Legislature(2009 - 2010)HOUSE FINANCE 519
01/26/2010 10:00 AM House ECON. DEV., TRADE & TOURISM
| Audio | Topic |
|---|---|
| Start | |
| Pnwer Regional Collaboration on Economic Revitalization | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
JOINT MEETING
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, INTERNATIONAL
TRADE AND TOURISM
SENATE SPECIAL COMMITTEE ON WORLD TRADE, TECHNOLOGY & INNOVATION
January 26, 2010
10:09 a.m.
MEMBERS PRESENT
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, INTERNATIONAL
TRADE AND TOURISM
Representative Jay Ramras, Chair
Representative Chris Tuck
Representative Nancy Dahlstrom
Representative Mark Neuman
Representative Lindsey Holmes
SENATE SPECIAL COMMITTEE ON WORLD TRADE, TECHNOLOGY & INNOVATION
Senator Lesil McGuire, Chair
Senator Gary Stevens
Senator Bill Wielechowski
Senator Hollis French
MEMBERS ABSENT
House Special Committee on Economic Development, International
Trade and Tourism
Representative Reggie Joule
Representative Mike Chenault
Representative Kyle Johansen
Representative Harry Crawford
Senate Special Committee on World Trade, Technology & Innovation
Senator Lyman Hoffman
OTHER LEGISLATORS PRESENT
Senator Johnny Ellis
COMMITTEE CALENDAR
PNWER REGIONAL COLLABORATION ON ECONOMIC REVITALIZATION
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
IAN BURKHEIMER, Program Manager
Pacific NorthWest Economic Region (PNWER)
Seattle, Washington
POSITION STATEMENT: Gave a slide presentation titled "PNWER
Arctic Issues Caucus".
MATT MORRISON, Executive Director
Pacific NorthWest Economic Region (PNWER)
Seattle, Washington
POSITION STATEMENT: Gave a presentation on PNWER's Innovation
Strategies.
RICHARD MARZ, Member
Legislative Assembly of Alberta
Alberta, Canada
POSITION STATEMENT: Provided comments about the oil sands of
Alberta.
MICHAEL PADUA
Alberta Ministry of International and Intergovernmental
Relations
Government of Alberta
Alberta, Canada
POSITION STATEMENT: Provided a presentation on the oil sands
and pipeline issues.
ACTION NARRATIVE
10:09:48 AM
CHAIR LESIL MCGUIRE called the joint meeting of the House
Special Committee on Economic Development, International Trade
and Tourism and the Senate Special Committee on World Trade,
Technology and Innovation to order at 10:09 a.m. Present at the
call to order from the House Special Committee on Economic
Development, International Trade and Tourism were
Representatives Tuck, Dahlstrom, Neuman, Holmes, and Ramras.
Present from the Senate Special Committee on World Trade,
Technology & Innovation were Senators Stevens, Wielechowski,
French, and McGuire. Also in attendance was Senator Ellis.
^PNWER Regional Collaboration on Economic Revitalization
PNWER Regional Collaboration on Economic Revitalization
10:10:09 AM
CHAIR MCGUIRE announced that the first order of business would
be a presentation by the Pacific NorthWest Economic Region
(PNWER). She relayed that the PNWER delegation has been meeting
with the governor and legislators on matters of energy,
workforce development, and economic development. PNWER is
comprised of a unique membership of public and private entities,
and the state and territorial governments of the United States
and Canada. Furthermore, the organization is nonpartisan and
presents an opportunity for a collection of leaders from the
Pacific Northwest region to meet and share information about the
best practices of resource development, workforce development,
and regional partnerships. Chair McGuire introduced the
following guests: Michael Chisholm, Member of the Legislative
Assembly, Saskatchewan, and Vice President of PNWER; Richard
Marz, Member of the Legislative Assembly, Alberta;
Representative Mike Schaufler, Oregon State Legislature, and
Vice President of PNWER; Jennifer Loten, Consul, Consulate of
Canada; Michael Padua, Alberta Ministry of International and
Intergovernmental Relations; Matt Morrison, Executive Director
of PNWER; and Ian Burkheimer, Program Manager for PNWER.
10:13:39 AM
IAN BURKHEIMER, Program Manager, Pacific NorthWest Economic
Region (PNWER), presented a brief discussion of the newly formed
PNWER Arctic Issues Caucus. He explained that PNWER members
from the Northwest Territories, Yukon Territory, and Alaska have
initiated the Arctic caucus. Members of the caucus first met
during November 2009, in Regina, to discuss how to ensure that
the issues important to the Arctic are effectively communicated
throughout the region and to the federal governments. The
caucus is comprised of legislators and private sector members
who meet to identify issues and inform PNWER's "working group
structure." Mr. Burkheimer advised the committees that PNWER
meets twice a year to work on areas of regional interest such as
transportation, tourism, and energy policy. The caucus proposed
topics for discussion at PNWER's upcoming annual summit in
Calgary during July 2010. The proposed topics are: (1) to the
energy working group, the challenges and opportunities of outer
continental shelf oil and gas development; (2) to the
transportation working group, presenting information to
communities and businesses on improving the flow of goods,
people, and services through the northern gateway; (3) to the
telecom working group led by Northwest Tel, the development of
telecom infrastructure; (4) to the border working group,
identifying solutions to the challenges of the Alaska/Canada
border. He then spoke of a proposal for PNWER to host a
Northern Caucus Symposium in Anchorage during June 2010. The
symposium would provide an opportunity for a high-level dialog
between the government and business leaders from Alaska, Yukon
Territory, Northwest Territories, and Nunavut. Mr. Burkheimer
opined this would be a unique opportunity for sub-national
jurisdictions to talk about issues and "help inform, again, our
national and regional discussion on these issues." He noted
that the caucus is working closely with Senator McGuire on its
proposed symposium.
10:19:17 AM
CHAIR MCGUIRE observed the symposium would be an opportunity for
Alaska to invite its neighbors from other Arctic regions to
share information about Arctic policy and for the participants
to project themselves as state, provincial, and territorial
leaders. At this time, most of the groups involved in Arctic
issues are federally based, and it is important for those who
govern and live in the region to weigh-in on those policies.
Indeed, the Arctic "frontier" will change the face of Alaska and
Canada forever. Chair McGuire requested that committee members
submit symposium agenda topics to her.
10:20:53 AM
MATT MORRISON, Executive Director, Pacific NorthWest Economic
Region (PNWER), stated that PNWER has had a working group on
innovation for the last five years. Initially, the Washington
State Legislature undertook a two-year analysis of "synapses of
innovation" from different areas of the U.S. The study
indicated that the most important keys to success were the
linkages between research and development (R&D) facilities.
Although there are "turf issues" between higher education and
R&D facilities, for the last three years PNWER has attempted to
link R&D institutions in Canada and the United States in an
innovation network. Legislators are concerned with the cost of
building new nanotech labs; however, what the private sector
wants is to access existing facilities, even if the facilities
are a two- or three-hour plane flight away. At PNWER's last
annual summit, arrangements were made for 25 university
presidents to participate in next year's summit discussion on
innovation. Furthermore, at the last winter meeting, PNWER
introduced the topic of "The Pacific Northwest as a Giant
Science Innovation Park, a 'Tool Box' for Growth" in an attempt
to build linkages and overcome the turf issues between existing
facilities. This will enable the best and brightest to work
together, and for the private sector to "tap into that network."
Mr. Morrison advised that discussions at the meeting also led to
the following questions: What platforms are needed? What are
the structures needed to catalyze the collaboration? What does
innovation as a distributive activity look like? Where are the
nodes in this network across the region? How do we encourage
the convergence of these nodes? As a result of these
discussions, the Washington State [Economic Development]
Commission Innovation Ecosystem asked PNWER to bring together
key innovation thinkers from all of the provinces and states in
the region to a two-day summit, March 16-17, 2009, in Seattle.
He expressed PNWER's interest in a discussion on how to build a
regional innovation strategy. Recognizing that there are great
economic challenges throughout the region, he said, "It's
innovation that we really need to get where we want to go, to
create the high-paying jobs that we'll need for the future."
Mr. Morrison acknowledged several technology laboratories in the
region that have been working together, and concluded that the
region has "so much more to gain from working together, than
just going it alone." PNWER's goal is to go beyond the "silo"
approach and identify a strategic economic development plan to
inventory regional capabilities and bring in partners where
necessary. He stressed the critical factor of including the
private sector in the dialog, because that is where the ideas
are pulled together and the products and jobs are created.
10:27:30 AM
MR. MORRISION then spoke of the PNWER Legislative Energy Horizon
Institute-a new product developed in collaboration with the
National Conference of State Legislators (NCSL)-that is a 60-
course hour program. He said that at the completion of the
course, legislators will receive a certificate of energy policy,
and the first class from this successful program will graduate
in April. Furthermore, the U.S. Department of Energy (DOE) is
encouraging PNWER to expand the institute into a sustainable,
nationwide program.
10:29:39 AM
MR. BURKHEIMER began the presentation entitled "PNWER at the
2010 Olympics." He noted that PNWER partnered with the
Vancouver Olympic Organizing Committee (VANOC) to become the
first bi-national organization, outside of the host country, to
be invited as a direct partner with the local Olympic organizing
committee. He pointed out that this partnership is in
recognition of the support by PNWER, and its member states, of
the 2010 Olympics. The games will bring about 2,600 athletes
and about 250,000 visitors to the Vancouver, West Vancouver,
Richmond, and Whistler areas, and about 3 billion people will be
watching worldwide. In addition, attending the Olympics will be
media from almost all of the major tourism marketplaces,
including Australia. During the games, 15 days are "themed" by
individual territories and provinces, and February 22 will be
"PNWER DAY," on which there will be special events on economic
development and tourism in Alaska. He displayed slide 3 that
indicated the first event scheduled for PNWER Day is a "Tourism
Promotion and Athletes Reception." Global and regional media
are invited to the reception, where regional Olympic athletes
will be recognized, and there will also be presentations by
tourism offices and mixer activities. He stated that this will
be an opportunity to improve existing relationships with
international media, build new relationships, and improve
relationships between various jurisdictions in the marketing
sector. Later in the day, there will be a "Border Symposium"
that will be a high level dialog with government and business
leaders as a means to guide the discussion of the summer
Trilateral meetings to the subject of the U.S. and Canadian
border. In the evening, the Northwest Territories and Yukon
Territory will host a "Business and Investment Reception." The
reception will be held at Canada's Northern House pavilion;
PNWER will be featuring Alaska and there will a focus on oil and
gas, mining, transportation, innovation, and tourism. Also on
February 22, "Global Business Leader Day" will be sponsored by
the Government of Canada and the Financial Times publication.
Finally, he displayed slide 7, which was a map illustrating the
location of the events and noted that most are within walking
distance.
10:38:16 AM
MR. BURKHEIMER, in conclusion, encouraged the committees to
search the PNWER website for further information on the
Olympics.
CHAIR MCGUIRE advised the committees that at the February 22
event, Alaska will have a featured area at which to display job
opportunities and tourism information on Alaska. She
highlighted that Alaska may have the highest percentage of
athletes from any one state in the U.S. participating in the
Winter Olympics.
10:39:31 AM
The committees took an at-ease from 10:39 a.m. to 10:43 a.m.
10:43:54 AM
CHAIR MCGUIRE then announced that the committee would hear a
presentation regarding the Alberta oil sands.
10:44:18 AM
RICHARD MARZ, Member, Legislative Assembly of Alberta, began by
stating that the oil sands of Alberta are very important to
Alberta. However, he also pointed out that the oil sands are a
resource that produces jobs throughout Canada and North America.
10:44:58 AM
MICHAEL PADUA, Alberta Ministry of International and
Intergovernmental Relations, Government of Alberta, informed the
committee that although he would be referring to the slide
presentation entitled "Alberta's Oil Sands," he would move
through the slides in a slightly different order than the
printed version. He explained that the oil sands are a
naturally occurring mixture of sand, water, and bitumen.
Bitumen is a very heavy form of oil. In fact, it takes about
two tons of bitumen to produce one barrel of oil. The oil sands
formation slopes upward from underground and reaches the surface
close to the town of Fort McMurray. From that point, the oil
sands are extracted, diluted, and piped to other parts of the
province or the U.S. for upgrade to synthetic crude oil. The
resource has been known about for years, but the technology to
utilize the resource has only recently been developed. Mr.
Padua noted that oil sands exist in other parts of the world,
but they're not being developed yet. The method of extraction
for oil sands, he explained, depends upon the depth of the
deposit. At depths of less than 245 feet, the extraction method
is open pit mining, and therefore the operation is similar to
those for coal, gold, or copper. The sand is extracted and
trucked to facilities where the oil sands are mixed with hot
water and the bitumen melts out. Then the bitumen is
centrifuged and extracted. He shared photographs of the large
equipment used to extract and transport the oil sands and
reviewed the costs of maintaining the equipment.
MR. PADUA related that although the most attention has been
given to the surface mining operations, it isn't the majority of
the resource. The majority of the resource, 80 percent, is too
deep for surface mining. Therefore, technologies have been
developed to access the resources too deep to surface mine,
which is referred to as in-situ mining. He then shared a
photograph of an in-situ mining site, which illustrates a
smaller environmental footprint. The smaller environmental
footprint results in the land being reclaimed much sooner.
Moreover, in-situ mining doesn't create tailings ponds like
those created with surface mining. Currently, the technology
used to extract the bitumen from underground is referred to as
steam assisted gravity drainage (SAGD) in which two parallel
wells are drilled 10 feet apart and drilled horizontally through
the formation. Super heated steam is pumped into the top well,
which melts the bitumen underground that flows down through
gravity and sucked through the bottom pipe.
10:49:40 AM
SENATOR WIELECHOWSKI inquired as to the cost differential
between in-situ and strip mining.
MR. PADUA said that the costs are probably fairly similar.
SENATOR WIELECHOWSKI then inquired as to why the in-situ mining
isn't being pursued since there is such an outcry and concern
surrounding strip mining.
MR. PADUA answered that it's definitely heading toward in-situ
mining. He estimated that at this point about 40 percent of the
resource is being extracted by in-situ mining. He then opined
that the future lies with in-situ mining.
MR. MARZ, to provide a point of reference, offered that the open
pit mine is comparable to the size of Toronto.
10:50:33 AM
SENATOR FRENCH inquired as to the relative energy differences
between in-situ and open pit mining, specifically which type of
mining requires more natural gas to operate.
MR. PADUA said that the energy use is probably about the same
because either way the bitumen has to be melted off. With the
open pit mining, trucks transport and dump the oil sands in vats
of heated water. The water is heated via natural gas. With the
in-situ mining, steam is being created and pumped underground.
He then informed the committee that there is experimentation of
other methods for in-situ mining because burning natural gas is
expensive for the producers; it's likely their biggest cost.
The alternative technologies being reviewed use solvents or pump
oxygen into the top hole, ignite the bitumen, and the burning
bitumen melts the surrounding bitumen. There are pilot projects
to determine whether the latter is a plausible alternative to
burning natural gas.
10:51:48 AM
SENATOR WIELECHOWSKI inquired as to the amount of thousand cubic
feet (mcf) it would take to create one barrel of oil.
MR. PADUA said he will address that in his presentation as well
as carbon capture.
10:52:15 AM
MR. PADUA, returning to his presentation, directed the
committees' attention to a map, entitled "Oil Sands - Alaska
Comparison," of the physical location of the oil sands. The oil
sands deposits underlay about 55,000 square miles, which is
about the size of Florida. However, he clarified that the
actual size of the disturbed land is a hole the size of the
Kennedy Space Center. The map illustrates the portion that
would be surface minable while the remainder would be in-situ
mining. He noted that about 205 miles is the part that is
actually being disturbed at the surface. Mr. Padua acknowledged
that it's more expensive and troublesome to extract the oil
sands than to extract conventional oil. However, the Alberta
oil sands contain 1.7 trillion barrels of bitumen in place and
the recoverable amount is about 170 billion barrels. The amount
of recoverable barrels places Canada in second place in
international oil reserves, when it was recognized a couple of
years ago. He noted that as conditions change, the amount of
recoverable oil from the oil sands may increase. As illustrated
on the slide entitled "World Oil Reserves - Top 18 Comparison,"
conventional oil makes up only a small portion of Canada's total
reserves, while the vast majority of it is oil sands. Mr. Padua
then referred to the chart on the slide entitled "Alberta Crude
- Future Production." The chart illustrates that conventional
oil production has been declining, while oil sands production is
increasing. He estimated that oil sands production will double
in the next five years. In 2007 total production for Alberta
was 1.9 million barrels per day, which included conventional and
oil sands. The total production for Alberta is expected to
reach 3.4 million barrels per day by 2017.
10:55:37 AM
REPRESENTATIVE NEUMAN emphasized that when one discusses carbon
reductions and taxes on carbon emissions, it's a global
situation. Canada has realized the aforementioned and has used
its funds to ensure that it's economical 10 years down the road.
MR. PADUA related that the emissions per barrel from the oil
sands are being reduced while the production is increasing.
Therefore, total emissions from the province are theoretically
increasing because of increased production. To stop that
production would eliminate economic growth anywhere because it
will always be accompanied by increasing green house gas (GHG)
emissions. The question becomes what can be done about [GHG
emissions], which is under review, he said.
10:56:59 AM
SENATOR FRENCH, referring to the slide entitled "Alberta Crude -
Future Production," inquired as to which of the oil from the oil
sands is in the synthetic crude oil and which is in the non
upgraded bitumen.
MR. PADUA clarified that both synthetic crude oil and non
upgraded bitumen are oil sands production. He explained that
synthetic crude oil is oil sands that have been upgraded to be
the same as crude oil, and therefore can be shipped to regular
refineries. The non upgraded bitumen is diluted oil sands. He
related that Alberta doesn't have the capacity to upgrade all
the non upgraded bitumen to synthetic crude, and therefore some
of that will be shipped to the U.S. to facilities that will
upgrade it.
10:58:14 AM
CHAIR MCGUIRE mentioned that she, Senator Wielechowski, and
Representative Neuman have reviewed some of the processes used
to convert coal and natural gases to synthetic crude. She
inquired as to the properties of the synthetic crude oil [from
the oil sands] and indicated her understanding that synthetic
crude oil is cleaner burning and has a higher commodity value.
She asked if that's similar [with the synthetic crude oil from
the oil sands].
MR. PADUA related his understanding that the synthetic crude is
actually "sweeter" since the sulfur content has been extracted
at the oil sands point. Therefore, the crude has a lower sulfur
content at the refineries when the crude is being mixed with
higher sulfur content resources.
10:58:59 AM
SENATOR WIELECHOWSKI inquired as to the rough breakeven point
with the synthetic crude oil.
MR. PADUA answered that it varies over time. At one point, the
breakeven point of synthetic crude oil cost about $30 per barrel
to extract the oil sands. However, in the last couple of years
the aforementioned increased to about $70 per barrel, which he
attributed mainly to an increase in labor costs due to a
shortage in labor. He noted that many factors are part of the
breakeven point, including the price of steel. He estimated
that the current breakeven cost of synthetic crude oil to be
about $50 or so per barrel, although it would depend upon each
facility.
11:00:03 AM
MR. PADUA, returning to his presentation, informed the committee
that there are 91 oil sands projects of which four are open pit
mines and the remaining are in-situ mines. He further informed
the committee that $150 billion was invested in these projects
as well as related projects, such as the upgraders, between 2000
and 2008. Another $142 billion has been invested in the last
two years for projects currently under development or projects
that will be completed in the next two years. Therefore, the
total amount of investments in the last 10 years is $300
billion.
11:00:36 AM
REPRESENTATIVE RAMRAS inquired as to the fiscal terms and the
certainty surrounding those terms. He further inquired as to
whether the prevailing tax regime has been in place and whether
the $150 billion investment was made incrementally over time.
He also inquired as to how the taxation issues have been
addressed. He then asked who the major producers of the
resource are.
MR. PADUA related that originally the oil sands were developed
with slightly better terms than for conventional oil in order to
encourage the initial investment. However, once the projects
break even, they are on similar terms for royalty as
conventional oil. The major players include Syncrude, Suncor
Energy, Shell Canada, as well as some smaller companies that are
beginning to explore. He offered to provide further
information.
11:01:58 AM
MR. PADUA, returning to his presentation, turned to the economic
impact of the oil sands. He noted that although the oil sands
are located in northern Alberta, the material and manpower comes
from other places. In fact, the Cambridge Energy Research
Associates (CERA) confirms that spinoffs of the oil sands had an
economic impact of $30 billion internationally to the year 2008.
Given Canada's trade patterns, he suggested that most of that
was spinoff to the U.S. Furthermore, the Canadian Energy
Research Institute (CERI) projects $1.7 trillion in economic
impact from the oil sands into the Canadian economy, which
includes $167 billion in federal tax revenue of which $85
billion will go to the Alberta government and $19 billion to
other provincial governments. The CERI also released a report
in October regarding the spinoff, specifically in the U.S.
economy. Because of increased demand for U.S. goods and
services from the oil sands, the U.S. gross domestic product
(GDP) will increase by $34 billion in 2015, $40 billion in 2020,
and $42 billion in 2025. He then directed attention to the
slide entitled "Impacts of Alberta Oil Sands Development on the
US Economy" regarding the impact in employment. He highlighted
that from 2011-2015 there was 343 thousand person year of
employment with declining numbers in the years after that. In
regard to Alaska specifically, Mr. Padua referred to the two
slides entitled "Impact of Alberta Oil Sands Development on the
Alaska Economy." These slides relate that the impact of the
Alberta oil sands development on the Alaska economy to 2025 is
an increase of $82 million to the state's GDP.
11:03:52 AM
SENATOR FRENCH inquired as to which Alaska companies would
benefit.
MR. PADUA clarified that the benefit is from increased overall
consumption. In many cases, there could be a specific Alaska
company that produces specific equipment that's used in the oil
sands. In other cases, the benefit is the result of gaining
employment in the oil sands that allows them to take a cruise to
Alaska or to increase the consumption of Alaska seafood. He
acknowledged that these spinoffs aren't only in the oil and gas
sector. In further response to Senator French, Mr. Padua
specified that CERI developed the aforementioned figures.
11:04:59 AM
REPRESENTATIVE NEUMAN asked if that change in value added GDP
assumes that Alaska will follow the pace and path of Alberta
with carbon capture and sequestration.
MR. PADUA related his understanding that the calculation [of the
increase in Alaska's GDP] was calculated using GDP input output
tables as they have used in the past. Therefore, the
calculation assumes the continuation of conditions as they have
been over the last couple of years. He explained that the GDP
multipliers are reviewed and the associations when there was
increase in the GDP in one location and the spillover in other
locations, such as with extra investment and extra creation of
jobs.
REPRESENTATIVE NEUMAN surmised then that Alaska might learn from
Alberta in regard to the value added/synthesis processing.
MR. PADUA noted that the aforementioned wouldn't be counted in
these figures. The figures are merely increased consumption in
Alberta of the type of products and services that are produced
in each of the states. He offered to share the report with
those who are interested.
11:07:15 AM
MR. PADUA, returning to the slides entitled "Impact of Alberta
Oil Sands Development on the Alaska Economy," highlighted the
person years of employment created in Alaska due to oil sands
development. Although the economic impacts are the main reason
the oil sands are strategic for Alberta as well as the entire
continent, continental energy security is another top factor.
Of the companies listed on the slide entitled "World Oil
Reserves - Top 18 Comparison," there aren't many friendly and
open faces on the list. Furthermore, only 13 percent of the
world's oil reserves are accessible to international oil
companies, of which half are in the Alberta oil sands.
Therefore, there are opportunities with the Alberta oil sands
that just don't exist with say Saudi Arabia oil. He then
directed attention to the slide entitled "US Sources of Crude
Oil," which illustrates that Canada is the largest supplier of
oil to the U.S. As oil sands production increases, Alberta will
become the most important source of foreign oil to the U.S. In
terms of Alberta's regulatory framework, the resource is owned
by Albertans, but developed by the private sector that pays
royalties for what is extracted. There is a comprehensive
regulatory regime, both provincially and federally for
environmental impacts. Mr. Padua pointed out the map on the
slide entitled "Crude Oil Pipeline Proposals" illustrates
current and planned network of pipelines leading out of Alberta.
He highlighted the line specifying the oil that will travel to
the West Coast. Currently, practically all of Alberta's oil and
natural gas exports are to the U.S., but the line [to the West
Coast] provides the potential for export to Asia.
11:09:53 AM
MR. PADUA said that although the oil sands have been known about
for some time, technological developments have allowed for the
capitalization of the oil sands. He then highlighted the chart
on the second slide entitled "Technology and Innovation are
Key," which charts Alberta's public investments in research and
development in oil sands and heavy oil. The $850 million
investment for the 2008-2012 timeframe allows Alberta to carry
on a lot of research and become a leader in oil sands, heavy
oil, coal gasification, carbon capture and storage, and water
use and management around the oil sands.
11:10:34 AM
CHAIR RAMRAS mentioned that Alaska is dabbling in government
subsidies to induce gas pipeline development. In doing so, when
the state develops proprietary work, he questioned how the state
would recover its costs and share it with the producers.
MR. PADUA opined that this type of research is being performed
in universities, which have their own commercialization
policies.
11:11:20 AM
MR. PADUA, continuing with his presentation, announced that he
would now discuss GHG emissions. He pointed out that there have
been many attempts in the media to target the oil sands as the
largest threat for GHG emissions in the world. However, as
related on the slide entitled "Oil Sands and GHGs," the oil
sands produce 5 percent of Canada's GHG emissions and Canada
produces 2 percent of the world's GHG emissions. Therefore, the
oil sands are contributing one-tenth of 1 percent of the world's
GHG emissions. Obviously, the problem is there, but shutting
down the oil sands would make no difference in terms of global
GHG emissions. He highlighted that GHG emissions per barrel of
oil have been reduced by about one-third since 1990. In fact,
some facilities have achieved reductions as high as 45 percent
per barrel. Mr. Padua echoed his earlier comments that burning
natural gas is expensive and they have every incentive to try
and cut those costs, which would also reduce the GHG emissions.
He then directed attention to the slide entitled "Canada and the
U.S. -- a shared challenge," which illustrates a comparison of
GHG emissions from the oil sands versus other U.S. sources of
crude oil. Often, it's said that the oil sands produce 3-5
times more GHG emissions than other sources of oil. However,
that's when one views only the extraction portion. He
acknowledged that extracting the oil sands is 3-5 times more
carbon intensive than extracting Saudi Arabian oil. Still, one
must realize that the Saudi Arabian oil has to be transported
from Saudi Arabia to the U.S. The aforementioned transport
occurs via tanker while the oil sands can be piped via pipeline,
which is more GHG efficient. [Referring to the slide entitled
"Life Cycle GHG Emissions of Crude Oil"] said that the blue
section reflects the bulk of emissions, which is produced when
oil/gasoline is burned by an automobile. The aforementioned
emissions are equal for every source. The [yellow] bar is the
differential between the other sources, which is extraction,
transportation, refining costs, et cetera. On the whole,
Alberta's oil sands produce between 5-16 percent more GHG
emissions than other U.S. sources of crude, wells to wheel.
MR. PADUA reviewed a scenario in which the Alberta oil sands are
shut down. He reminded the committee that the oil sands are 5
percent of Canada's production of GHG emissions and Canada
produces 2 percent of the world's GHG emissions. If nothing is
done on the demand side, the oil from the oil sands would have
to be replaced with oil from elsewhere. Therefore, he
calculated that shutting down the oil sands would result in
declining world GHG emissions of .03 percent. He acknowledged
that the oil sands have a slightly higher environmental impact
in terms of GHG emissions. However, those U.S. jurisdictions
that are considering low carbon fuel standards might want to
consider whether national security outweighs that .03 percent
difference in world GHG emissions.
11:15:29 AM
SENATOR FRENCH asked if there's a slide for U.S. produced crude
oil.
MR. PADUA said that the presentation does include a couple such
slides. He then related concern with California, which has
introduced low carbon fuel standards that aren't based in
science. California deducts its heavy oil from its fuel
standards while including the oil sands without any
justification, in terms of GHG emission. Furthermore,
California's heavy oil produces more GHG emissions than oil sand
imports do, in many cases.
11:16:30 AM
MR. PADUA, continuing on the topic of GHG emissions, specified
that the problem isn't really oil, but rather is coal-fired
power plants. Referring to the slide entitled "Canada and the
U.S. -- a shared challenge," pointed out that the blue circle
represents GHG emissions from the oil sands; the yellow circles
represent coal-fired plants. In Alberta alone, coal-fired
plants produce more GHG emissions than the entire oil sands
operations. The aforementioned doesn't even consider the many
red circles on the map that represent the coal-fired power plant
GHG emissions in the U.S. Therefore, addressing the GHG
emissions from the oil sands, but not addressing the coal-fired
power plant GHG emissions does nothing to reduce GHG emissions
worldwide. To address the GHG emissions from the coal-fired
power plants in the U.S., Mr. Padua proposed capturing and
storing those GHG emissions. He then directed attention to the
slide entitled "Confronting Global Issues: Alberta's Climate
Change Plan (2008)," which relates Alberta's plan for GHG
reduction between 2010 and 2050. The reductions are in the
following three components: conservation and energy efficiency,
greening production, and carbon capture and storage. He
informed the committee that Alberta was the first jurisdiction
in North America to introduce carbon pricing, which applies to
those large facilities that release over 100,000 tons of CO per
2
year. That's 100 facilities that compose 50 percent of
Alberta's CO emissions. In the two years this project has been
2
in place, there has been 10 mega tons of actual emissions and
$123 million has been put toward a fund that can be used for
investment in greening energy production, efficiency, and carbon
storage.
11:18:26 AM
SENATOR FRENCH surmised then that the $123 million is generated
from the price placed on the carbon emissions, and therefore
it's coming from producers.
MR. PADUA replied yes, adding that it's being generated by the
producers within the province.
CHAIR MCGUIRE expressed excitement regarding the possibility of
pairing hydrocarbon development with carbon capture and
sequestration technology that's available to grow an energy
economy that's clean, safe, and located on free soil.
11:19:26 AM
SENATOR WIELECHOWSKI inquired as to the status of exploration in
Alberta.
MR. PADUA answered that exploration on the oil sands is
increasing while it's decreasing for conventional [oil]. He
then reviewed the process with carbon capture in which the COis
2
taken from large points of production, particularly coal-fired
power plants, and is transported by pipeline, pumped underground
into the same formations where the hydrocarbons were extracted.
The advantage of pumping into the depleted formations is that it
releases a fair amount of extra oil as the COis being
2
sequestered there permanently.
MR. MARZ interjected that the [sequestration of the CO]replaces
2
water in some of the wells that are currently in use.
SENATOR WIELECHOWSKI asked if the CO could be used to achieve
2
enhanced oil recovery of the heavy oil as well.
MR. PADUA replied yes, but clarified that would be the case for
heavy oil deposits not in the oil sands.
CHAIR MCGUIRE noted that Alaska is struggling with the heavy
viscous oils in Prudhoe Bay, and therefore it's appropriate to
continue to review ways in which the carbon can help lift out
heavy oils.
11:21:23 AM
SENATOR FRENCH remarked that Mr. Padua is likely aware of the
one area of resistance to the natural gas pipeline, which is
that it will only fuel more development in Alberta and increase
the world's woes with regard to carbon. Senator French opined
that major steps in the right direction are being made, and
therefore he asked if Alberta is receiving any credit or support
from environmental groups.
MR. PADUA said it would be nice to have such support. He noted
that an entity called the Aspen Foundation gave an award to the
province for its work on carbon capture. He offered to find out
more about the Aspen Foundation. Mr. Padua agreed that it's
unfortunate that the Alberta oil sands are being targeted as a
global-sized disaster, in terms of GHG emissions. He
highlighted that the Alberta government has put forward $2
billion for carbon capture and storage research. Four pilot
projects have been announced and if the technology works, they
can be applied worldwide. [As specified on the slides entitled
"CCS Commercial Scale Projects"], the pilot projects are at an
ungrader refinery facility, a coal-fired power plant, converting
coal to synthetic gas underground and then injecting carbon, and
a pipeline network that will connect the sources of carbon.
11:25:08 AM
CHAIR MCGUIRE highlighted that for the Swan Hills project, which
aims to convert coal into synthetic gas for low-emissions
electricity and carbon capture for use in enhanced oil recovery,
the Alberta government has committed $285 million. She asked if
there is a private sector partner for the Swan Hills project.
MR. PADUA specified that the actual generator itself is the
private sector partner. He explained that the government isn't
providing funding until the contract specifying what will be
developed is written. He anticipated that the aforementioned
will occur in the next couple of months.
CHAIR MCGUIRE asked whether the government is providing the
capital infrastructure or providing a match.
MR. PADUA offered to find out for the committees.
CHAIR MCGUIRE said such information would be helpful as she and
others review where it's appropriate for the government to be a
partner in energy projects, particularly in innovative
situations such as with in-situ mining and carbon capture
sequestration. She also expressed interest in incentives that
Alberta has done through policy to incentivize the private
sector to enter some of these large projects.
MR. MORRISON interjected that there will be presentations at an
upcoming PNWER summit on this matter.
11:27:13 AM
MR. MARZ pointed out that the federal government is also
contributing a portion, $63 million, for the Alberta Carbon
Trunk Line.
CHAIR MCGUIRE asked if the aforementioned funds are through
Canada's federal stimulus package.
MR. PADUA answered that those funds are separate from the
stimulus and are from the environmental funds.
CHAIR MCGUIRE reiterated her interest in understanding where the
government is involved in the four CCS commercial scale
projects.
11:28:16 AM
MR. PADUA, returning to his presentation and the slide entitled
"Responsible Water Use," turned the topic of water usage. He
informed the committees that it takes two to five barrels of
water to produce a barrel of oil sands oil. He noted that 90
percent of that [water] is recycled. Although the water being
used is from the Athabasca River, there are strict limits in
place. Although the limit is 3 percent of the average annual
water flow, in 2008 only .06 percent was drawn. As with carbon
emissions, the operations are becoming more efficient. Although
water usage has been reduced by 40 percent between 2002 and
2007, bitumen production increased by almost 50 percent.
Referring to the slide entitled "Tailings Pond Management," he
explained that the tailings ponds are necessary to filter the
solids from the water. The water on top is reused multiple
times to get the solids to settle out. The solids contain
toxins that are already present in the ground, but they become
more concentrated. Historically, it has taken large mining
operations up to 40 years to settle out the solids. However,
last month Suncor announced that it has developed new technology
that reduces reclaiming tailings ponds to seven years. He noted
that the in-situ projects don't produce tailings ponds. The
goal is to reclaim all of the land impacted by the oil sands to
its natural state, including the pit mines. To that end, all
the sand is stored for use to refill the pit upon conclusion of
the project. In order to ensure the aforementioned, a security
bond has to be provided by the mining companies. Currently, the
reclamation security bond holds $828 million to ensure
reclamation of the land to its natural state. The first
reclamation was issued in 2008 to Syncrude for 257 acres.
11:30:38 AM
CHAIR RAMRAS commented that he was struck by the magnificent way
in which Alberta has managed its resources, from which Alaska
should learn. He said he was also struck by the difference
between the posture of an expanding oil and hydrocarbon province
and a province, Alaska, which is in decline. Alaska, he opined,
needs a significant paradigm shift from its defensive posture.
11:31:44 AM
CHAIR MCGUIRE mentioned her wish to have more time because
Alaska seems to have much in common with Alberta. She pointed
out that Alberta has travelled on the same journey on which
Alaska is embarking, that is revisiting oil and gas taxes.
Alberta had some of the most attractive oil taxes in the world,
went to higher taxes, and now is shifting back. Finding balance
between incentivizing industry and growing jobs is a challenge,
she opined.
MR. MARZ noted that Alberta's change in royalty structure was
done with much support from the electorate. However, the
economic climate can change, which can change the electorate's
view. Therefore, Alberta has had to review the unintended
consequences [of its royalty policy]. He agreed that finding
the aforementioned balance is a difficult challenge, although he
felt that Alberta is close. He noted that the sliding scale
structure that is in place results in the citizens take
increasing as prices rise and vice versa. Therefore, with the
new structure and the recession many companies were actually
receiving more than before.
CHAIR MCGUIRE pointed out that Alaska has a similar tax system
to that of Alberta. She recalled past discussions with Alberta.
11:34:27 AM
REPRESENTATIVE NEUMAN, recalling Senator French's comments
regarding environmental concerns, pointed out that when
synthesis fuels are created coal is being used for indirect and
direct processes. He further pointed out that the U.S.
Department of Environmental Conservation (DEC) classifies
[synthesis fuels] as biodegradable because there are no
aromatics, sulfurs, and most of the carbon has been removed.
Therefore, any spills don't hurt the environment since it's a
biodegradable product.
11:35:32 AM
CHAIR MCGUIRE remarked that perhaps the PNWER conference should
hold a work shop on the various types of transportation fuels,
which countries are using them, and how Alaska could grow that
market.
11:36:06 AM
MR. MARZ related that development is expanding outside of
Alberta into Saskatchewan. "As you can see by the slides, it's
just not oil sands or Canadian oil sands, it's North American
job sands," he highlighted.
11:36:45 AM
CHAIR MCGUIRE thanked the presenters for taking the time to come
before the committees.
11:36:58 AM
ADJOURNMENT
There being no further business before the committees, the joint
meeting between the House Special Committee on Economic
Development, International Trade and Tourism and the Senate
Special Committee on World Trade and State/Federal Regulations
was adjourned at 11:36 a.m.
| Document Name | Date/Time | Subjects |
|---|