. Again, those were very helpful presentations for the committee.
We'll go directly to questioning now, starting with Mr. Coderre from the official opposition. You have up to seven minutes.
Go ahead, please.
Thank you, Mr. Chair. Thank you, gentlemen.
These are, of course, very important issues. We're talking about diversity. We're talking about governance. Our role is to put up some recommendations for the future, and I think you are truly an asset to that future report.
Let me ask you first, Dr. Isaacs, a question. I want to talk about three issues. I'd like to talk about governance, I'd like to talk about perception, and I'd like to talk about partnership.
Regarding governance, it seems that there are some holes in the relationship between the federal government and the provincial government, whether it's a perception or not. Whatever the case, we have a role to play. There's a convention that has been signed between Alberta and the Government of Canada. How do you perceive our role? Do you feel that we should get more involved in the monitoring process, and is the environmental assessment sufficient? This is probably one of the key issues. Of course, I'm from Quebec, so by definition I'm respectful of jurisdictions.
I'd like to understand how we can be a counterbalance and be part of the solution for a better quality of life for our people.
Thank you very much.
I think it's a very important question. The way I look at it is that the federal government does have a very important role to play. Monitoring is one. The federal scientists are world renowned, some of them, in this whole area, and they can certainly contribute to the overall game plan in terms of monitoring and making sure that we're doing the right things on the environment. We work very closely with the Devon lab of National Resources Canada, as an example. From a scientific basis and in terms of wanting to make the resources more environmentally sustainable, I think that the federal government has a very important role to play, because this is a strategic asset for all of Canada.
I think my perception of the people I work with in the federal government is a very positive one. They are certainly partners in the work we're doing on technology.
Our role would be to have more input into Canadian partnerships regarding R and D and innovation. Our role should be more in science, but on the governance level we switched from Environment Canada to NEB regarding environmental assessments.
If there's a perception problem, it's because some people feel there is a problem with the quality of the air and water, and there is the issue with the fish. We saw pictures. It might be just a perception, but science is important, so do you believe that's the kind of counterbalance role that the federal government should play?
The federal government needs to be there because of the science it provides and the credibility required to make sure the monitoring is done properly.
These things need to happen. My organization has been looking at the whole issue of renewable energy and how to make the connections happen. This is an important aspect for the whole country.
I was a co-chair of the working group for the ministers of energy. In that capacity we looked at smart technologies for renewable energy quite broadly. Everybody was of the opinion that this needs a lot of work, and it is actually one of the things that can be done jointly because it is important for all provinces.
In our partnership with industry, instead of putting in some tax breaks on capital, should we put more emphasis on R and D and green energy? Should that be our relationship with industry regarding technology?
You can have many relationships with industry, but I think it is important to be able to work with industry to make sure that the right technologies are taking place.
The type of work that needs to be done will require what I'll call next-generation technologies. That takes a long time to bring into the marketplace. Industry is very good at current technology and making it more efficient. They are not good at planning ahead for 20 or 30 years down the road for new generations of technology that are going to be required from an environmental standpoint. Government can play a role in helping us move away from just the incremental to the higher-level, more sustainable technologies.
Science is the key issue that will address the perception problem, but we need more accountability, of course. Do you believe that energy security has to be linked to climate security?
Yes. When I was speaking about environment, I really meant to include climate change. If I didn't, that's an oversight on my part.
That is beyond my level of understanding, but people have been saying that a carbon tax could be made to work. It's already working in Alberta.
Thank you.
Mr. Reid, inclusiveness is the name of the game, and I think that in a way you proved that. When you say that one-third is owned by the aboriginals, are we talking also about sharing governance? It's a bit philosophical, but one of the main problems we face regarding any energy issues and all that, specifically in your area, is the relationship with the aboriginals. I think first nations deserve to be full partners.
How do you address that issue?
It is important to note that we're an alignment of three aboriginal groups in the Mackenzie Valley. The aboriginal groups actually approached our other partners--Imperial Oil, ConocoPhillips, Shell, and ExxonMobil--prior to an application even being filed for the pipeline project.
The genesis of APG goes back to the 1980s and the settlement of the land claims up there that allowed the aboriginal groups to put a priority on economic development. In January 2000, Chief Harry Deneron called a meeting in Fort Liard of the aboriginal leaders in the Northwest Territories. He declared that if there was another pipeline built in the Mackenzie Valley, the aboriginal people would want to have a part in it. That meeting and subsequent negotiations with our partners led to us having a full one-third partnership in the Mackenzie Valley pipeline.
Merci, monsieur Coderre.
Now we'll move to the Bloc Québécois.
Madame Brunelle, you have up to seven minutes.
[Translation]
Good afternoon, Mr. Isaacs, and thank you for being here. In your presentation, you said that technology development was costly because it was a 20- to 30-year process to take an idea from the lab to commercialization, and I can understand that. You also said that the government's role was to create the conditions necessary for investment.
What are those conditions? To me, that means you want money. Have you received federal or provincial funding in the past? If so, how much?
[English]
Thank you very much. It's a good question.
You're correct in assuming that we will need a large amount of investment to make sure that we can achieve the goals we set. We are a provincial organization, and all of our funding comes from the provincial government. We do not receive any federal support. We work jointly with the federal government in areas of importance to the federal organizations.
We also support some of the research that goes on in federal labs. We actually have an agreement that we've had for a long time with regard to the National Centre for Upgrading Technology in Devon, to support some of the work they carry out there. They're important for what I'll call the “next-generation” upgrading technologies, looking at conversion technologies that have a footprint that's much less than what it is today.
We also work closely with Natural Resources Canada in other areas, both in Bells Corners and Quebec.
[Translation]
Do you work on carbon capture and storage projects? If so, what do you think of those technologies? Have you thought of other possible technologies? As you know, there has not been much progress in that area, and we are still only at the exploration stage. Can we expect to see any other initiatives, other technologies that would help reduce the impact on the environment?
[English]
I hope I understood your question. Am I correct that it has to do with carbon capture and storage, the sequestration project?
It does; okay.
We've been very active in this area. With regard to the investments that have happened between Alberta with the $2 billion that Alberta has invested and the federal government with the $800 million or so that the federal government has invested, many of the projects have come through our shop, in the sense that we have piloted some of these projects. We still have this project with Shell to look at and delineate the wells that are going in, and the rate at which you can inject carbon dioxide into the formation. These are saline formations that are deeply buried. We're looking at what the rates are at which you can do this. We have been looking at making sure that the technology is safe and that it can be applied securely.
You're right, though, that it will take a long time to make these technologies commercial, just because of the cost of doing this. Most of the cost is associated with capture of the carbon dioxide and making sure that you have the carbon dioxide. There's also the compression cost; to put it under high pressure is very expensive. It will require new technology to make this whole technology viable, but if we don't start now, it's not likely that we will achieve success in the next 20 years or so.
I think there's been a good start, but this will require a long period of time. Fortunately we're working very closely with international collaboration in this area. There is a lot of interest internationally.
[Translation]
Mr. Reid, in your presentation, you talked about shale gas. As you know, that is a big concern for us in Quebec. You mentioned something very important, the very high decline rates in early years. That is the first time I have heard about that. What does it mean?
[English]
What I meant by that is when you first commence operations for a shale gas well, there's a large initial output from the well; then it declines as much as 65% in the first year, and then it continues on out.
There's not a great deal of experience with shale gas. It's a relatively new phenomenon regarding the length of the tail and the overall supply from a given well.
[Translation]
Is the decline still noticeable when there is a similar well and other horizontal wells? Is there still a decline then?
[English]
Yes, that's correct.
As you're aware, a shale well is drilled vertically, and then there's horizontal drilling that can go out for a kilometre or so. That's done because they have to fracture the shale rock to release the gas. Once they've done that, the output from the well is very high in the initial year, and then declines rapidly in the first year and then tails off. The rate of decline tapers off after the first year.
[Translation]
Thank you. I understand now. You also said that the extraction of shale gas required a significant quantity water, typically a hundred times more than the gas.
Is that figure based on scientific data? Is it reliable? Is it really a hundred times more? If I include that figure in one of my speeches in Quebec, will they laugh at me?
[English]
No, there are published numbers to support those data. That's for a typical well. Some are higher and some are lower, of course.
[Translation]
I have another quick question.
I want to come back to your pipeline. Have you received any federal or provincial funding for the project?
[English]
[Translation]
[English]
Because this is recorded by audio and not video, I want to point out for the committee that Mr. Anderson was in fact signing a cheque, so it should be done by the time we're done this meeting.
Thank you, gentlemen.
It was in 1974 that Justice Tom Berger started his inquiry into the Mackenzie Valley pipeline. Now, 37 years later, here we are with the government issuing their order in December.
Mr. Reid, you were saying today that essentially the order from the NEB is sitting on the cabinet's table, and you folks are waiting for that. Is this the final sign-off? If cabinet signs off on this final piece of paper, have you got all the regulatory things in place in order to proceed with the project?
That's correct. The order in council is usually a procedural matter that follows any NEB decision. It gives effect to the NEB decision.
Do you know why there's a delay? I'm sure you're in conversation with the government. I'm sure your partner members--Imperial Oil, ConocoPhillips, Exxon, and Shell--have good connections with this government as well. Do we have any notion as to why it's taking this long?
Typically an order in council would take four to six weeks following the NEB decision. This decision occurred right before Christmas, so I would expect it could be longer. We're right at the eight-week point now, so we're right at the tail end of what would be normal.
I have not been able to find out any reason for a delay, or even if there is a delay.
We're essentially at the eight-week mark after the decision came in, given the Christmas holidays as well, and maybe we'll hear an answer today, but I doubt it.
I hesitate to ask this question. One of the money reports after this announcement was made was questioning whether this project was dying of old age. Being around for 40 years is a long time for a project to be proposed in anyone's world. These large companies have equity that they can move around the planet for different projects. Holding money up and holding engineers up, etc., is very difficult.
I got no sense from your testimony today that you fear that the delay we're under right now, waiting for the order in council, jeopardizes the project. Is there, in fact, a so-called drop-dead date with this project? If you don't have an answer by spring, late spring, or summer, are you in a lot of trouble?
The concern is that the NEB certificate contained a number of conditions, one of which was a sunset date that indicated we must commence construction no later than December 31, 2015. We have about three years of detailed engineering work and permitting, as I mentioned—about 7,000 site-specific permits, etc.—that we need to undertake before we commence construction. That's about three years' worth of work.
To sum up, with the building season being what it is in the north, you're starting to bump up against the early limits of when you could complete this project in order for your NEB certificate not to expire.
That's correct. It's unusual in this circumstance, because it's winter-only construction; the tundra will not support heavy equipment.
Yes, of course.
To both of you, a number of the energy companies--both traditional oil and gas companies and some of the so-called alternative-energy folks--have come before us and said that one of the things lacking in Canada is any notion of an energy security strategy, or an energy strategy at all. It creates uncertainty in the marketplace. We're the only energy-exporting nation in the world not to have a plan of this type, essentially. When I look at 37 years of Mackenzie experience, I see uncertainties around things like native land claims and whether or not there will be a price on carbon, and if so, how much it will be.
Do you have any opinion on whether there's a need, or are these other companies in fact wrong?
Thank you.
My opinion is that this country needs an energy strategy. We need to know what the future looks like so that we can plan ahead. I understand the difficulty in developing one, because of our patchwork of different energy resources across the country. Western Canada is fossil-based and eastern Canada is more nuclear- and hydro-based, so this does create difficulties, but I think it's important--
There's been a notion put forward, and I'm wondering if your group has considered this aspect for a number of the communities along the route. It's always a question of risk and benefit and what benefits will be seen. One of the benefits that's been proposed is to develop the use of waste heat from the compressor stations to generate electricity for communities. A lot of these communities are sitting on diesel. They are very remote, and it's very expensive.
Has your group, or the group at large, looked into this as part of your proposal, or would you consider it?
We haven't looked specifically at using waste heat to generate electricity. I'm aware that has been done on the TransCanada Pipeline system. It could be looked at in this case as well. The plan at the moment is to utilize the natural gas from the pipeline to replace diesel in the communities along the route.
When Justice Berger came out with his report 34 years ago, it was much criticized by industry at the time, and it was a shock to the then Liberal government. He was supposed to go up there, look around, and approve the Mackenzie in its state at that time. There was much opposition, in particular from first nations communities along the way—members of your group.
Has Justice Berger been proven right in a sense? If so, what are the implications for Canada going forward with other energy projects, energy plays, that go on right across the country?
In hindsight, there's no question that Justice Berger was correct in deferring this project back then. The aboriginal communities were simply not in a position at that time to take advantage of the huge benefits that could accrue to them. The big difference was the land claim settlements, and that's what Justice Berger recommended.
I want to extrapolate this a bit for both of you, then. With the particular attention given to Mackenzie and settling some of the land claims along the way, thus making equity available, we're seeing more and more mining companies and oil and gas companies setting up economic arms that are then available to first nations to participate in.
Some of them are good and some are a bit more thin, yet we don't necessarily see a lot of leadership coming from the federal government in settling that uncertainty. Companies are constantly talking to us about certainty; if there isn't certainty in the market, if there isn't certainty on the land, it's very hard to go to the market and attract sometimes billions of dollars.
Mr. Isaacs or Mr. Reid, how critical is having that question settled around first nations rights? I assume there is an obvious role of the federal government in doing that, but it seems to me that industry is doing it right now. They're not necessarily obligated to do it, while the federal government is constitutionally obligated to do it.
Absolutely fundamental to the whole process is the settlement of the land claims. That was the key that unlocked the Mackenzie Valley and turned the aboriginal groups around from absolute opposition back in the 1970s to being partners in the project today. It really introduced the aboriginal communities to the wage economy and to the importance of economic development.
Today in the north, the aboriginal youth have access to satellite television, digital cell phones, and things like that. They see how the rest of the world lives. They don't want to go out and chop wood to keep warm; they want to turn up the thermostat. Living off the land is moving away from being the prime mover in the north.
Of course, the land is still very important to aboriginal people, and it becomes very important for recreation, but the mainstream there is now more wage oriented. They have to have dollars to fill up their ATVs, snowmobiles, and so on. We've moved a long way since the 1970s.
Thank you, Mr. Chair, and gentlemen, I thank you.
Mr. Reid, there have been some announcements from the Chinese folks that natural gas is their target in the future. They can see their purchases of oil and coal declining as a result of switching over to natural gas. I would imagine that Asia has to be a real market for you down the road.
I see in your deck that the line will run down to the northern Alberta border. If you are to tap into the Asian market, what would be the route for your gas?
There's currently a proposal to construct a pipeline from the Spectra system in British Columbia over to Kitimat, convert the natural gas to LNG, and export it to the Asian market.
To get northern gas into that system, our system interconnects with TransCanada. TransCanada actually has a leg that goes into southeastern B.C., and there is a connection between the TransCanada system and the Spectra system at that point. By exchanges, you could get Mackenzie gas up to Kitimat and sold in the export market.
Given the capacity that you'd need, it would mean constructing a new pipeline out to the Kitimat area.
Right, and then they would liquefy it there and ship it by freighter over to Asia.
I'm sure you're aware of the problems we have out in the northwest part of British Columbia. We have a tremendous amount of concern from the energy companies over the anti-freighter, anti-pipeline groups that are out there. As a matter of fact, Mr. Cullen, who is not here, plays a leadership role in that effort out there to stop any type of line going out to the northwest to Kitimat.
I'm encouraged by how you've managed to get the first nations groups on board up in the Northwest Territories, but out in the northwest Mr. Cullen and his friends have managed to inflame the groups out there to the point that they're saying no to everything, to every effort. That surely has to cause you some problems with the future vision of the Asian market.
We're not targeting the Asian market at this point. I really can't comment on the aboriginal situation in southern Canada.
As I said earlier, it's important to note that it was our aboriginal regions that came together and established a priority for themselves to participate in the pipeline and seek a better way of life.
I appreciate that.
With regard to tapping into the Asian market, the shale gas people tell us that down in the United States the fields are so big that the dependence on Canadian gas will decline over the next 10 years as they develop this huge Marcellus basin, etc., so all eyes seem to be turning west to Asia as a good market to move into.
Of course, the port at Kitimat is the ideal loading point, given the facilities they've got there. As I said, the anti-freighter, anti-pipeline groups are very active out there, and there appears to be no reconciliation as long as they stay in the mood they are in, so I see that as a problem.
I had a question here. You said it was going to create 7,000 jobs over the construction period. That's amazing. There are three first nations in the area that are part of your group. How will that affect the unemployment in those first nations? What's the current unemployment rate, and how would that change with the construction?
The current unemployment rate in the Northwest Territories is very high. It's a real concern. In the Mackenzie Valley itself there is simply no economic base.
I don't have a number with me, sorry.
The pipeline will obviously significantly help the employment situation in the Northwest Territories. At the peak of construction there will be 7,000 jobs. There is $1 billion in what is called “set-aside” work that's been negotiated under the access and benefits agreements between the aboriginal groups and our project managers.
That's great.
I have another question. What did you mean in your presentation by, in the section dealing with quarter one of 2011, “fiscal framework concluded; financeable for APG”?
What does that mean?
We commenced discussions with the federal government a couple of years ago, with Minister Prentice, on what we call a fiscal framework. Just about one year ago, Minister Prentice put those discussions on hold and told us to come back for serious discussions once we got our certificate.
The purpose of those discussions was to do two things: one, create a shipping toll that's attractive to get more shippers on the pipeline; two, to actually make sure the shipping fee is the same for everybody. To have a user-friendly pipeline is, I suppose, a good way to word it.
We want to reduce the cost of capital. That's the key to reducing the shipping toll, so some kind of guarantee would be what would be on the table.
Thank you very much. I appreciate that. I wish you a huge success in getting the capacity that you need out to the west coast and over to Asia. I think that's where the market lies in the future.
Thank you, Mr. Harris.
We actually have very little time left. We have about two minutes for each party in the next round.
Mr. Tonks, please ask a short question with a crisp answer.
I'll try to do better than I have in the past on that.
Thank you for being here.
I think, Mr. Reid, you talked about the role of the federal government with respect to one particular part. You mentioned providing a guarantee to lower the cost of capital. Do you have any suggestions as to how and where that might take place?
We intend to re-engage with the federal government. It has now been announced that INAC will be the responsible ministry. We intend to re-engage once we get the certificate or the order in council. We'll be picking up where we left off a year ago, and it'll be some form of guarantee. There's nothing carved in stone here, but lowering the cost of capital is the key.
So it would be something more than the accelerated capital plan that might allow for quicker write-offs at some point?
Yes. We're not looking for that at all. What we're looking for is a loan guarantee or equivalent, something along those lines, that simply stands behind the commercial loans.
Okay.
I just have a quick question to Dr. Isaacs.
Dr. Isaacs, I'm very impressed, and I'm sure the committee is, with respect to the integration of a number of related research-based issues--water, oil sands technology and so on--that have been integrated into your group now. I understand that it is a provincial corporation. Is there an accountability through the board? How does it actually work?
Yes, you're right about the accountability. I report directly to the board of directors. It's a very prestigious board, consisting of people who have been in the business community but who also have good insights into the technology aspect. It's a combination of these things. They report directly to the minister. He hires them and he fires them, but in between they are allowed to act in a responsible manner.
Thank you, Mr. Chair.
I appreciate you gentlemen being here today.
Mr. Reid, we've heard a lot in our hearings about both shale gas and conventional gas, as well as oil sands. Is your pipeline supplied by both conventional and shale gas, or is it pretty much all conventional gas?
Not really, because the large decline rates, as you can see on the chart, are 20% per year. The conventional resources in the south are mature and are declining. Shale gas, as you can again see from the chart, is filling some of that gap, but overall, production is still declining.
I don't have the tables from the other days here, but it seemed to me that the shale gas was going to be a far bigger part of the production in the future than what's on your map here. I suppose we'll have to take a look at those.
We had some testimony that said shale gas is actually competitive at the price that natural gas is right now, while presently conventional gas development really is not. How has the price of natural gas impacted the development of your project here in the last little while?
First of all, some shale gas is economically.... Primarily the shale gas being produced in the U.S. basins, such as the shale gas in Horn River, for example, is going to be relatively costly, and again, all conventional gas is not equal. There are some wells that are more than economically viable today and some that are simply not. You can't really compare. All shale gas is not equal, and all conventional gas is not equal.
I wish I had a little bit more time.
Mr. Isaacs, I wonder if you could be a little bit more specific about some of the technologies that you're talking about as part of your mandate. We've heard lots about things like new fracking methods. Horizontal well-drilling, of course, is something that we've heard quite a bit about, as well as the SAGD and those kinds of changes that are taking place here.
What do you see in the future? What will be some of your main initiatives that we could put in our testimony and our report?
I think that this report will provide you with a little bit of guidance on that. I should say that our previous organization was the one very much responsible for the creation of steam-assisted gravity drainage. We now need to go beyond this technology; there are some technologies that are up and coming, including solvents, including the use of solvents with steam, including the use of electricity, including underground coal gasification. Some of these things we are very much engaged in to try to make happen and to advance.
We're also looking at renewable energy and turning waste into fuels. We've supported the City of Edmonton waste-to-fuels pilot plant. It actually uses a Quebec technology, Enerkem's technology. There are a number of technologies that we think are going to be critical. In the end, we do need biofuels. We have targets for biofuels, but we also think that there will be a future for both biofuels and fossil fuels together.
[Translation]
Thank you, Mr. Chair.
Thanks to both of you for coming so far to be here today. The weather may be better back home.
Mr. Reid, in your presentation, you talked about the role of the federal government. You said the project was “truly a nation-building project, determined to be in the public interest”. There is an implicit recognition in that statement that when something benefits the nation, no matter where in Canada—and gas development is very profitable—it inevitably benefits everyone.
If I was a Canadian in Toronto, I would say I agree completely, that is absolutely true, but I am not. I come from Quebec, and there are two nations in Canada. Even Mr. Harper recognized not just a nation, but the nations.
As a nation, we see things very differently. Why? I will give you an example. You mentioned funding that had been given to other major projects in the past, including the St. Lawrence Seaway, which was built mostly in Ontario with Quebec supplying 30% of the funding, the Hibernia development, which was built in Newfoundland Labrador with Quebec supplying 25% of the funding, and the TransCanada Pipeline, which is probably out west. But you did not mention the CANDU reactors at Atomic Energy of Canada Limited, which are also located mostly in Ontario.
In Quebec, we have an energy supplier called Hydro-Québec, but we did not get a penny from the Canadian government. As a nation, we feel as though we are paying 25% to 30% of everyone's else bill, while we receive payments under the equalization program. So we do not really think it benefits everyone.
I just wanted to make sure that everyone here understands that there are also aboriginal nations.
My colleague talked about two nations. I won't get into a history lesson, but he needs to correct himself, especially since we are talking about a pipeline in partnership with aboriginal nations.
[English]
Monsieur Coderre, I think you're engaging in debate here.
Monsieur Pomerleau, did you have a question at the end of your comment?
The question was this: do you understand that it is very possible to see things in another way than what you present?
[Translation]
[English]
[Translation]
Yes, I understand.
[English]
The people in the Northwest Territories share your sense that they have not had their fair share. This would be an opportunity to really develop a project that has benefits not only for the aboriginals in the Northwest Territories but for people widely spread across Canada. It provides an environmentally preferable fuel, the fuel we need, in a timely manner, and it brings economic benefits and jobs for all of Canada.
[Translation]
Thank you, Mr. Pomerleau.
[English]
Thank you very much, gentlemen, for coming today.
Your presentations were very enlightening, and your answers to questions were very helpful to our study. Thank you very much.
We will suspend now for a minute or two as we change witnesses. Then we will come back to the second panel.
We resume the meeting now with our second panel for today.
From the Alberta Chamber of Resources, we have Brad Anderson, executive director, and Larry Staples, project manager of the task force on resource development and the economy. From the Town of Bay Bulls, we have Harold Mullowney, mayor, and Ted Lomond, executive director, Newfoundland and Labrador Regional Economic Development Association.
Welcome, gentlemen. Thank you very much for coming today.
We will start the presentations in the order listed on the agenda.
From the Alberta Chamber of Resources, we have Mr. Brad Anderson and Mr. Staples. You have up to seven minutes. Go ahead, please.
Mr. Chairman, we appreciate the opportunity to speak with the standing committee today and to provide the perspective of the Alberta Chamber of Resources.
The Alberta Chamber of Resources is 75 years old. We had a great birthday party last Friday night in Edmonton, with 700 of our closest friends at our annual banquet and awards evening. We have about 200 member companies from all sectors of resource development. We think that cross-sector membership gives us a unique, broad, strategic, and balanced perspective.
Our mission is orderly and responsible development. We think we've had an impact over the years on both corporate strategy and public policy. That impact has come through reports such as the few examples I have to show you today, including, the National Task Force on Oil Sands Strategies; the Oil Sands Technology Roadmap; “Learning From Experience: Aboriginal Programs in the Resource Industries”, which is a best practices guide for relationships between resource companies and aboriginal communities; and “Caring for the Land”, which is a summary of rehabilitation for surface mining operations and some success stories in terms of renewal and rehabilitation of surface mining.
The latest report of the task force on resource development and the economy will be issued in a few weeks. That task force was commissioned by the board of directors of the Alberta Chamber of Resources to look at the historical impact and the potential future impact of resource development on the economy and to formulate some recommendations that would invite governments and industry to work together to optimize that in the future.
The report was developed with very broad input from nine sector committees and with economic modelling by Dr. Robert Mansell and his team at the School of Public Policy at the University of Calgary. They used the Statistics Canada provincial input-output model to assess both the direct impact of economic activity within the resource sectors and the forward and backward linkages that give rise to the indirect effects in supply sectors and service sectors such as engineering and accounting. We think this more thorough understanding of the total effect, both indirect and direct, will be one of the major contributions of our report.
The report is in the process of being printed. We'll be pleased to send you a copy in early March as soon as it is available.
I'd like to highlight four of the broad conclusions from the task force report.
First, the resource sectors are key drivers that propel the whole economy. Nationally, one-quarter of all business profits and one-third of business investments arise in the resource sectors. Over half of the value of shares traded on the Toronto Stock Exchange are resource shares. The resource sectors are the largest net contributors to Canada's positive balance of trade. When we add up all these direct and indirect factors, we see that 20% of Canada's gross national product and over 60% of Alberta's gross domestic product arise from resource development activity.
Second, we have two wonderful competitive advantages in Canada: the resources in and on the ground, and the thriving knowledge economy, driven by resource development, that exists above the ground.
Some of that knowledge economy is resident within the resource development companies, some within the regulators and government departments and research laboratories that are connected with resources. To a large extent, that knowledge economy is in the supply and service sectors.
I'd like to point out that this knowledge is globally competitive, and there is a large export component to that knowledge economy.
Third, we should remind ourselves that in Canada we have a good track record in terms of responsible development. We have knowledgeable regulators, who set high standards and enforce them. We have resource development companies that take their safety, environmental, and community responsibilities seriously. They walk the talk.
Finally, as we look at the future of resource development, we see that we have ample resources. In the energy sector we have coal and bitumen. The production horizon of those resources is measured in centuries. Even for conventional oil and gas, as we've been hearing about, production horizons have been rising in the last few years. Beyond the energy resources, we have a big basket of other mineral resources. We have renewable forests. When we put all that together, we see that we have a large and diversified portfolio.
As we talked with our sector leads, we asked them to describe low scenarios and high scenarios for future development in their sectors. Dr. Mansell and his economic modelling team put all this together so that we could determine the size of the prize if we can come up with smart corporate strategies and wise government policies that steer us away from the risks of the low scenario and toward the rewards of the high scenario.
That prize, that difference between the low and the high curve, we've estimated in Alberta as $700 billion worth of incremental GDP over the next 10 years, as well as four million person-years of incremental employment over the next 10 years, so industry, governments, and society generally have high motivation to pursue orderly and responsible development.
In conclusion, I would encourage the committee, when the report arrives in the next few weeks, to please read it and please understand the economic importance of these sectors and the tremendous effect the direct and the indirect effects have on the overall Canadian economy. Please look at the recommendations to determine how the federal government could work with the provincial governments and industry to pursue a common vision of orderly and responsible development.
Thank you.
Thank you very much, Mr. Staples, for your presentation.
From the Town of Bay Bulls, we go to Mayor Mullowney. Are you going to make the presentation?
Mr. Chair, committee members, thank you for the opportunity to speak with you today about the energy security of Canada, and in particular the regional economic impacts of oil and gas development.
The maximization of economic benefits from this non-renewable resource is of considerable interest to the numerous community-based organizations and countless volunteers who I am representing here today.
While oil and gas development and production have infused the province of Newfoundland and Labrador with financial resources and a confidence beyond any in our history, it must be noted that not all regions of the province have shared equally in this prosperity.
Excuse me, Mayor. The interpreters are having a little bit of trouble keeping up. Perhaps you could slow down a little bit. I know you have a limited amount of time, but they can't keep up. Please just slow it down a little bit. Thank you
Regional and economic development groups, such as those I represent, are working to bring local capabilities, knowledge, skills, and initiative to bear to ensure that the province capitalizes fully on this finite opportunity. We must nevertheless not lose sight of how a strong Newfoundland and Labrador contributes to a strong and vibrant nation of Canada.
Let me be clear: we do not support development at any cost. As the mayor of a small coastal community, let me first say that our natural resources and environment must be protected. Others may have already started to forget the disaster in the Gulf of Mexico, but we have not. Industries such as fish harvesting, aquaculture, tourism, and nutraceuticals will long outlast the oil and gas industry. The continuation of these sectors is squarely dependent upon our stewardship.
As the brother of one of those lost in the Cougar 491 tragedy of March 12, 2009, let me make a second point: it is a price no family should have to pay. We believe that we must develop our offshore resources in the safest manner possible.
There are many things the federal government can do to help Canadians benefit fully from the offshore oil and gas industry. The oil and gas industry directly employs over 4,500 people in our region of Atlantic Canada and generates revenues of almost $7 billion annually. The tax royalties resulting from the oil and gas industry, combined with those accrued in related spinoffs, are massive.
The cumulative benefits have not only enabled the province to end years of deficit financing but can now also be felt on the national balance sheet. The federal government must work to promote the technological advancements required to prolong the life of existing discoveries while it creates an exploration-friendly environment. This will ensure that the life of the industry is maximized to the fullest extent possible.
It is important to remember that while there have been 2.84 billion barrels of oil discovered in Newfoundland and Labrador, a potential six billion barrels remain to be discovered. In Nova Scotia waters, the CNSOPB projects another 2.6 billion barrels of undiscovered oil. Still, exploration in the region lags.
In the North Sea area, approximately 4,000 exploration wells have been drilled, compared to 140 wells in Newfoundland and Labrador, which has an area four times the size.
The federal government must also work with organizations such as NLREDA and the Newfoundland and Labrador Oil and Gas Industries Association, NOIA, to facilitate the participation of local business in the sector in the provision of products and services for the petroleum industry. The industry is one that is highly technical and regulated. It can be intimidating and it can be a challenge to enter. We must remove the barriers so that those closest to the resource can benefit.
The federal government must also engage with the Government of Newfoundland and Labrador and with industry to capitalize on exploration off the cost of Greenland. Greenland lacks the infrastructure and industry base required to adequately supply development of the sector in that region. We believe that our capabilities, our geographic location, and our position put us in a very good position to pursue a mutually beneficial partnership.
We must also leverage our skills and infrastructure to exploit opportunities for export all over the world. Companies from Newfoundland and Labrador have already demonstrated success in this regard. Together community, government, industry, and academia can grow exports through network and cluster development.
Natural gas holds tremendous potential for Newfoundland and Labrador, which has proven natural gas reserves of over 10 trillion cubic feet and an estimated 60 trillion cubic feet waiting to be discovered. The federal government must work with industry and academia to marry existing technologies with harsh-environment expertise to enable the development of natural gas production in that province. It is important to note that from an environmental perspective, natural gas produces far lower carbon emissions than coal.
Knowledge mobilization has always been challenged by large industrial projects, but it is by no means impossible. The project management, engineering, safety, and harsh-environment skills engaged in this sector are a potential source of competitive advantage, where they are not only transferred, but are embraced as part of the business culture. The federal and provincial governments, working with academia, industry, and development organizations, must develop a knowledge mobilization plan that spans the 30-plus years of coming oil and gas activity.
Increasingly we recognize the need for government and industry to work with communities to build sustainable regions that offer not only employment but also equality of life in a rural setting. Funding earmarked for research, development, and training must be invested so as to contribute to maintaining a vibrant culture and to enhancing the opportunities outside oil and gas so that regions will continue to flourish long after the royalties have begun to disappear.
The social dividend of the oil and gas industry is something that is often overlooked. I've already alluded to the pride and confidence that come with prosperity. This is reflected in the growth of the province's artistic, heritage, and cultural sectors. In the province there has also been a sharp decline in the number of families torn apart as family members were forced to move away to find employment elsewhere. In our efforts to develop the industry further, we must never lose sight of the fact that these resources belong to the people and must be developed for the good of the people--all of the people.
The oil and gas industry has led to significant economic benefits, including direct employment, tax revenues, infrastructure improvements, skills training, major capital project spending, and supply opportunities. These benefits, however, are far short of their true potential. As we go forward we must not lose sight of those communities not sharing in the prosperity that the industry brings, nor must we lose sight of our environmental responsibilities or of our duty of care for those who put themselves in harm's way on behalf of all of us.
Thank you for this opportunity. I would like to end by saying that regular engagement with industry and community-based development organizations, such as the Newfoundland and Labrador Regional Economic Development Association, is critical if we are to maximize the benefits from our oil and gas resource as we move forward.
Thank you.
Thank you very much, Mayor, for your presentation.
We'll go now directly to questions and comments.
Go ahead, Mr. Andrews, for up to seven minutes.
Thank you very much, Mr. Chair, and thank you to the witnesses for coming today.
I'm going to start my questions with you, Mr. Staples.
In your presentation you talked about provincial and federal governments and the high standards of regulation. We've heard from some witnesses that there's a lot of duplication in regulations.
Do you see that this is the case in your area? If so, is there something that this committee should address to reduce the amount of duplication in regulations?
It is certainly something we've seen. Luckily, there is action well in progress in the form of a regulatory review process in Alberta, where just in the past few weeks they have announced some streamlining at the provincial level to eliminate duplication without reducing standards. As well, there is a federal-provincial regulatory streamlining initiative under way. I can't recall the name of it exactly, but we had one of the associate deputy ministers from Natural Resources Canada actually come to speak to us at our environmental forum last year. It sounds as though progress is being made in resolving that problem.
Thank you very much.
This question's for you, Mayor.
You mentioned oil and gas benefits stretching across the entire island, and how not all areas benefit from these.
Do you want to elaborate a little further on how far the benefits from oil and gas stretch across the Island of Newfoundland, and how not all areas are seeing this economic impact?
Most of the development and most of the spinoff benefits so far have been centred on the Avalon Peninsula, and the closer you get to the city of St. John's, the more you see.
I represent, as a mayor, a small town of 1,000 people. It has been 1,000 people for many years. We have a 500-year history, but in the last decade we've built an offshore oil supply base in that community. We have a deepwater port and, yes, we have received benefits. We have seen property values pretty well triple in the last 10 years. We have seen numerous new housing starts. We have seen numerous new subdivisions begin.
We are struggling with the fact that infrastructure and communications and the proper material to support all this is not always there. We're often reactive as opposed to proactive, but the communities farther removed from the community of Bay Bulls or from some of the oil and gas ports often do not share to the same degree.
I would also say we have created a very mobile workforce in Newfoundland. Many of our young people have travelled all over the world, and many of them have worked in the oil and gas industry. In recent years they are coming back home and are building their communities. Still, they are trying to centre themselves closer to the bigger communities.
I am fortunate that my community of 1,000 people is only a 15- or 20-minute drive from the capital city of St. John's, but we're also fortunate in that we have a very good deepwater navigation-free port that can service the Grand Banks. St. John's, as a harbour and a service port, is pretty well full, so the harbours that exist nearby will be filled up and move out, and you'll continue to see development, but that development needs infrastructure spending. I always fear that we'll miss the opportunity because we're always being reactive; the opportunity comes and goes and is lost, because we don't have the infrastructure to avail ourselves of it.
I don't know if that answers your question.
Yes. Your community does a great job of balancing the oil and gas, the fishing industry, and the tourism industry, which are all vital to the survival of Newfoundland and Labrador.
You briefly talked about exploration. Let's dig into that a little bit. Exploration off the east coast has been decreasing. You said we need to prolong exploration and that government has a role in encouraging exploration.
Can you give us some examples of how, as a federal government, we could encourage more exploration off the east coast?
Any government really has the task of creating the environment in which things can happen, so when it comes to regulations and such, that's the role I see primarily for government. Of course, helping financially doesn't hurt either, but by and large, I believe government is in place to create the environment whereby things can move forward without trying to slow them down too much.
I have two quick questions.
The first is on protecting the fishery. We had Earle McCurdy here before the panel. What are your thoughts on how we have to protect the fishing industry, balancing oil and gas?
Second, you briefly mentioned the Cougar helicopter crash. I wonder if you could just say a little bit on the safety aspect of the offshore oil and gas and how important that is.
For 500 years the fishery has been the mainstay of the economy of Newfoundland. In recent years we have moved a fair distance from that. It's still a billion-dollar-plus industry, but we've moved away from groundfish and into shellfish for the most part. I think the fishery is a sustainable resource that, if managed properly, will be there for generations to come.
Right now in Newfoundland, most people who pursue the fishery pursue it for a very short time and with a limited number of species. Many year ago I worked in the fishery as a quality control manager, and at that time we processed 37 species of fish and we worked 52 weeks of the year at the plants where I was in charge. I would have to go to the office and plead my case around Christmas to get a week off to enjoy with my family. Those days have disappeared, but the fish are still there, I think. It's just that we have moved away from them into other directions. That is something with which I'm a bit disappointed. I think that the fishery still holds great potential.
With regard to the Cougar crash, again it comes down to a regulatory regime. I've read through some of the report. At a quick glance, there were 16 items that could have probably prevented that crash. There were 26 other items noted, and four recommendations, but at the end of the day we had a helicopter that flew offshore from Newfoundland that supposedly should have had 30 minutes of run-dry time and didn't.
I do not blame the pilots. The pilots probably were operating with improper information. They thought they had longer to get to shore and they didn't.
My brother, who was on that chopper, had always said, “Don't worry. We have safety mechanisms in hand.” I said, “ If you're 200 miles out there over the North Atlantic, what happens if a problem occurs?” He would always sort of grin and say, “No big deal. We've been trained. They'll put her down, we'll jump into the ocean, and somebody will come to get us.” He made light of it.
The thing that bothers me most of all is that he never had the opportunity to jump into the ocean. There were signals that said to put this chopper down. The protocols were there. They were not followed. Someone second-guessed it, and it was probably second-guessed because of false information. That still bothers me.
[Translation]
Good afternoon gentlemen and welcome. It is a pleasure to meet you.
Mr. Staples, I want to start by congratulating you on your success. The companies you represent account for 62% of Alberta's GDP. That's a lot.
You called the current global trading environment resource-hungry. So that must put you in a difficult position because, as business people, you are trying to produce enough to meet the huge demand. But there are still major environmental challenges.
I am in favour of energy security, but not at any cost—not when it leads to environmental degradation. You mentioned in your presentation a project by the name of Caring for the Land. I would like to hear a bit more about that.
Given the project's name, I also want to know whether it is aimed at helping the environment. Are you accountable to the Alberta government to produce results? Do you have a strategic plan for the project?
[English]
Madame, yes, as you point out, there are many challenges of being globally competitive with the development of our resources, so we attract capital to Canada. There are challenges to make sure that it is not development at any cost and that we do have that balanced development, that responsible development.
Lately one of the issues that has been on everyone's mind, of course, is reclamation of surface mines. We see in the oil sands that we're just at the very beginning of that reclamation process.
Together with some of our other mining companies, our coal-mining members, we produced a document “Caring for the Land”, which explains the whole reclamation process and the regulatory environment surrounding it. It presents some success stories of older mines that have been decommissioned and very successfully rehabilitated to support vegetation, wildlife, and wetlands, and these success stories really help to set the bar for reclamation in the future.
[Translation]
With such a project, surely you have an obligation to produce results. A culture of social responsibility must exist in Alberta, as it does in Quebec—the responsibility to be a good corporate citizen, as they say.
You represent 200 companies including operators, suppliers and advisors. Are you really the best people to look after the environment? Isn't that like the fox in the henhouse?
[English]
Well, I don't have red hair, so I'm not sure if I qualify as a fox.
Voices: Oh, oh!
Mr. Larry Staples: I can tell you that everyone with whom I deal in industry is passionate about this topic. They're passionate that we do things properly and that Alberta and Canada will be as good for our grandchildren as it is for us.
Most of the operating companies produce environmental impact statements and ongoing accountability reports. One of our recommendations in the task force report you see here is that we work a little bit more on improving that process and doing international benchmarking. Some companies do it now, but we want to broaden that out across the industry.
So we're not really in a conflict of interest here; I think we're in a confluence of interest, where we try to bring together government, regulators, and industry to try to create that common vision, those success stories--the height of the bar--and create progress.
Thank you.
That was a great answer.
The mayor made a comment that really struck me. It was about the “pride and confidence that come with prosperity”. I think I quoted him pretty closely there.
I really liked that, but I'd add one more bit, about the pride and confidence that come with doing the right thing--with prosperity and with doing the right thing.
A great example, which is in this brochure, is Suncor's recent reclamation of its Pond 1. I went to that event. My career for nearly 30 years has been mostly in oil sands, and I have to tell you how proud the folks at Suncor and the reclamation workers were about what they were showing off, and what we were walking on was amazing.
I heard your comment about the fox in the henhouse. Maybe there's a little bit of that, but I'll tell you what: there's much more so a tremendous amount of pride about doing the right thing here.
[Translation]
If we had the chickens here to testify, I would ask them whether they were satisfied with your work.
Mr. Mullowney, I have little time left, but I want to take this opportunity to commend you. From your presentation, I can see how dedicated you are to your community and your region. You take all of the stakeholders into account, and at the very least, that makes me want to visit Bay Bulls. It is positive to see.
I have a brief question. You said you need to develop your resources, but in the safest manner possible. Do you have suggestions on how to do that? I know we are talking about a huge issue here, but have you come up with ways to pursue that development safely?
[English]
There's always an inherent danger when you work in the North Atlantic. I don't know how safe you can make it, but we can certainly make it safer than it is.
I would refer to the helicopter crash in which my brother and those other individuals he worked with were killed. They had a helicopter that was certified and they thought they had 30 minutes to fly. The helicopter only had 11 minutes. That's the longest test they could pass. It was certified by the Americans and then sanctioned by the Canadians, because they regarded the chances of a catastrophic loss of oil as being extremely remote. Well, it's extremely remote that I will win the lottery on Friday, but I'll probably buy a ticket, so “extremely remote” doesn't cut it.
The other thing that bothered me was that there are aircraft out there that can fly for 30 minutes. It comes down to dollars and cents in that case. It's only money. I mean, we're talking people's lives here. Lives cannot be replaced. Money comes and goes.
We need to look at some of the regulations and make it as safe as possible for those people who engage in those industries on all our behalves, because it is the money that they generate that makes this country of Canada that much better.
So, yes, we can do things in the regulatory regime that would probably make the job a little safer, but then there's the social dividend I referenced earlier, and that's very important to me. Lots of people make incredible amounts of money in certain industries, but there are people who do not share in that. They do not have the same opportunities. That's where the social dividend comes in. If we were to spend some of that money on things like health, education, infrastructure, roads, and communications, I would see that as a social dividend. We all would benefit collectively.
What about pensions, for God's sake? There are Canadians who have worked a lifetime and have missed the opportunity to get the social dividends. They have been disenfranchised. We move on, and the new generation behind them benefits. What about those who did the time in the trenches, who worked hard to make this country what it is? We must do something to benefit all Canadians, not just a few.
That's where I come from on that.
Thank you, Chair, and if you could let me know after four minutes, I'd like to pass it over to my colleague, Mr. Harris.
To the gentlemen from the Alberta Chamber of Resources group, you sit on the Alberta Water Council. Is that correct?
You seem like nice folks. You take environmental responsibility seriously. You want to do the right thing. Your companies walk the talk.
There are 25 folks from different groups—industry, government, environmental groups, non-profit groups—who sit on the Alberta Water Council. There was a recommendation that there should be reclamation of wetlands that have been disturbed or destroyed by oil sands projects. You folks and the Canadian oil sands producers were the only ones that rejected that proposal. Is that right?
First off, most of the material in the report we endorsed. There were only certain aspects of the report that we had some problems with.
You say on your website, “While the wetlands policy has not yet been implemented, these changes”--you recommended changes against the report--“may save literally billions of dollars for our members in the future”.
Your members are industry members. Walking the walk means walking the walk.
When a wetland is destroyed by an operation, of the 25-member group, which includes other industrial groups--not just oil groups, but farmers' groups, non-profits, the Alberta government--only you and the Canadian oil producers were the ones that resisted this reclamation proposal.
Are you aware of the Commissioner of the Environment's report on water testing in the oil sands this past year in December?
Are you aware of the report of the oil sands advisory panel delivered on December 21? The panel testified before this committee.
That's confusing to me, because I'm assuming you had confidence in the water testing abilities that were going on with many of your member companies. I'm looking at the executive of your organization in 2010: Syncrude, Enbridge, Ainsworth, Finning, Suncor, Capital Power. You are an industrial group. Your industrial members work in and around the oil sands. Water is one of the most significant issues when talking about the impact of the oil sands.
The auditor has come forward and said that there is no baseline measurement, there was no testing for oil sands chemicals, there were no long-term data to track the changes. The oilsands advisory panel said there was a lack of leadership and coordination and a lack of scientific vigour to actually test the water that was being polluted by the oil sands projects--your members. You say you're barely aware of the reports, if at all. You talk about doing the right thing, but water is one of the essential concerns of the impacts of the oil sands, and you represent members of that group.
The oilsands advisory panel wasn't picked by Greenpeace; it was hand-picked by the federal government. They came back and said that the water testing in this environment is below basic standards, and you folks didn't raise any concerns with that at all leading up to that time, or even since.
Thank you.
Clearly, water is a big issue, and that's why we've been participating on the water council. In fact, we were part of the group that helped form it. They're doing good work, and we support it.
On the piece that you mentioned on the wetlands, of course we still want reclamation. In fact, we're obligated to reclaim lands; however, the initial recommendations were very high ratios of 10:1 or 3:1 of reclaimed land to wetland. In other words, if you disturbed one acre of wetland, either three acres or ten acres should be replaced. That's where we had an issue. I just want to be clear on that part.
There's also--
I want to put a clarification to Mr. Anderson.
You said that the reason you resisted these policies--and you celebrated that the policies were being resisted by the Alberta government--was that it would save literally billions of dollars for your members. It was expensive.
Thank you very much.
Well, it is expensive, and we do spend a lot of money reclaiming land. There's no question about that. It's a big cost of our business.
There are issues when you have a replacement ratio of something in the order of 10:1; there's also an issue of where you are going to do that. In Saskatchewan, there's only a certain amount of area to reclaim, so we reclaim the part of the land that we disturb, and that's where we come to.
If there were numbers in the order of 10:1, yes, it would be very expensive., but even more important, where are we going to do it? Are we going to do it in southern Alberta? Are we going to do it in northern Alberta? Are we going to do it outside of Alberta?
I'll pass this to my colleague, Mr. Harris, in a second.
I would note that none of the other folks except you and the Canadian oil producers had problems with this recommendation--no one in forestry, nobody in mining, none of the government officials who sat that table. It was just you folks.
I have a correction on there being no one in mining. We represent the mining sector on that water council, so I think you're in error with that claim.
You folks and the oil producers were the only ones--not anybody from government, not anybody from the livestock, not anybody from forestry, just you and the oil guys.
If I have only a minute, I think I'll focus on one issue that's a big concern of mine, and that is safety and search and rescue.
You mentioned your brother, and I know members of your family, Mr. Mullowney. A cousin of mine was on that same helicopter. Search and rescue may not have made any difference in that particular issue, but can you tell us the importance of high-level search and rescue capability in response to the development of both the oil industry and the fishing industry, particularly in Newfoundland and Labrador?
It's extremely high, extremely valuable. We work in the North Atlantic. We prosecute our livelihoods there. Most times if you go into that water, your life expectancy is measured in literally minutes.
In the case of my brother and those on the chopper, they may not have survived if they had got into the water. I do take some comfort from the fact that at least one severely injured individual did survive. I wonder, if they'd been quicker, then maybe.
It's absolutely critical to get a rapid response in the North Atlantic. Any time a fishing boat goes down, any time an oil rig has a problem, you don't have hours to wait; you have minutes. I don't care about the suits and all the protocols you put in place; that's what it comes down to--you have minutes.
It got better over the years. I remember in the early days, 30 years ago, when my brother was offshore working on the rigs. He often would say things like, “If we have to evacuate this thing in a storm, I might as well just stay on board and go down with it, because I'm just jumping into the water to die”. He felt a little better as time went on and things changed, but you're right, the time is absolutely critical.
Thank you, Mr. Harris.
Mr. Anderson, there's not much time left in the meeting, but go ahead, please.
Thank you, Mr. Chair.
Mr. Mullowney, I come from a small town in Saskatchewan that's in the oil and gas area, and I think we have the same challenge as you do, which is keeping our young people around.
I wonder if you can tell us a little more about the employment mix in your community. You said it's about 1,000 people and you're fairly close to the capital. In terms of that, what's the employment mix of the population? Also, what kind of training and educational opportunities are set up for people to get careers?
I'll answer briefly and then, if I could, I'd turn it over to my colleague, Mr. Lomond.
In Bay Bulls we are very close to the city of St. John's. Many people have access to Memorial University. Many people have access to the trades colleges. There's a tremendous interest in education. The young people have left, for many years, and they have travelled everywhere. They are a very mobile workforce. Many of them have worked in oil and gas and offshore pursuits, in shipping and such. The good thing is that many of them are coming home now, because there are opportunities at home that didn't exist years ago.
In terms of the mix, Bay Bulls has probably five streams. We've got a lot of residential development going on, a lot of construction. We've got small-scale and large-scale manufacturing for the offshore and elsewhere. We have a tourism industry; people come from all over the world to see the whales at Bay Bulls. We have 1,000 people, but we have about 80,000 tourists pass through each year to see the whales. In addition, we have a commercial sector.
I think everyone shares equally in the prosperity, and the prosperity now is noticeable, but not all individuals have the high-paying jobs. That's why I always continue to talk about a social dividend. Some of those individuals are being left behind, even though there's tremendous wealth around them.
The only thing I'd add is that there's obviously been a big change in the province over the last number of years. Earlier, Mr. Andrews asked what we could do to encourage exploration. Well, right now in Newfoundland and Labrador about 50% of our GDP is underpinned by geological work. About 11% of our GDP is coming from mining, and around 39% to 40% of our GDP is coming from oil and gas.
What we need to do is, as you say, to be able to create opportunities for young people. It's not just through training; it's through some of the other things we've mentioned. Training is great, but training and research are not just for the industry but for what comes after the industry. How do we diversify? How do we build on the skills that we've acquired in operating in harsh environments and lever those skills to use in other industries, whether it be fishing or whatnot?
We've got a project of 30 years or more. If we were to put in place a 30-year knowledge mobilization plan, the skills we could acquire could be a source of competitive advantage for years to come, as Mr. Mullowney said.
In the interests of time, I won't ramble on about that.
That's interesting. It's great to see that potential being realized.
I want to talk to Mr. Staples a bit, and this has to do with the realization of the potential we're talking about. In talking about the number of person-years that are going to be required in Alberta over the next while, you mentioned about 4 million over 10 years. Do you have comments on the challenges to fill that workforce?
We've talked about this, and some of our other witnesses have, but you're talking a lot about other areas. What are the challenges to fill that? Maybe Newfoundland has some of that same challenge as well, if not Labrador.
They're interrelated, certainly. The 2006 to 2008 period could be described as frantic in Alberta. We certainly had workforce challenges, and they constrained the rate at which we could build projects and bring them online and start creating wealth.
I think there's every expectation that we're headed in the same direction starting in late 2011 and into 2012. We're going to have to apply the lessons we learned and work hard to produce the projects and start bringing the wealth on stream.
I would echo that. I know right now that in Newfoundland and Labrador we have a number of megaprojects out there in the wings. I fear if they were all to come to fruition in a short period of time, we wouldn't know where we'd find the workers.
Most individuals who want to be working are working. There's a high level of skills that we require for some of these projects, and this is a mobile workforce that travels the planet, so if you wanted to start several of those projects at one time, the workers really are not there right now. That's a challenge.
I have just one more question to wrap up.
We have had some witnesses in here who have suggested that it would be better if some resources weren't developed right now and that we should leave them in the ground. I pointed out that our province already tried that, and it didn't work very well.
I would like reflections from both of you on what you think your province would be today without the development of the natural resources they have chosen to develop.
That is actually one of the charts in our reports. When you get the report, you will be able to look at one of the figures and track the total GDP in Alberta over time. There's a line where we have subtracted conventional oil, and another line where we have subtracted bitumen and unconventional sources. Then there's another line where we have subtracted all of the resource industries. Needless to say, that bottom line is about 40% of what it is now.
I would believe that without the spinoffs and the direct moneys from oil and gas development, our province would be in a very sad position indeed today. It has been a tremendous boon, a tremendous windfall. I always say that it could be much more. As my colleague Mr. Lomond said, we're probably looking at a 30-year window. We're well into it now.
Who's looking beyond 30 years? There are not too many people. I think we need to be really focused on the fact that we'll reach peak oil, and then it will start to drop off. We really need to look at the sustainable industries that sustained us for all those years leading up to oil. They still can be there and can be great drivers of our economy in the future, and now's the time to be at it. Now is the time to be developing and to be looking in those directions. There are lots of other resources out there that we have put on the back burner. The skill sets to even pursue some of them have disappeared.
We're missing a tremendous opportunity in enjoying this brief boom in cash.
Thank you.
I do not usually sit on this committee. I chair public safety. I find this study quite fascinating.
First of all, I pass my sympathies on to you, Mr. Mullowney, on the loss of your brother. Certainly tragedies like that one lives with forever, and our sympathies go out to you.
I wanted to thank both Mr. Staples and Mr. Anderson for appearing. I'm an Alberta member of Parliament, and I thank you for the work done by you and other groups like yours, such as CAPP and other groups and organizations that are involved in advocacy.
Mr. Staples, a couple of times you mentioned bitumen. This maybe isn't part of the study they're presently doing, but if you're doing it on security of energy in Canada presently, what is your opinion as to the capacity for refining bitumen in Alberta and in Canada right now, compared to just shipping the bitumen down to the United States? Are we low in capacity? Do we need to increase that greatly? Is it a better model to have refineries than it is to ship?
Do you have an opinion on that?
Certainly the best plan for Alberta and Canada is to add the most value we can to the resources before they're exported, but right now the economics of doing so are not in our favour. The Alberta government has certainly been promoting technology development to change those economics to allow us to add more value.
In the final analysis, the market will dictate that, but it depends on how clever Dr. Isaacs and the scientists in the Devon labs and the scientists in industry are in coming along with technology that makes it economical to add value in Canada. That has to be the goal.
I'm sorry, Mr. Sorenson, but our time is up. People have flights to catch.
I want to thank all members of the committee for a great discussion here today. I especially want to thank all members of the panel for your presentations and for your answers to the questions. Thank you very much for appearing. We appreciate it.
The meeting is adjourned.
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