[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

THE AMERICAN ENERGY INITIATIVE, PART 17: A FOCUS ON THE FUTURE OF
ENERGY TECHNOLOGY WITH AN EMPHASIS ON CANADIAN OIL SANDS

=======================================================================

HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND POWER

OF THE

COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

__________

MARCH 20, 2012

__________

Serial No. 112-128

Printed for the use of the Committee on Energy and Commerce

energycommerce.house.gov

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COMMITTEE ON ENERGY AND COMMERCE

FRED UPTON, Michigan
Chairman

JOE BARTON, Texas HENRY A. WAXMAN, California
Chairman Emeritus Ranking Member
CLIFF STEARNS, Florida JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania EDOLPHUS TOWNS, New York
MARY BONO MACK, California FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina GENE GREEN, Texas
Vice Chairman DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma LOIS CAPPS, California
TIM MURPHY, Pennsylvania MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California TAMMY BALDWIN, Wisconsin
CHARLES F. BASS, New Hampshire MIKE ROSS, Arkansas
PHIL GINGREY, Georgia JIM MATHESON, Utah
STEVE SCALISE, Louisiana G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington DORIS O. MATSUI, California
GREGG HARPER, Mississippi DONNA M. CHRISTENSEN, Virgin
LEONARD LANCE, New Jersey Islands
BILL CASSIDY, Louisiana KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky JOHN P. SARBANES, Maryland
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

7_____

Subcommittee on Energy and Power

ED WHITFIELD, Kentucky
Chairman
JOHN SULLIVAN, Oklahoma BOBBY L. RUSH, Illinois
Vice Chairman Ranking Member
JOHN SHIMKUS, Illinois KATHY CASTOR, Florida
GREG WALDEN, Oregon JOHN P. SARBANES, Maryland
LEE TERRY, Nebraska JOHN D. DINGELL, Michigan
MICHAEL C. BURGESS, Texas EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California ELIOT L. ENGEL, New York
STEVE SCALISE, Louisiana GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington LOIS CAPPS, California
PETE OLSON, Texas MICHAEL F. DOYLE, Pennsylvania
DAVID B. McKINLEY, West Virginia CHARLES A. GONZALEZ, Texas
CORY GARDNER, Colorado HENRY A. WAXMAN, California (ex
MIKE POMPEO, Kansas officio)
H. MORGAN GRIFFITH, Virginia
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

(ii)
C O N T E N T S

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Page
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 1
Prepared statement........................................... 3
Hon. Kathy Castor, a Representative in Congress from the State of
Florida, opening statement..................................... 5
Hon. John Shimkus, a Representative in Congress from the State of
Illinois, opening statement.................................... 6
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 7
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, prepared statement................................... 191

Witnesses

Eddy Isaacs, Chief Executive Officer, Alberta Innovates--Energy
and Environment Solutions...................................... 9
Prepared statement........................................... 12
Anton R. Dammer, Former Director, Naval Oil Shale Reserves,
Department of Energy........................................... 19
Prepared statement........................................... 21
John Nenniger, Chief Executive Officer, N-Solv Corporation....... 39
Prepared statement........................................... 41
William McCaffrey, President and Chief Executive Officer, MEG
Energy Corporation............................................. 54
Prepared statement........................................... 56
Final Report, dated October 2009, ``The Impacts of Canadian
Oil Sands Development on the United States' Economy,''
Canadian Energy Research Institute......................... 68
Report, dated July 2009, ``Life Cycle Assessment Comparison
of North American and Imported Crudes,'' Alberta Energy
Research Institute \1\.....................................
Murray D. Smith, President, Murray Smith and Associates.......... 122
Prepared statement........................................... 125
Simon Dyer, Policy Director, The Pembina Institute............... 132
Prepared statement........................................... 135
Melina Laboucan-Massimo, Climate and Energy Campaigner,
Greenpeace Canada.............................................. 162
Prepared statement........................................... 164

Submitted Material

Statement, dated March 29, 2012, of the Canadian Association of
Petroleum Producers, submitted by Mr. Shimkus.................. 192

----------
\1\ The report is available at http://www.eipa.alberta.ca/media/
39640/life%20cycle%20analysis%20jacobs%20final%20report.pdf.

THE AMERICAN ENERGY INITIATIVE, PART 17: A FOCUS ON THE FUTURE OF
ENERGY TECHNOLOGY WITH AN EMPHASIS ON CANADIAN OIL SANDS

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TUESDAY, MARCH 20, 2012

House of Representatives,
Subcommittee on Energy and Power,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:04 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Ed
Whitfield (chairman of the subcommittee) presiding.
Members present: Representatives Whitfield, Shimkus, Terry,
Bilbray, Scalise, McMorris Rodgers, Olson, McKinley, Gardner,
Pompeo, Griffith, Castor, Engel, Green, and Waxman (ex
officio).
Staff present: Charlotte Baker, Press Secretary; Michael
Beckerman, Deputy Staff Director; Maryam Brown, Chief Counsel,
Energy and Power; Allison Busbee, Legislative Clerk; Garrett
Golding, Professional Staff Member, Energy and Power; Cory
Hicks, Policy Coordinator, Energy and Power; Ben Lieberman,
Counsel, Energy and Power; Carly McWilliams, Legislative Clerk;
Phil Barnett, Democratic Staff Director; Caitlin Haberman,
Democratic Policy Analyst; Angela Kordyak, DOE Detailee; and
Alexandra Teitz, Democratic Senior Counsel, Environment and
Energy.

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

Mr. Whitfield. I would like to call this hearing to order
this morning. I might say that this is the 17th day of hearings
that we have had on energy in America.
Frequently, President Obama in his speeches talks about
America having only 2 percent of the world's proven oil
reserves. Today, we are going to discuss how Canada took action
to increase its proven reserves several-fold by allowing the
development of oil sands in Alberta. We know that in Canada and
in the U.S., there have many groups that have opposed
additional oil production in both countries, but Canada faced
that situation and as a result, as I have indicated,
dramatically increased their proven oil reserves.
As a result of that, those of us in America, many of us,
are going to continue to advocate for the Keystone XL Pipeline
Expansion project that could bring an additional 700,000
barrels of oil a day to Midwestern and Gulf Coast refineries
from Canada. The benefits in terms of additional secure oil and
thousands of jobs is simply too important for us to give up on.
I for one would like to see more Canadian oil flowing into
America. I would also like to see the same type of pro-energy
agenda in America that made oil sand production possible in
Canada.
There is a bountiful supply of untapped oil reserves here
in the U.S., but frequently, it is too bottled up with Federal
access restrictions and regulatory red tape. And I believe this
needs to be changed. And the development of oil sands in Canada
provides many lessons for us here in America.
In spite of regulatory obstacles to additional development
and production in the U.S., we do see signs of the can-do
spirit in America. For example, new drilling techniques
pioneered in the U.S. have turned North Dakota into a major
oil-producing State. But that was possible only because it was
developed on private lands, not Federal lands. In the vast
areas of America where we have public lands and oil in these
areas, the Obama administration has been reluctant to give the
go-ahead for additional exploration and production in those
areas.
I am sure the Canadian people care about the environment
every bit as much as we do in America, and they have insisted
all along that oil sands production be done in an
environmentally safe way. We will learn today about the
successful efforts to reduce environmental impacts from oil
sand even as the production of oil sands increases through
technology. The difference is that Canadian regulators seek to
make energy production safe while the Obama administration
regulators often seek to make it impossible to do. That is why
Canada's oil sands is nearly as valuable as an example of
energy policy done right as it is for the oil itself. America
can and must increase its domestic energy production and there
is much that we can learn from the Canadian experience. And I
look forward to the testimony of all of our witnesses today on
that very subject matter.
[The prepared statement of Mr. Whitfield follows:]

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[GRAPHIC] [TIFF OMITTED] T7480.002

Mr. Whitfield. At this time I would like to recognize the
gentlelady from Florida, Ms. Castor, for a 5-minute opening
statement.

OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA

Ms. Castor. Well, thank you, Mr. Chairman. And thank you to
the witnesses who are here today.
Today, we are having a hearing on tar sands and we are
going to hear testimony about how the production and use of tar
sands fuel exacts a very heavy toll on the environment and on
communities, whether it is impacts to water quality or strip
mining or the very serious carbon pollution. This is dirty
stuff. Do we have the technology to address these issues? It is
not clear at this point that we should be going gangbusters,
full speed ahead, until we really can address the economic and
environmental impacts of tar sands.
As one of our witnesses will testify today, from the
production well to the wheels of a car, tar sands fuel is
estimated to generate about 23 percent greater carbon pollution
than conventional oil. These are very serious issues and we
need to get ahead of them and not stick our heads in the sand
so to speak and play ostrich with this. This could be very
beneficial for our energy production strategy, but it can't
come at such a high cost that communities suffer, the
environment suffers, that we pollute our water, we pollute our
air.
One of the worst impacts could be to the climate. And
colleagues, we have a responsibility to understand the impacts
to the world's climate because climate change does threaten our
public health, it threatens our economic security, it threatens
our agricultural production and our national security. Those
are just some of the threats posed by climate change. And in
some ways, this hearing is a first step. We are finally hearing
about how much carbon-intensive tar sands fuel is and we are
hearing about some of the technologies that could be used to
reduce that carbon pollution if we are really serious, if the
United States and Canada are really serious about reducing
those impacts.
There are other very serious issues. I know process isn't
all that exciting, but we need to be mindful that we have very
important pipeline systems all across this country and
throughout Canada and they work well, but what is the
difference here? They have been subjected to appropriate
environmental review and they have been subjected to certain
safety standards. And I am afraid the majority party's push to
override those considerations will eventually come at the
detriment of our communities throughout both countries. So we
have a responsibility to follow the law and not override these
important environmental laws and community safety laws that
every other business has been subjected to.
I am also at a loss frankly that throughout the entire
112th Congress, the majority of this committee has made no
effort to consider a comprehensive energy strategy, one that
puts everything on the table, one that seriously examines the
proper places to invest for a truly diversified energy supply.
Until we do that, these issues will continue to be debated
pipeline by pipeline and coal plant by coal plant and that
really doesn't make sense. It is past time for this committee
to examine these issues with the seriousness they deserve.
I yield back.
Mr. Whitfield. At this time I recognize the gentleman from
Illinois, Mr. Shimkus, for 5 minutes.

OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS

Mr. Shimkus. Thank you, Mr. Chairman. Thanks for calling
the hearing. It is good to continue to talk about energy
security and lower-priced crude oil, lower-priced gasoline,
decrease in our reliance from Iran, decrease in our reliance
from the Strait of Hormuz, countries that dislike us and
looking north to our friends and allies, the Canadians, who I
would make a point that there are no better environmental
stewards than any country on Earth.
And so let me start by--I have got a couple slides based
upon my trip. First, I am going to put up the pipeline issue
that I addressed at a hearing before. Look at all of the
pipelines we have in this country today. Why do we have
pipelines in this country? Because it is the safest, most
secure way to transport liquid product, whether that is crude
oil, refined product. If you have ever been to a refinery, you
don't see trucks going in and out because pipeline is bringing
the crude, pipelines send out the broken up component parts of
the refined product.
In the last hearing we talked about the numerous pipelines
we already have across the Canadian-U.S. border also on the
Mexican border. Next slide.
[Slide.]
Caterpillar, a great U.S. company, one of our largest
exporters, relies on Canadian oil sands mining for building
these great pieces of manufactured--we talk about manufacturing
in this country. That is manufacturing. Our Michelin tires made
in South Carolina, we are proud from Illinois, and I am proud
of Caterpillar and their ability to work in this operation.
Next slide.
[Slide.]
Ford trucks, Ford 150 trucks all over Fort McMurray, that
is at one of the oil sands mining operations, a good American-
made, probably built by United Autoworkers. It is great to see
up there. Next slide.
[Slide.]
Traffic jams, if you have been to Fort McMurray, it is a
little podunk town--well, it was a little podunk town. Now, you
have traffic jams. And if you look to the left, those are two
Harley-Davidson motorcycles, nice to see American-made products
up in Canada. Next slide.
[Slide.]
That is a mining operation, and this is a good point. I
want to put this up because what we are going to hear today is
about a different type of oil sands recovery that creates a
carbon footprint less than the California standards. This is
what you will hear debated. You won't hear anybody talk about
what we are going to hear testimony about. Next slide.
[Slide.]
Another mining operation. I am from mining country in
Illinois. I love surface mining; I love subterranean mining,
good jobs, good salaries, good health benefits. And I think
that is the last slide. I wanted to have an in situ slide but I
think for most people it would be very disappointing. And
hopefully we can get a slide up later on in the questioning
because if you see in situ operation, what are you going to
see? You are going to see a platform, maybe the sides, a
coverage area, maybe three football size long. You are going to
see a couple buildings and you are going to see pipes. That is
all you are going to see. You are not going to see a big
footprint. And you are going to see geothermal applications
that create a smaller carbon footprint.
And I am not a big carbon guy, OK? If you follow my public
testimony and my comments, this climate change thing, pricing
carbon, I am not in that camp. But if you go in that direction,
80 percent of this oil sands recovery can be in situ, and that
is what I hope my colleagues on the other side learn about
today. Two different types of recovering oil sands, mining
operations, in situ. Eighty percent of the oil up there now is
in situ and it is in pipelines and there is no footprint.
So Mr. Chairman, great to have the hearing today. American
jobs, Canadian jobs, third-largest oil reserves on the planet.
To our neighbors and friends, the Canadians, a democratic
country, if you look at the top 10 how many are free capitalist
societies, free market ability to grab crude oil, the oil sands
is one area. We need to work with our allies and friends the
Canadians to recover that. It will decrease our reliance on
imported crude oil and lower our prices.
Thank you. And I yield back my time.
Mr. Whitfield. Thank you, Mr. Shimkus.
At this time, I recognize the gentleman from California,
Mr. Waxman, for 5 minutes.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Waxman. Thank you, Mr. Chairman.
Today's hearing will examine the production of fuel from
tar sands, the technologies used in that process, and the
environmental impacts of tar sands development.
The Republicans and the oil industry will use this
opportunity to call for building the Keystone XL tar sands
pipeline and developing deposits of tar sands and oil shale in
the United States. They will base these recommendations on two
central claims. First, they will say that we can reduce
gasoline prices by expanding production, including developing
unconventional deposits such as tar sands and oil shale in the
United States. And second, they will suggest that the
environmental effects of developing tar sands are not that bad
and getting better. My response is, don't believe them.
Let us consider gas prices. It is a Republican article of
faith that we can drill our way to lower prices at the pump.
But as we heard at the recent hearing on gas prices, if we
increase production, it is easy for OPEC countries to reduce
production by the same amount. That is the definition of a
cartel--a group of entities that coordinates to control prices.
The fact is we are drilling more and prices are still going
up.
U.S. crude oil production is the highest it has been in 8
years, and the U.S. has more oil and gas drilling rigs
operating right now than the rest of the world combined. Net
oil imports as a share of our total consumption declined from
57 percent in 2008 to 45 percent in 2011, the lowest level
since 1995, but prices are still going up.
In fact, Canada is the poster child for the point that more
production will not free us from world oil prices. Canada has
huge tar sands deposits and is developing them at a breakneck
pace. Canada is a net exporter--that means they produce more
oil than they use.
And I want to put up a chart that shows what has happened
since 2000. Canada's production and net exports have increased
steadily for the past 12 years. Canada has increased its crude
oil production by more than 35 percent. Canada is producing so
much oil that it now exports 70 percent of all the oil they
produce.
If everything the Republicans have been telling us is true,
then gasoline prices in Canada should have plummeted over the
last 10 years. But that is not what happened.
Here is another chart I would like to have up. And this
shows the U.S. and Canadian gas prices over that period. As you
can see, U.S. and Canadian gasoline prices track perfectly
because they are both driven by the same thing--world oil
prices. In fact, Canada's gas prices are actually higher than
our prices due to taxes.
More drilling, building a new tar sands pipeline or
developing oil shale has not reduced gasoline prices in Canada
and it won't in the United States either.
But that is not the only fantasy we will hear about today.
We will also hear that the environmental harms from tar sands
production have been minimized and will be solved by
technology. In reality, the tar sands operations have vast and
devastating effects on the land, water, air, and ecosystem.
Canadian tar sands are produced in Alberta's boreal
forests. And the photo I would like to have put up you can see
a pristine area before tar sands production begins. The
landscape is beautiful. The air and water are clean.
In the second photo of which we can put up you can see the
effects of tar sands production. The land has been turned into
an industrial wasteland. The forests have become an open pit
mine. Maybe some of this damage can be avoided. Technology can
reduce environmental impacts. But that won't happen without
stronger government regulation.
I recognize that tar sands holds a large amount of oil. But
it is a resource that should not be exploited without
environmental safeguards that protect that land, water, and
pollution, controls that stop the growing emissions of carbon
and other dangerous gases. Until these problems are addressed,
the oil in the tar sands is best left underground.
Thank you, Mr. Chairman.
Mr. Whitfield. The gentleman's time is expired.
At this time, I would like to introduce the witnesses
testifying this morning. We appreciate all of you being here.
We look forward to your expertise and we anticipate we will
learn a lot from your testimony.
First, we have with us Dr. Eddy Isaacs, CEO, Alberta
Innovates-Energy and Environment Solutions. We have Mr. Anton
Dammer, Former Director, Naval Oil Shale Reserves, U.S.
Department of Energy. We have Dr. John Nenniger, who is
President and CEO of N-Solv Corporation. We have Mr. William
McCaffrey, President and CEO of MEG Energy Company. We have Mr.
Murray D. Smith, who is President of Murray Smith and
Associates. We have Mr. Simon Dyer, who is the Policy Director
for The Pembina Institute. And then we have Ms. Melina
Laboucan-Massimo--I should pat myself on the back--for Climate
& Energy Campaigner, Greenpeace Canada.
So welcome to all of you. I am going to call on each one of
you to give a 5-minute opening statement. And on the front of
the desk there there is a little instrument that will have
different colors on it. It will have green, yellow, and red,
and when it gets to red, that means your time is up. So if you
wouldn't mind looking at that periodically. But each of you
will be given 5 minutes. And Dr. Isaacs, we will begin with
you. So you are recognized for a 5-minute opening statement.

STATEMENTS OF EDDY ISAACS, CHIEF EXECUTIVE OFFICER, ALBERTA
INNOVATES-ENERGY AND ENVIRONMENT SOLUTIONS; ANTON R. DAMMER,
FORMER DIRECTOR, NAVAL OIL SHALE RESERVES, DEPARTMENT OF
ENERGY; JOHN NENNIGER, CHIEF EXECUTIVE OFFICER, N-SOLV
CORPORATION; WILLIAM MCCAFFREY, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, MEG ENERGY CORPORATION; MURRAY D. SMITH, PRESIDENT,
MURRAY SMITH AND ASSOCIATES; SIMON DYER, POLICY DIRECTOR, THE
PEMBINA INSTITUTE; AND MELINA LABOUCAN-MASSIMO, CLIMATE AND
ENERGY CAMPAIGNER, GREENPEACE CANADA

STATEMENT OF EDDY ISAACS

Mr. Isaacs. Thank you very much, Mr. Chairman. And thank
you for the opportunity to address you. I hope that I can add
value to the work of this committee.
I have submitted a short briefing to the committee on what
I wanted to address so I will keep my remarks fairly brief. I
want to introduce my organization, I want to speak to oil sands
technology and the importance of innovation and collaboration,
and finally, how this all ties to energy security.
First, my organization, Alberta Innovates--Energy and
Environment Solutions, we are one of four new provincial
corporations launched by the Alberta Government in January
2010. We serve as the technology arm of the Alberta Government
in Energy and Environment. We are a successor to two previous
organizations stretching over 37 years. These organizations
have been instrumental in creating the climate for commercial
development of the oil sands.
We invest or fund research and technology with industry,
other governments, and international collaborators. U.S.
organizations are major collaborators not only in oil sands but
also in cleaner coal development, in carbon capture, and
renewable energy.
I want to switch now to talk about oil sands technology and
the importance of innovation. Heavy oil and bitumen are found
in many places worldwide. Alberta has the largest global
reserves of these hydrocarbons that are not under the control
of the state. Technology has been critical to the development
of the oil sands resources. Many of the technologies we use
today originated by companies operating on both sides of our
border. The message for extraction--I think it has been
mentioned--are generally mining and in situ. For in situ, we
use in situ for the deeper deposits.
The major innovation in mining has been the development in
the past 10 years of hydro-transport. Instead of using a truck
and shovel, the ore is transported by a pipeline from the mine
face as a slurry with water. The oil separates in transit to
the plant. This method is operated at lower temperature than
conventional extraction, thus reducing energy intensity and
greenhouse gases. With in situ methods, our steam-based
processes, cyclic steam stimulation, similar technology to what
has been pioneered in California in the 1960s; steam-assisted
gravity drainage, which has been only in commercial operation
for the past 10 years.
New technologies are emerging that are poised to
significantly reduce energy intensity, reduce water use and
greenhouse gases. These include steam-solvent hybrid processes
that are being applied at least by one company commercially
today. Use of solvents without steam, you will be hearing about
that from Dr. Nenniger and N-Solv is a good example of this
type of technology. Electric heating and electromagnetic
heating technology is coming into use. Electromagnetic uses
radio frequency to heat the oil in the oil sands. These are
early days for the electromagnetic heating technology which
really does bring the knowhow of the Harris Corporation in
radio communication technology with the reservoir expertise of
oil sands producers and is a great example of cross-border
collaborative effort on a new, innovative, next-generation
technology.
I also want to mention carbon capture and storage and the
several-billion-dollar investments that are being made in four
commercial-sized demonstration projects in Alberta. In addition
to new, transformative technologies there is a critical need to
focus on emerging innovations to decrease the impact of current
technologies on the environment, a good example of the
technology deployment action plan for an end-to-end solution
for oil sand dealings. This project has brought together all of
the oil sands mining companies, the Federal and provincial
government, as well as the key engineering technology providers
working in the area. Not only are there 100 technologies being
evaluate to chart promising pathways, but there is a complete
and open knowledge-sharing of pilots and demonstrations that
have taken place and practices that have taken place for the
past 20 years.
We have had a great deal of success in Alberta from a
strong government-industry partnership based on clear business
case and well articulated implementation strategies. This is
all the formula for success, especially on the environmental
front.
In the resource sector, it takes 20 to 30 years to bring
new technology to market, much longer than in other sectors,
and this increases the risk profile and the financial
commitments required. The role of my organization is to work
with industry to significantly reduce the time lag for
innovation and the risk of adapting new technology, especially
next-generation technology.
And the final point I want to make is about energy
security. Canada and the U.S. are the only developed countries
that can dramatically increase oil production. The chairman
alluded to the fact that not only do we have oil from oil sands
but also increasingly from shale oil reservoirs, the Bakken
type found in North Dakota, Montana, Texas, California, and the
Canadian provinces of Manitoba, Saskatchewan, and Alberta.
Societal expectations are that in considering economic
development, we do what is best for the environment. If we are
to be successful on the environmental front, then technology
will be the key. To put it in the form of a simple equation,
energy security equals energy, economy, environment, and
societal values. In all of these, technology innovation is the
glue and government's role is to create the conditions that
ensure that energy is available, accessible, acceptable and
affordable, or in other words, secure.
Thank you.
[The prepared statement of Mr. Isaacs follows:]

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Mr. Whitfield. Mr. Dammer, you are recognized for 5
minutes.

STATEMENT OF ANTON R. DAMMER

Mr. Dammer. Thank you, Mr. Chairman and members of the
committee. It is a great pleasure and honor to me to share the
podium today with Murray Smith from Canada. I think I am the
only U.S. citizen on the committee today. Murray was a leader
in the orderly and progressive development of the Canadian oil
sands.
Development has enabled Canada to be energy-independent,
the goal that has eluded our country since the 1960s. Today,
Canada is our largest source of imported oil. Canada--Alberta--
has increased their proved reserves of oil to 176 billion
barrels, second only in size to Saudi Arabia. In comparison,
the United States has approximately 22 billion barrels of
proved reserves. We can learn from the development of the
Alberta oil sands development.
The first and perhaps the most important lesson might be to
create a permanent program and decision-making process that
promotes research, technology development, regulatory and
statutory reform, and public education. Oil sands and oil shale
share some distinct physical and developmental characteristics
as both resources are unconventional and both resources are
well defined, airily consolidated, and highly concentrated.
We also share a common beginning. Following the Arab Oil
Embargo, there was a resurgence in interest and purpose in
energy independence in both Canada and the U.S. in 1974. In
1974, the DUI prototype Oil Shale Leasing Program awarded two
leases in Colorado and two in Utah, attracting $681 million in
bonus payment. It seemed that as soon as development gained
momentum, it came to an end in 1982 with the precipitous drop
in oil prices and the realization that prices would not
escalate as originally speculated. Exxon's Colony Project
abruptly closed doors without warning, an event that is
popularly referred to as Black Sunday.
Not until 25 years later, the passage of EPAct '05 did the
U.S. Government demonstrate any appreciable interest in U.S.
oil shale resource. In the Energy Policy Act of 2005, the
President and the Congress of the United States declared that
unconventional fuels, including oil shale ``are strategically
important resources that should be developed to reduce the
growing dependence of the United States on politically and
economically unstable sources of foreign oil.''
Section 369(h) of that Act directed the Secretary of
Energy, in cooperation with the Secretaries of the Interior and
Defense to establish a taskforce to develop a plan to
accelerate the commercial development of strategic
unconventional fuels and initiate partnerships with Alberta and
nations with oil shale resources. The taskforce report with
recommendations was completed and forwarded to the President in
February of 2007. Unlike the Alberta experience, the report was
never implemented, no plan, no policy, no progress.
We are grateful for a strong and reliable trading partner
to our north, but we are still dependent on the import of close
to half of our daily oil requirements. We still consume roughly
a quarter of the world's oil supply and we remain reliant on an
increasingly competitive, unstable, and often hostile world oil
market for our energy security.
The United States is the custodian of the largest and most
concentrated hydrocarbon resource on earth, oil shale.
Conservatively estimated to exceed two trillion barrels, it has
the potential to provide millions of barrels of production per
day if developed in a planned and prudent manner analogous to
the Alberta experience. In the Green River Basin of Colorado
alone, the USGS estimates that 800 million barrels could be
produced, over three times the total reserves of Saudi Arabia.
In spite of lack of national direction in oil shale
development, there remains considerable activity in the private
sector. The activities of 32 companies are summarized in the
report Secure Fuels from Domestic Resources, which is found on
the web.
Great progress has been made in limiting water utilization,
increasing energy return on investment, and minimizing the
environmental impacts historically associated with oil shale
development. As history as proved, the only limitation to
developing oil shale resource in the United States has been,
firstly, economic; and secondly, access to the resource, 80
percent of which is on Federal land. As oil prices range above
$100 per barrel, the economics look increasingly attractive and
the technical evolution of both surface and in situ
technologies are encouraging.
The oil shale moratorium established under the Hoover
administration in 1930 remains in effect. Today, a handful of
oil shale R&D leases have been parsed out by the Department of
Interior. Another programmatic environmental impact statement
has been published and is now in comment, a weak, disjointed,
and affected process, unable to provide industry the surety of
commitment on the part of the government to risk investment of
billions. We need to plan for the development of this prolific
U.S. resource as the Canadians plan for the successful
development of the Athabasca oil sands. We have the mechanism
through Section 369 of EPAct '05. Ironically, failure to
perform the requisite planning and preparedness will inevitably
lead us back to everyone's deepest fear--Black Sunday.
Mr. Chairman and members of the committee, I thank you once
again, and I look forward to working with you in any capacity
in furtherance of national security and preparedness.
[The prepared statement of Mr. Dammer follows:]

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Mr. Whitfield. Thank you.
Dr. Nenniger, you are recognized for 5 minutes.

STATEMENT OF JOHN NENNIGER

Mr. Nenniger. Thank you. Good morning, Chairman Whitfield,
Ranking Member Rush I guess is not here and members of the
committee. I am John Nenniger, CEO of a technology company
called N-Solv. I am a Canadian who has had the great privilege
of earning a doctorate in chemical engineering from MIT. My
energetic and remarkably patient wife is an American citizen,
born and raised in Kentucky, who also has a doctorate in
chemical engineering.
It is a great honor for me to be here today to discuss
solvent-based oil sands extraction. Inexpensive energy is good
for the American economy but the evidence of climate change is
both compelling and terrifying. This is a profound moral
dilemma. I believe that harm reduction is the most pragmatic
option. On the oil sands, this means finding profitable ways to
produce cleaner oil.
The N-Solv extraction process is an underground extraction
process similar to steam except condensing solvent provides the
heat. The N-Solv process produces a more valuable product for a
lower cost because it is energy efficient and it does not use
water. Although our laboratory results are very encouraging, N-
Solv has not yet been tested in a reservoir. In comparison to
steam, N-Solv is expected to reduce energy consumption by 85
percent, reduce well-to-tank greenhouse gases by 205 pounds per
barrel, increase oil value by 23 percent, reduce capital and
operating expenses by 30 percent, double the net back per
barrel, triple the payout. Our field pilot is expected to
produce first oil in April of 2013.
As a scientist, I view extravagant claims with great
skepticism unless they can be supported with compelling
evidence. I don't have time to present our evidence today but
there is more detail in the written handout and on our Web
site. We found that bitumen dissolution into solvent proceeds
in a way that was quite different than what everybody had
thought. Our observations have been independently confirmed by
researchers at a number of different universities. Although
there has been decades of experimental work on solvent, our
results show that the previous interpretation of lab
experiments was incorrect, and consequently, the reservoir
predictions were also incorrect.
We developed a sophisticated apparatus and ran a series of
experiments to measure chamber growth rates. Our experiments
showed we could achieve oil rates at 100 degrees Fahrenheit
that were three times faster than steam at 450 Fahrenheit. To
make sense of our results, we assembled a database of every
solvent experiment in the scientific literature. We were able
to successfully correlate the literature data over a huge range
of conditions and our lab results are exactly in line with the
independent data from the literature. This gives us great
confidence that our spectacular results are real and credible.
It is the early days for N-Solv, so discussion of its
economics are speculative. The commercial advantage comes from
producing a more valuable oil at a lower cost. The oil is more
valuable because it is de-asphalted. On the process capital
cost is cut in half because there is no boiler feed, water
treatment, and no steam generation.
The net back for N-Solv of $52 per barrel is expected to be
almost twice as high as SAGD. The payout ratio, $6 of net back
per dollar of investment is three times higher than SAGD.
Remarkably, we think these numbers are understated. The ability
to operate modest temperature and pressure will help us access
standard bitumen resource that is currently uneconomic,
including the carbonates which contain over 1,000 billion
barrels.
Now, I am going to talk about the environmental benefits.
N-Solv does not use any water. That is a big deal. N-Solv
reduces the energy consumption by 85 percent because the
extraction takes place at 100 Fahrenheit instead of 450. The 85
percent reduction doesn't capture the entire story because the
oil quality makes it easier to upgrade and refine. We are
building a $60 million field pilot to test the N-Solv
technology in a reservoir setting. Suncor Energy has offered to
host the pilot, including building the wells. Hatch has made
major capital investments and is providing the engineering. We
have received financial support from Sustainable Development
Technology Canada. I can't say enough good things about SDTC.
Enbridge Pipelines has also contributed significant capital
towards the pilot.
The final item I want to talk about is safety. Safety is
always at the top of our minds. The science tells us that we
can achieve commercial extraction rates at modest temperatures
and pressures. Over-pressuring the reservoir is both
unnecessary and economically undesirable. If a high temperature
is needed at a lower pressure, the operator can always change
to a more appropriate solvent.
In summary, N-Solv produces a more valuable product at a
lower cost because it is energy efficient and does not use
water. I look forward to your questions and comments. Thank
you.
[The prepared statement of Mr. Nenniger follows:]

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Mr. Whitfield. Thank you very much.
And Mr. McCaffrey, you are recognized for a 5-minute
opening statement.

STATEMENT OF WILLIAM MCCAFFREY

Mr. McCaffrey. Mr. Chairman, Congressmen, thank you very
much for the opportunity to speak today about technology and
the energy industry in Canada.
I am Bill McCaffrey; I am the president and CEO of MEG
Energy, and today I am here representing In situ Oil Sands
Alliance. And this is a group of independent Canadian companies
dedicated to the responsible development of the Canadian oil
sands using in situ technology. The main in situ technology
used today is steam-assisted gravity drainage, or SAGD, as it
is called. And SAGD is important because it is currently the
most common commercially proven--pretty much the only
commercially proven way to reach the deep reservoirs that
contained 80 percent of Canada's total oil sands reserves. And
just to put that into perspective, that represents about 140
billion barrels of reserves, roughly equivalent to the entire
reserves of Iran.
Now SAGD technology is pretty simply, really. It uses
horizontal wells drilled from surface and we drill down to
about 1,000 feet below the Earth's surface. Once we reach the
reservoir and complete the wells, we drill about half a mile
out, inject steam into the reservoir, and bring the heated oil
and the water back to surface without disturbing the forest
floor. And from a well pad a fraction the size of this
building, the subsurface equivalent of 95 NFL football fields
can be accessed. This provides what is among the lowest ratios
of surface disturbance to resource recovery in the oil and gas
industries anywhere in the world. About 90 percent of the water
that is used to create the steam is recycled with the portion
we can't recycle returned to deep, non-potable reservoirs.
There are no tailing ponds created and it is essentially a
closed-loop system.
In going forward, one of the key research and development
focuses is to reduce the amount of energy we need to produce a
barrel of oil. That is critical because of both the emissions
and costs associated with the energy consumption. One of the
technologies we are currently applying alongside of the SAGD is
cogeneration, a very energy-efficient process that produces
both steam for our operations and electricity for the sale to
the grid. And that electricity has a carbon footprint less than
half the Alberta grid average, reducing greenhouse gas
intensities in the province.
And in 2011, just as an example, MEG's cogeneration
contribution alone was equivalent to taking 80,000 cars off the
road. That kind of benefit is continuing to grow as co-gen
replaces legacy plants that have reached the end of their
useful life. In our case, when we factor in the benefits of
cogeneration and efficient steam use, SAGD can produce a barrel
with the wells-to-wheels carbon footprint about 6 percent below
the average U.S. imports.
And as we look to the future, the industries investing in
many other innovative technologies, nearly all of which share
the same common goal--and you will hear that today--is to
improve energy efficiency, it is to drive down emissions, and
it is to increase resource recovery rates. And I underline one
point. SAGD is just 10 years old. It is a young technology. It
has been in commercial operations for about 10 years. But the
point out of it is there remains tremendous opportunity for
innovation to further accelerate the strides that have already
been made.
Looking beyond resource recovery, we are also working with
Canadian and U.S. research groups on technology to customize
our export barrels. The goal is to better align these barrels
with the configurations of U.S. refineries offering significant
improvements in refinery efficiencies and economics and the
jobs that come with them. These technologies can also support
more efficient lifecycle fuel use. For example, barrels can be
tailored to be an ideal feedstock in the creation of ultralow
sulfur diesel, a friendlier fuel option that many U.S.
automakers are now targeting.
Government can have a role in partnering with industry to
encourage technology acceleration, a topic I know several of
the other panelists are talking about here. But I would also
note that the government also has a necessary and a critical
role as a regulator. While still maintaining the highest
standards, we need to streamline the regulatory processes so
that windows of opportunity to invest and innovate are not
missed.
And to conclude, innovation, collaboration, and regulatory
efficiencies are all critical to our economy today and into the
future. With the oil sands industry alone, the prize for the
United States is an increase in goods and services output
projected to reach $45 billion a year by 2035 and the creation
of nearly half a million American jobs in that same time
period.
And finally, I would just argue that it is of our mutual
interest in terms of economic stability, environmental
responsibility, and energy security to work together. The focus
of this committee on harnessing technology to realize these
goals to me is entirely appropriate. And I thank you for the
time today.
[The prepared statement of Mr. McCaffrey follows:]

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[Additional information is available at http://
www.eipa.alberta.ca/media/39640/
life%20cycle%20analysis%20jacobs%20final%20report.pdf.]
Mr. Whitfield. Thank you.
Mr. Smith, you are now recognized for 5 minutes.

STATEMENT OF MURRAY D. SMITH

Mr. Smith. Well, thank you, Chairman Whitfield and members
of the committee. And as Canadians, let me thank you for
holding this hearing in March and not in July or August. It has
been my privilege to serve Albertans as minister of energy,
elected position, from 2001 to 2004. During that time, I was
able to quantify and register the 176 billion barrels of oil
sands resource, proven oil sands resource with the U.S. Energy
Information Agency. This move catapulted Canada's total proven
oil reserves from less than 1.4 percent of the world's supply
to over 15 percent, and we believe, as you have heard, that
there are many more barrels to come and only technology will
unlock this resource.
How did Alberta move from this? We started from scratch,
1967, with a joint government-private sector consortium, and
today's production levels of over 1.7 million barrels today is
a compelling story of human will, initiative, and technology
evolution. And it would not have been possible without
significant contributions from U.S.-based companies. Now,
Alberta owns these resources and manages them on behalf of the
citizens of Alberta. And today, some scant 50 years later, the
oil sands is the largest investible resource in the world today
where private dollars can flow in from private companies into a
jurisdiction that respects property rights and ownerships.
Oil sands projects are carefully regulated on multiple
levels and learning and improving operations all the time.
Mined permits, facilities, must go through extensive review
before approval is granted, and after approval, construction
and fabrication is carefully monitored with annual plans in
development submitted for mandatory approval. As the projects
begin to produce, there is again extensive oversight. There are
no reports of oil spills from oil sands reserves.
As oil is produced and shipped, there are in place numerous
monitoring programs, and today this oil is shipped primarily to
the USA. And a recent EIA report in February showed that retail
gas prices in areas where oil sands oil is delivered to other
regions of the USA, the difference in price is as much as 50
cents per gallon where there has been reports of Alberta oil in
that region. And that is in the EIA report.
Throughout this period, technology innovation and
continuous improvement have been Keystone's and oil sands
development. Government policy including land sales, royalty,
and tax assistance, and in some cases actual funding and
partnership with industry have created a wealth-creating job-
generating engine over many years. In 1993, the oil sands have
moved primarily from the production of two operators and
production was 300,000 barrels a day. Government of Alberta
royalty revenues have been suffering from low commodity prices.
We had a government that had a deficit that exceeded revenue by
some 25 percent, debt levels were approaching 28 billion. We
are 100th the size of this country. Oil sands investors asked
for a level playing field, a generic royalty structure, and an
accelerated tax recognition of their investments. They received
no direct benefits unless they invested their money first. A
tax on machinery and equipment was phased out, royalty
structures became based on a payout period, royalties started
low, and as projects paid out, increased to 25 percent of net
profit.
Today, Mr. Chairman, oil sands royalties exceed those
collected from all our natural gas production and the problems
in Alberta. So with this structure and investment, billions of
dollars poured in. We increased production to 600,000 barrels
per day by the time I got elected in 1993. In 2003, the world
became aware of this resource and it created a stampede of
investment. It created technological innovation that basically
has coined the oil sands as the world's engineering sandbox.
Let me just give you one example. Williams is an active,
respected, midstream gas USA company. They have developed and
deployed a technology that we use as surplus gases emitted from
the coking process that upgrades bitumen to a transferable
form. Now, as the gases are emitted from the coking process,
Williams traps these gases. They then remove the propane,
butane, and higher C5 gases for use in sale later in the gas
stream. They return dry, clean-burning gas back to the coker.
This elegant but simple process now removes over 300,000 tons
of CO2 from the atmosphere each and every year. They have the
potential to put four or more plants in that area resulting in
over some million tons per year in reductions.
So as a former politician, Mr. Chairman, let me just
outline the changes. We balanced our budget in 1995 after
implementing the Oil Sands Royalty Program. All of our
provincial debt was paid off in 2004. We had never increased
taxes. We in fact refunded cash to the citizens of Alberta. We
have doubled the Medical Research Fund. We have doubled the
Alberta Ingenuity Fund, and we have created a sustainability
and capital plan that allowed us to go through the difficult
times of the last 3 years. And then in 2004, the book showed a
stunning $68 billion turnaround from the dismal economic
situation of 1993.
Let me finish, Mr. Chairman, with two quick stories. 2005,
60 Minutes aired a special on the oil sands. A 22-year-old
trucker said he made $120,000 that year. The end of the program
the CBS phone line system was so deluged with calls it crashed.
Over 1,500 Americans ranging from truck drivers to nuclear
engineers phoned in. What did they want? Jobs.
So let me finish with a quote from our great neighbor to
the south, Governor Schweitzer, Brian Schweitzer, who realizes
that production from Alberta will be secure, reliable, non-
geopolitical, reasonably priced energy. And he says, ``I do not
believe that we will ever have to send the National Guard to
Alberta to protect our oil supply.'' Now Alberta is the number
one energy supplier to the USA and the dialogue and the insight
that your wisdom has shown in calling this committee meeting,
Mr. Chairman, that will be gained today is critical to
maintaining that special relationship. Thank you for this
opportunity to serve the House of Representatives.
[The prepared statement of Mr. Smith follows:]

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Mr. Whitfield. Thank you.
Mr. Dyer, you are recognized for 5 minutes.

STATEMENT OF SIMON DYER

Mr. Dyer. Good morning, Mr. Chairman and committee. My name
is Simon Dyer. I am the policy director with the Pembina
Institute based in Alberta, Canada. The Pembina Institute is
Canada's nonprofit sustainable energy think tank. We focus on
energy solutions through research, education, consulting, and
advocacy. We have a long history as the leading independent
expert on oil sands environmental policy and performance. We
have participated in the regulatory process in Alberta for 20
years and we conducted extensive research on policy solutions
to current environmental problems in the oil sands.
The biggest impediment to progress on reducing the
environmental impact of oil sands through the deployment of new
technologies is the lack of regulatory policy to drive improved
performance. All the major environmental accomplishments such
as dealing with acid rain, the hole in the ozone layer, and
removing lead from gasoline were all driven by regulatory
approaches that resulted in increased environmental performance
and technological innovation in the industry. In the oil sands,
however, little attention has been focused on the appropriate
role of government in regulating environmental performance, and
thus, many of the environmental impacts continue to worsen
today.
My comments, due to the short time, will be focused on
greenhouse gas pollution but the same principles apply to other
unresolved environmental impacts such as tailings waste
management, fresh water use, air pollution, and land and
wildlife impacts. Over the last two decades, oil sands
greenhouse gas emissions have more than doubled. In 2009, oil
sands operations in Canada emitted 45 megatons of greenhouse
gases. According to recent projections by the Government of
Canada, this is set to double again by 2020.
What is less well known is that oil sands greenhouse gas
emission intensity--that is how much carbon dioxide per barrel
produced--has actually worsened over the past 6 years. This has
undone some of the improvements in the emissions intensity that
other presenters have mentioned. Improvements since 1990 were
largely driven by one-time changes like switching fuel from
coke to natural gas and by incorporating cogeneration into
projects. The insinuation that these kind of improvements will
continue into the future is not supported by the evidence.
The worsening emission profile of the oil sands can be
attributed to three main issues. Firstly, an increasing
proportion of oil sands production will be coming from in situ
oil sands development, as noted by other speakers here today.
In situ development produces two-and-a-half times more
greenhouse gas emissions per barrel than oil sands mining does.
Secondly, as oil sands development increases, companies are
exploring lower-quality and harder-to-access bitumen resources
and developing these resources means increased environmental
impacts per barrel. Thirdly, the very weak regulatory
environment of the greenhouse gas management in Alberta and
Canada does not require substantial improvements in greenhouse
gas emissions.
As you may know, the Government of Canada has repeatedly
failed to meet its own targets to reduce greenhouse gas
pollution, and the oil sands are the major reason behind this.
While most industries in Canada are holding steady, emissions
in the oil sands continue to rise. A 2010 MIT study quantified
this effect with economic models and concluded that the niche
for the oil sands industry seems fairly narrow and mostly
involves hoping the climate policies will fail. In Canada,
hitting climate targets while the oil sands expand dramatically
would mean asking every other sector in our economy to do more
than their fair share, a prospect that is so unappealing that
every Canadian environment minister to date has opted to miss
their targets instead.
Much attention has been paid to the potential role of
carbon capture and storage, or CCS, in limiting greenhouse
emissions from the oil sands. Indeed, Alberta's climate plan
says CCS alone will account for 70 percent of Alberta's
reductions by 2050. However, there are no operating CCS
projects in the oil sands. One planned integrated project,
Shell's Quest Project, proposes to capture 1.2 million tons of
emissions from the Scotford Upgrader. This project will receive
$865 million in subsidies from the Alberta and Federal
governments.
While in principle, CCS could be applied at different
stages of the oil sands, it is not economic under current
policies. Carbon capture costs for oil sands projects range
from 75 to $230 per ton of carbon dioxide. In Alberta, the
effective carbon price is only $15 per ton of CO2. At this
price level in the absence of further massive public subsidies,
there will be no deployment of CCS in the oil sands beyond
Shell's Quest Project.
Unfortunately, Alberta's climate plan states that 30
megatons of annual reductions will be derived by CCS by 2020,
the equivalent of building 25 Quest-type projects in the next 8
years. Clearly, this is a fiction. For carbon capture to be
economic, governments would either have to implement carbon
prices an order of magnitude higher than they are currently or
mandate carbon capture and storage for the oil sands industry.
In December, Pembina Institute conducted the first
assessment of Alberta's climate plan. We concluded that Alberta
will miss its emissions target by two-thirds. We characterized
Alberta's climate plan as ``a car without an engine,'' as many
of the elements that could be effective but without a
meaningful carbon price, it just won't run. The current
frenzied rate of oil sands development in Canada is a symptom
of our failure to implement policies and regulations to meet
our commitments. Rosy projections of oil sands expansion are
simply mathematically inconsistent with these commitments.
I would like to finally comment on the fact that Pembina
Institute is supportive of voluntary measures in research and
development by oil sands industry. It is important to
distinguish between lab research and small-scale pilot projects
and commercial penetration of new technologies. The commercial
application of new technologies is simply not keeping pace with
this expansion and the vast majority of new production will
rely on conventional more polluting technology. This represents
a significant opportunity lost and can only be addressed
through policy and regulatory intervention.
Thank you very much. I look forward to your questions.
[The prepared statement of Mr. Dyer follows:]

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Mr. Whitfield. And thank you, Mr. Dyer.
And Ms. Laboucan-Massimo, you are recognized for 5 minutes.

STATEMENT OF MELINA LABOUCAN-MASSIMO

Ms. Laboucan-Massimo. Thank you. Good morning, chair and
committee. My name is Melina Laboucan-Massimo. I come from
northern Alberta, Canada. I am a member of the Lubicon Cree
First Nation, which is one of the many communities impacted by
tar sands development.
For those of us in Canada who are experiencing the
detrimental effects of tar sands, it is encouraging to see that
many decision-makers and citizens in the United States are
beginning to ask questions around whether or not the tar sands
are in the right direction and which we should be pursuing in
an already carbon-constrained world. In the past 5 years, I
have worked in communities throughout Albert and British
Columbia that are very concerned about the approval of tar
sands pipelines not only because of potential spills but also
because it will increase pressure for more tar sands expansion
in Alberta.
I personally have felt the impacts of both pipeline spills
and tar sands-driven industrialization of the landscape in the
north. Last spring, I returned home where I was born to witness
the aftermath of one of the largest spills in Alberta's
history, which was 50 percent larger than the oil spill in the
Kalamazoo River in Michigan. What I saw was a landscape forever
changed where my family fished, hunted, and trapped for
generations. Days before the Federal or provincial government
admitted that this had happened, my family was sending me
messages telling me of headaches, burning eyes, nausea, and
dizziness, asking me if I could find out more information as to
if it was an oil spill and how big it might be. This was one of
the saddest and most frustrating points because my family was
not the first, nor the last, to experience these effects. It
was alarming to hear that the first phase of the Keystone had
already leaked and spilled 14 different times in its first 12
months of operation.
Where I come from billions of dollars are taken out of our
traditional territories. Yet, until this day, my family still
has no running water. The indigenous communities have lived in
these regions for thousands of years and yet are being pushed
out, unable to access their traditional territories and unable
to practice their treaty rights due to tar sands expansion.
This is a violation of our constitutionally protected rights
under Section 35 of the Canadian Constitution.
Communities like Fort McKay First Nation can no longer
drink the water from their taps and their children are
developing skin rashes from bathing in this contaminated water.
A cancer study done by Alberta Health Services reveal that
there was a 30 percent increase in the community downstream of
Fort Chipewyan. Leukemias and lymphomas were increased by
three-fold and bile duct cancers increased by seven-fold.
Almost all of the cancer types that were elevated were linked
in scientific literature to chemicals in oil or tar. We have
toxic tailing ponds sitting in the north of Alberta that span
over 170 square kilometers, which is equivalent to 42,000
acres.
This is the reality in Canada. And more specifically, in
Alberta, we have a lax and failing environmental monitor
system, which has little to no enforcement when it comes to the
tar sands. There have been thousands of alleged contraventions,
notifications, and releases with little to no evidence of
enforcement as see in a database from Alberta Environment
Documents, which details incidences of licensed and unlicensed
discharges of pollutants, tailing leaks, chronic acute
pollution incidents, habitat destruction, and failure by
industry to maintain monitoring equipment, pollution and
government documentation of reclamation and chronic lack of
enforcements.
We have endured decades of promises that have taught us
that promises of new technologies that will repair this damage
feel like empty words. The reality is that SAGD solutions
usually move the problem elsewhere such as pumping the toxic
byproduct underground where they can leak into aquifers rather
than storing them in tailing ponds from the mines. Meanwhile,
the scale of production is increasing and the overall programs
are getting worse. We have not yet seen a cumulative
environmental assessment overall in the tar sands and the
government is therefore passing these projects without this
cumulative environmental assessment.
Companies will leave irreparable damage to our lands and
our homes, and the Alberta government claims to reclaim the
land. However, many prominent scientists dispute that this is
possible. Just last week, a report was published in the
proceedings of the National Academy of the Sciences of the
United States of America stating ``any suggestion that oil
sands reclamation will put things back to the way they were is
greenwashing.''
First Nations in British Columbia are also adamant that the
Enbridge pipeline will not be built through their territories.
Over 100 First Nations have signed on to this declaration to
oppose the construction of the Enbridge pipeline and its
associated supertankers on the west coast of Canada and First
Nations are willing to pursue litigation if the Enbridge
pipeline is approved in Canada as they have constitutionally
protected rights under Section 35 of the Canadian Constitution.
If constructed, the Keystone XL would deepen our mutual
addiction to dirty oil and enable the ongoing expansion of the
tar sands at the expense of communities, as well as at the
expense of advancing cleaner energy alternatives. You have a
choice in the direction we are taking in the world. You have
the opportunity to become the world leaders in clean renewable
energy solution that meet our energy needs without undermining
or sacrificing the health of our communities and ecosystems.
Thank you very much.
[The prepared statement of Ms. Laboucan-Massimo follows:]

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Mr. Whitfield. Thank you very much. And thank all of you
for your thoughtful testimony.
And at this time we will have periods of questions for the
panel and I will recognize myself for 5 minutes, and then we
will go to the other members.
First of all, Mr. Smith, you were the minister of energy in
Canada for a number of years, is that correct?
Mr. Smith. That is correct. I was the minister of energy
for the Province of Alberta, which owns the resource and
manages it on behalf of all Albertans.
Mr. Whitfield. And how would you describe the government of
Alberta's approach to leasing land for oil sands development?
Mr. Smith. What happens, Mr. Chairman, is that if there is
no record of development after a lease has been purchased in an
open auction type of format, then that lease reverts back to
the Crown and it is in fact resold. So that way it is a clear
process, it is a transparent process, and it is one that has
been free from corruption for the last 70 years that it has
been in place.
Mr. Whitfield. Well, would you characterize Alberta as
being encouraging development or being an obstacle to
development?
Mr. Smith. Well, I don't think the government that I was
involved with, Mr. Chairman, made any secret out of wanting to
generate employment and create jobs and create prosperity and
wealth for the Province of Alberta. That province, at the time
I was elected at 2.5 million now has 3.7 million people. It has
consistently the lowest unemployment across Canada,
consistently the highest average earnings. The oil sands itself
has created more jobs for aboriginal and First Nations people
in Canada than any other place in Canada today.
The oil sands fall under three areas of the government--
regulator, policymaker, and royalty collector. So you are
always in a dynamic tension of dealing with those three
matters. They are making great progress. I have seen
reclamation of mined sites, Mr. Chairman, where the company
went to the elders of the First Nations, they asked what would
they like in reclamation, and in fact they created a buffalo
herd. That buffalo herd that is on there today has a herd of
about 300 with a 99 percent successful calving rate.
Mr. Whitfield. So if I describe the Alberta area as having
an economic boom since this took place, would that be accurate
or not?
Mr. Smith. Absolutely.
Mr. Whitfield. Accurate, OK. Now, we have had a number of
hearings on Keystone pipeline, and those people who are opposed
to it I think I can characterize their description of oil sands
production and so forth as being inherently dirty and
inherently more risky than other types of oil. Would you agree
with that characterization, Mr. McCaffrey?
Mr. McCaffrey. No, I wouldn't actually. When we look at the
greenhouse gas footprints that we have relative to other U.S.
imports, I think we have made great strides on it. It doesn't
mean we can't continue to do better and that is what we are
doing. We are focusing that on energy efficiency, and some of
the things that we are working on right now in areas of
technology are very exciting. But no, I wouldn't agree with
that.
Mr. Whitfield. OK. Mr. Dyer in his testimony made this
comment that in situ extraction had significantly more
greenhouse gas intensity means it ostensibly produced more
greenhouse gases than other methods of extraction and he said
on average 2.5 times more intensive than mining as far as
greenhouses go. Would you and Mr. Smith agree with that comment
or not?
Mr. Smith. Actually, Mr. Chairman, Dr. Isaacs would
probably be the best person to----
Mr. Whitfield. Would you agree with that comment, Dr.
Isaacs?
Mr. Isaacs. No, I wouldn't agree with that comment.
Mr. Whitfield. OK. Now, Mr. Dyer also said that there is a
weak regulatory system in Canada relating to production of oil
sands. Would you agree with that statement, Mr. Smith?
Mr. Smith. No, I wouldn't, Chairman Whitfield, because
Alberta recognizes that it has great and vast resource and it
must be developed in an orderly manner and it must pay
attention to environmental values and social values. It was the
first province in Canada to have a Department of Environment.
It was created solely for the purpose of managing these
resources. We have a quasi-independent semi-judicial regulator
that makes decisions on the development. It takes 3 \1/2\ to 5
years to approve one SAGD process. A mining project has been in
approval over 7 years. These panels are joint panels, Federal
Fisheries and Oceans, Federal environmentalist departments,
they will share in the panels. It is a very highly regulated
and public process.
Mr. Whitfield. Thank you. My time is expired.
At this time I recognize Ms. Castor for 5 minutes.
Ms. Castor. Well, thank you, Mr. Chairman. Thank you all
for your testimony.
I would like to keep on that line of questioning and
understand that in Alberta you have an Energy Resources
Conservation Board, Department of the Environment, Department
of Sustainable Resource Development. They all maintain very
robust rules for tailings management, land reclamation, water
pollution, groundwater monitoring. So, because my time is
limited, could you go down and just give me a yes or no answer.
I think many of you have already stated this. Are those
fundamental health safety and environmental regulations
important? Yes or no?
Mr. Isaacs. Yes.
Mr. Dammer. Yes.
Mr. Nenniger. Yes.
Mr. McCaffrey. Yes.
Mr. Smith. Without question.
Mr. Dyer. Yes.
Ms. Laboucan-Massimo. Yes.
Ms. Castor. Well, see, the difference here in the great
United States of America is that what the Republicans have
tried to do is have this Keystone pipeline approved by passing
a bill and giving short shrift to a lot of those health,
safety, and environmental reviews, really giving them special
treatment by passing a law and not adhering to things like the
National Environmental Policy Act and others. And that is not
fair. All of these entities should play by the rules.
Today, we have heard several witnesses testify about the
ability of new technologies that attempt to minimize the
impacts of tar sands oil development on strip mining, on water
pollution, the lingering toxic chemicals in these large tailing
ponds, the decades of dealing with the solid wastes that is
left over and carbon pollution. And it is important that here
in the United States we understand the impacts of the tar
sands.
Mr. Dyer, based on your study of the tar sands industry in
Canada, have environmental impacts of the tar sands been
significantly mitigated through the deployment of new
technology?
Mr. Dyer. Well, I wouldn't take my word for it. I mean if
you look at the Royal Society of Canada's report on the tar
sands, which is the equivalent of your U.S. Academy of
Sciences. They concluded that regulations haven't kept pace
with oil sands development, so absolutely not. As was
mentioned, there was an absolute boom in the oil sands and it
left regulators unprepared to catch up with addressing
cumulative environmental limits in the oil sands.
Ms. Castor. Thank you. And how about you, Ms. Laboucan-
Massimo? Has technology fixed the environmental harms from tar
sands production that are so devastating to the First Nations
communities?
Ms. Laboucan-Massimo. In my opinion no, unfortunately,
because what we are seeing are impacts of the land. We are
seeing impacts to the air and to the water. And so we have seen
exceedances happen from operations that impact the communities
downstream and that are around the communities. We have seen
cattle ranchers actually have they think connected to the
emissions have their cattle miscarriage because of things like
where they are feeling quite ill from the inability for them to
capture fugitive emissions. So it is impacting people and I
don't feel like it is doing its job.
Ms. Castor. And in addition to pollution of water and water
quality issues, development of tar sands is a very water-
intensive process. So it impacts water quantity. In fact, it
takes as much as four barrels of water to produce just one
barrel of bitumen from tar sands. And here in the United States
it is reported that we have rich deposits of tar sands and oil
shale in arid western States such as Utah and Colorado and
Wyoming.
Ms. Laboucan-Massimo, can you speak to the impacts of tar
sands development in Alberta on the local water resources? Go
into a little greater detail on water quantity requirements and
water quality.
Ms. Laboucan-Massimo. Well, the area where we are, the
Peace-Athabasca Delta is a sixth of Canada's fresh water
supply, so we are dependent on that water supply. It is very
important to us so what we have seen is that industry has used
this water as well so we are somewhat at competing needs for
it. But the damage that we have seen happen to the downstream
communities, you know, we are seeing unfortunately fish with
tumors and such because of the contamination but we are also
seeing lower levels of water in the area. So I have talked to
elders that, you know, used to boat down from community to
community and now they are hitting sandbars because there are
decreased water levels in the areas. And that is very
concerning. For the scientific community where they are
actually saying if there is decreased levels that will, you
know, do a fish kill or a potential fish depopulation of the
areas. So there is definitely downstream impacts as well as for
communities around that region as well.
Ms. Castor. Thank you very much.
Mr. Whitfield. At this time, I recognize the gentleman from
Illinois, Mr. Shimkus, for 5 minutes.
Mr. Shimkus. Thank you, Mr. Chairman. So many questions, so
little time. First of all, I did meet with the chief elder of
First Nation on my trip and although he was concerned about
expansion, he did appreciate the hundreds of jobs, thousands of
jobs available to tribal members in these operations. I want to
put that on the table.
And again, this Keystone debate is really kind of goofy
because we only spent 3 \1/2\ years to study it. Ten thorough
agencies all approved it. EPA said it was OK. So for us it just
drives a lot of us crazy to hear these really fallacious false
statements about the entire process.
Let me go briefly. I have got a couple pictures. Let us put
the first one up. This is in response to my friend, Mr. Waxman.
That is a recovered mine operation site. Now, I am from
Southern Illinois. We had strip coalmining obviously in the
first days, not very good environmental stewards. We recover
coalmine operations now and that is a picture of before and
after of a recovered, reclaimed surface mining operation.
Let us go to the next slide because it really dealt with my
opening. We better start talking about the two different types
of operations. For as much as the environmental left wants to
keep beating us up, there are two different operations. And
these three pictures show that. This is an in situ operation.
Go the next picture. That is the footprint when it tails off.
That is kind of the wells. Go to the next one. Of course the
little pipeline and then the product. So I just need to put
that on record.
Let me ask Dr. Isaacs. I have a quick question. You
mentioned some technology company, communications company. What
company was that?
Mr. Isaacs. Harris Corporation, headquartered in Florida.
Mr. Shimkus. Melbourne, Florida, I think, right?
Mr. Isaacs. Right.
Mr. Shimkus. So this is a big operation for them?
Mr. Isaacs. Yes.
Mr. Shimkus. Great. Mr. Dammer, I just want to thank you
for talking about the 2005 energy bill. I was on the Conference
Committee, great piece of legislation and I hope it helps us
create additional operation in oil shale development.
Dr. Nenniger, when you are talking about your new
operation, it sounds like you are putting a chemical solution
down to recover the oil sands. Is that correct?
Mr. Nenniger. Most likely, it is either condensing
propane----
Mr. Shimkus. OK.
Mr. Nenniger [continuing]. Which is what you burn in your
barbecue or condensing butane.
Mr. Shimkus. And obviously, you have been following our
debate on fracking. And you are doing a lot of research. Would
you want to immediately disclose that list of operation to
anyone who wants to use that or would it be proprietary
information?
Mr. Nenniger. No, it is absolutely open.
Mr. Shimkus. Good.
Mr. Nenniger. We have technical papers on our Web site. We
have 10, 15 patents so----
Mr. Shimkus. Great, thank you. I got short time. Let me go
to Mr. McCaffrey.
Mr. McCaffrey, you have listened to a lot of some of the
statements. I would like for you to address two issues--wheels-
to-well carbon dioxide emission levels, and also I would you to
address this water issue that was raised, especially in your
expertise on in situ.
Mr. McCaffrey. Sure. In terms of wells-to-wheels analysis,
we are focused on the energy intensity and we have been
successful in continuing to reduce our greenhouse gas emissions
throughout the last several years and we have a target of
continuing to reduce those. It is all focused on improving our
energy efficiency and using novel technologies like
cogeneration and then seeing what we can do to substitute out
the steam as we go along through infield wells and the use of
natural gas, which is just methane in the reservoir. We just--
--
Mr. Shimkus. And you told me that that process is actually
lower than the California carbon standards, is that correct?
Mr. McCaffrey. Absolutely. I think it is about 15 percent.
Mr. Shimkus. Great. Can you now move into the water usage
issue?
Mr. McCaffrey. Sure. It is pretty much a closed-loop system
where we recycle the water back--or we bring the water back
when it is produced so it is condensed steam, drains down to
the producer, we bring it back, we recycle it, and we use it
over and over again.
Mr. Shimkus. So this number of the use of water in your
operation is not true?
Mr. McCaffrey. No. No, we recycle 90 percent.
Mr. Shimkus. Great. Thank you.
Mr. Chairman, I will return back 19 seconds.
Mr. Whitfield. At this time, I would like to recognize the
gentleman from California, Mr. Waxman, for 5 minutes.
Mr. Waxman. Thank you, Mr. Chairman.
Since last May, this committee has held four hearings on
the Keystone XL tar sands pipeline and passed two separate
bills to mandate approval of that pipeline, and yet the
majority has never bothered to examine the impacts of tar sands
production and transport on public health and the environment.
In particular, there has been no effort to understand what a
shift to tar sands fuel would mean for U.S. carbon pollution.
So today's hearing is long overdue. And it appears that most of
the witnesses here recognize that tar sands pose serious
environmental threats that must be addressed. For example,
every witness on this panel has provided testimony about
efforts to reduce greenhouse gas emissions from tar sands
productions. One of the witnesses invited by the majority, Dr.
Nenniger, states that ``the evidence of climate change is
compelling and terrifying.'' Another, Dr. Isaacs, states that
``careful management of environmental issues, especially
greenhouse gas emissions, is essential.''
Mr. Dyer, are the tar sands operations really getting
cleaner in terms of carbon pollution, and if not, why not?
Mr. Dyer. In absolute terms, definitely not as we
demonstrated here looking at the emissions doubling by 2020.
And in terms of the intensity, the evidence suggests not as
well. You know, this is government and industry data that says
we have got a worsening trend in the past 6 years. Our data
that demonstrates in situ development is more greenhouse gas
intensive than mining is based on industry data and highlights
in our report drilling deeper the in situ report card. So I
think the data is quite clear that in situ, based on its
requirements for steam, is more GHG-intensive than mining and
that trend is currently outstripping any potential
improvements.
Mr. Waxman. Mr. Dyer, are there technologies available that
could substantially reduce greenhouse gas emissions for tar
sands production?
Mr. Dyer. Yes, there are but unfortunately they are
expensive. And, you know, if you are making decisions about
whether to deliver, you know, a responsible product that has
low carbon emissions, adopting expensive carbon capture and
storage voluntarily is not going to happen. So I think we are
in a situation where we have been facing other great
environmental challenges in North America. If we are serious
about cleaning up some of the worst aspects of oil sands
development, we should be willing to regulate them. And clearly
the evidence is that Canada so far hasn't taken interest in
regulating the oil sands.
Mr. Waxman. So there are no operating carbon capture and
sequestration projects now. One is planned, as I understand it,
but it is being heavily subsidized by the government. Absent
such subsidies, the industry has no incentive to deploy
technology, is that right?
Mr. Dyer. That is correct. You know, there are dozens of
projects in the regulatory queue currently in Alberta. And with
the exception of the Shell Quest project, which will be built
using taxpayers' dollars, none of those projects propose carbon
capture and storage.
Mr. Waxman. Ms. Laboucan-Massimo, what is your view? Does
the industry rhetoric about the sustainable development match
up to the reality on the ground?
Ms. Laboucan-Massimo. In my opinion, no, it doesn't. What
we are seeing is massive mines the size of entire cities. Pearl
Mine will be bigger than Washington, D.C. What we are seeing is
a number of in situ projects all over the region. I am from the
Peace region. There is the Athabasca region. This region in
total takes up the size of the State of Florida. We are talking
about completely fragmenting or destroying a landscape the size
of an entire State of the United States of America.
Mr. Waxman. The industry and Alberta government talk a good
game but this is a classic example of greenwashing. The reality
is that the carbon pollution from tar sands is growing very
rapidly and the Alberta government is not willing to put the
policies in place that would be necessary to change that. One
claim we have heard repeatedly about the Keystone XL tar sands
pipeline is that if the U.S. doesn't take the tar sands crude,
Canada will just send it to China.
Mr. Dyer, does Canada currently have the transport capacity
in place to send the tar sands to China instead of the U.S.?
Mr. Dyer. No. There is a small pipeline that currently goes
to Vancouver but there is a major proposed pipeline the
Enbridge Gateway project. That is facing even more opposition I
would say in my estimation than the Keystone XL.
Mr. Waxman. Ms. Laboucan-Massimo, is this pipeline going to
happen?
Ms. Laboucan-Massimo. No, in my opinion it will not happen.
Over 100 First Nations are opposing this pipeline and over 80
percent of British Columbians themselves actually oppose the
supertanker traffic that would need to be associated with the
tar sands pipeline.
Mr. Waxman. Thank you. My time is expired. Thank you, Mr.
Chairman.
Mr. Whitfield. At this time, I recognize the gentleman from
West Virginia, Mr. McKinley, for 5 minutes.
Mr. McKinley. Thank you, Mr. Chairman. Melina?
Ms. Laboucan-Massimo. Yes. Hi.
Mr. McKinley. I am just curious if you could give me a
little insight. Does your group or something similar--do you
support drilling for oil in the Gulf?
Ms. Laboucan-Massimo. In the Gulf? Well----
Mr. McKinley. Yes or no.
Ms. Laboucan-Massimo. No.
Mr. McKinley. Do you support drilling in ANWR?
Ms. Laboucan-Massimo. ANWR which is where?
Mr. McKinley. In Alaska.
Ms. Laboucan-Massimo. Oh, no.
Mr. McKinley. Do you support the Keystone Pipeline, the
conception of it?
Ms. Laboucan-Massimo. No, I don't.
Mr. McKinley. Do you support surface mining for coal, like
mountaintop mining, for example?
Ms. Laboucan-Massimo. Well, I have been to Kentucky and I
have talked to people from there and it seems like the
repercussions are similar to the tar sands so I would say in my
opinion things have been sacrificed.
Mr. McKinley. Do you support the fracking technique to get
to the gas shale like in the Appalachian Mountains or in Texas
or wherever shale gas is located? Is that something that your
group would support?
Ms. Laboucan-Massimo. For fracking?
Mr. McKinley. The fracking to get the gas out of the ground
there.
Ms. Laboucan-Massimo. No.
Mr. McKinley. So I am really curious where you are going
with this. You know where I am going----
Ms. Laboucan-Massimo. Yes.
Mr. McKinley [continuing]. And that is that we don't want
oil, we don't want coal, we don't want gas, but yet we have a
Nation that depends on those. But you are saying that I want us
to use--and that is fine. I am going to support the all-of-the-
above, the renewables----
Ms. Laboucan-Massimo. OK.
Mr. McKinley [continuing]. But I don't understand your
point because you are trying to ban this. The technique that
everyone has used up here has been very clever, the focus on
the 20 percent that is not in situ. In situ, clearly you have
seen the pictures how environmentally sensitive it is for that
but everyone seems to be focused, even from the folks on the
other side of the aisle have been focused so much on the
negative of surface disruption. But coming from the
construction industry 45 years, I would challenge someone if
they have not been on a golf course to see a golf course
constructed. Millions of cubic yards are disturbed to have a
golf course but at the end of the day everyone enjoys it.
Surface mining, I have seen them use then, after the surface
mine, to use after the reclaim for shopping malls, schools,
penal institutions. But you just always look at the worst side
of it and that is during the construction. And again coming
from a construction I don't think anyone ever likes a
construction site during construction but when it is all done,
when it is reclaimed, it is something positive. Why are you so
focused on the negative?
Ms. Laboucan-Massimo. Well, what I am actually----
Mr. McKinley. Because you are not willing to get oil, gas,
or coal----
Ms. Laboucan-Massimo. Well, it is actually asking for more
of a transition away from oil and gas and the associated
greenhouse gas emissions that are causing issues worldwide. We
need to transition away from that and actually put our
investments in renewable energy systems so we can actually have
healthier communities.
Mr. McKinley. OK, Mr. McCaffrey, if I could go to you just
for a minute.
Back in May of last year, we had some testimony here in a
hearing and there were issues. I would just like your comments
that were given to us by--it said on a lifecycle basis, tar
sands may emit almost 40 percent more carbon pollution than
conventional fuel. Would you agree with that?
Mr. McCaffrey. No, I wouldn't.
Mr. McKinley. OK. There was another testimony on the same
day that--we have talked about pipeline safety because a lot of
the opponents are trying to indicate that it is dangerous what
we are doing. There was testimony said including the bitumen
high pressure, including internal corrosion, abrasion, and
stress corrosion cracks only weaken pipelines over safety. And
then it went on to say that Alberta's scorched earth tar sands
operations are the most destructive sources of oil on the
planet. Would you agree with those statements?
Mr. McCaffrey. Absolutely not.
Mr. McKinley. Back to Mr. Smith. Can you touch on just a
little bit about the revenue source, what impact your revenue
source has been on the Nation with Canada, what you have been
able to facilitate in Alberta? Has that had a positive impact?
Has that provided revenue to the country to get out of its
own----
Mr. Smith. Well, there are significant studies done by
major and reputable economic groups across Canada and the
United States that talks about an oil sands barrel delivers
more economic value to the United States than any other barrel
that you use import or derived in the world today. Member
Shimkus talked about Caterpillar and Michelin, Chicago Iron,
the number of companies that are involved in the oil sands----
Mr. McKinley. I know my time is essentially expired, but if
we in America couldn't mine coal or can't burn coal and we
couldn't use oil or gas, what do you think our role is as
leaders? How long do we----
Mr. Smith. North America's economic recovery has always
been based on reasonable and low-priced energy costs and will
continue to be that way.
Mr. McKinley. Thank you very much.
Mr. Whitfield. The gentleman's time has expired.
At this time, I recognize the gentleman from Texas, Mr.
Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. And let me for the
record correct--there were some statements made earlier by our
ranking member that talked about the Keystone pipeline was
trying to get ahead of what is normally required for pipelines
in our country. That is just not true. The Keystone pipeline
has had, you know, one environmental impact statement with two
supplemental and it was still approved by the EPA. So that is
even more than the typical pipeline from Texas to Cushing,
Oklahoma, that is the southern leg of it that the President
supports. So there has been no exceptions. You know, when you
have study for 2 \1/2\ years on a pipeline, you obviously are
going to get a lot of reviews so there have been at least one
full environmental impact and two supplementals and approval by
the EPA of the Keystone pipeline. And that is subject to even
more reviews than our typical pipeline safety law, even the
ones that we just passed that is now law. So the Keystone
pipeline has been reviewed. Now, I don't know wherever the
people get their information.
Let me ask some questions, though, of Mr. McCaffrey. A
number of what happens at the oil sands is you are using
cogeneration to natural gas to use to provide steam for the
process in the in situ. How many of the current oil sands sites
are using cogeneration?
Mr. McCaffrey. I don't know the exact number but I would
guess that there are three or four that are doing it, but a lot
more are starting to flag it as a very viable way to go.
Mr. Green. And you mention in your testimony the technology
developed largely along reducing the steam-to-oil ratio in the
in situ operations. Is that also a process that is being more
expanded?
Mr. McCaffrey. Yes. The industry is very, very focused on
reducing the steam-to-oil ratio and seeing great successes. And
every quarter that goes by you see improvements. There are
other companies besides ourselves that are just putting great
effort in as well.
Mr. Green. Is that natural gas produced somewhere close to
the sites?
Mr. McCaffrey. Typically, it is in Alberta. It is quite
often very close to the sites.
Mr. Green. OK. So we don't have to worry about pipelines to
bring that natural gas to your well sites?
Mr. McCaffrey. No, there is significant infrastructure in
Alberta already.
Mr. Green. I know the issue is fresh water, even in Alberta
but, you know, in Texas obviously hydrofracking has been very
successful but it takes a tremendous amount of water. What
happens to the water? Is most of it recycled?
Mr. McCaffrey. Yes, we recycle about 90 percent of it. And
the water we originally use is non-potable so it is saltier
water and it is from deep aquifers. We do not use any surface
water, no rivers, no lakes in our operations.
Mr. Green. And what happens to that 10 percent----
Mr. McCaffrey. And I am referring to most of the operations
in the south. Towards the north where it outcrops, they do need
to use the Athabasca River.
Mr. Green. OK. Also, Mr. McCaffrey, in 2010 Big K Energy
Corp contribution and Greenhouse Power offset 238,000 tons of
GHG production. Was that based on the In Situ Oil Sands
Alliance or where did that number come from?
Mr. McCaffrey. That comes from our own operations and we
are planning to put in more cogeneration because of the
benefits we see on our future phases right now.
Mr. Green. OK. Mr. Smith, Ms. Massimo writes in her
testimony the government of Alberta actually allows the
industry to self-report in this system where there is no
independent third party regulating. Is that true?
Mr. Smith. The Energy Resources Conservation Board is an
independent regulator. In fact, you can go to a Web site today
with the Department of Environment and see active air quality
life on a real-time basis. The maximum flow from the Athabasca
River that the oil sands companies can extract in its
development does not exceed 4 percent. So there is extensive
water conservation, water management, and it is independently
regulated at this point through rules and permits.
Mr. Green. I was wondering because our gas wells that we
hydrofrack, obviously OSHA has access to those sites and EPA
has those on the U.S. side, so I assume Alberta has some of the
same government oversight regulations. You can send an
inspector out and verify whatever self-reporting is being done?
Mr. Smith. Absolutely.
Mr. Green. To verify that number.
Mr. Dyer, in your testimony, based on approved water
licenses and current proposed projects where they draw 15
percent of the Athabasca River flow during the lowest period
introducing fish habitat, if the producers are going to move to
in situ production in order to reach the resource, if it is
doing so, they are not going to use fresh water instead of
using recycled water is the testimony. In your statement, what
was your basis for, ``based on approved water license, the 15
percent of the river's water flow?''
Mr. Dyer. A basic problem with your statement there,
companies are not moving to in situ oil sands development. Oil
sands mining is expanding and it is going to trickle. It is
just in situ development is actually expanding at a fast rate.
So we are still going to see three times the impact on the
Athabasca River from mines. It is just because more in situ----
Mr. Green. OK. Well, you are talking about the strip
mining?
Mr. Dyer. Yes, that is correct.
Mr. Green. OK, but----
Mr. Whitfield. Gentleman----
Mr. Green [continuing]. Mr. Chairman, I understand that 80
percent of the production is going to come from in situ and
only 20 percent from the strip mining is my understanding.
Mr. Dyer. Yes, that is correct----
Mr. Green. OK.
Mr. Dyer [continuing]. But we have only produced 3 percent
of the bitumen so far so there will be lots more cumulative
effects for both mines----
Mr. Whitfield. At this time I will recognize the gentleman
from California, Mr. Bilbray, for 5 minutes.
Mr. Bilbray. Thank you, Mr. Chairman.
First of all, I guess I need to clarify some items that the
representative from Greenpeace was able to bring up. Your
concerns about oil or natural gas, how about does Greenpeace
support corn ethanol and the use of corn ethanol in the
mandates?
Ms. Laboucan-Massimo. I can't comment on that right now.
Mr. Bilbray. OK. How about the expanded use of algae
production for the----
Ms. Laboucan-Massimo. That is also not my study of
expertise.
Mr. Bilbray. No alternative fuels. OK.
Mr. Smith, I have some real questions. As somebody who has
been involved in the environmental movement in one way or the
other since 1970, I am just trying to think of a country
anywhere in the Western Hemisphere that is at least
historically been perceived as environmentally sensitive. I
cannot think of a country that at least the public perceives as
environmentally sensitive than Canada. In fact, I remember
operation Canadian Bacon was the way we were going to attack
you guys was we were going to throw trash into your parks.
Mr. Smith. I think, Mr. Bilbray, we also said we walk
amongst you undetected.
Mr. Bilbray. And we worry about that. Has Canada made such
a huge shift from its history of being the environmental leader
of the Western Hemisphere, leader in everything from, you know,
renewable resources to greenhouse gas control? How can I sit
here and believe that Canada has totally abandoned its standard
of environmental protection that has historically been there
and taking a walk on this issue? Has Canada been taken over by
some evil foreign force and forced you guys to have to trash
the environment?
Mr. Smith. Well, Honorable Member, Canada and resource-
producing provinces of which there are now six have responsible
permitting, they pay attention to changing environmental
conditions, to they pay attention to that triple bottom line of
environment, social values, and corporate profit. We have been
able to weather a serious, serious recession because we do
produce a great abundance of natural resources and natural
minerals and products. We continue to clean up oceans and
fisheries and ponds--the Sydney Tar Ponds, for example. We have
environmental records of excellence. I think that as we grow,
we are going to continue to get better and better about
defining surface reclamation.
One of the issues is that we are transparent. We are not
afraid to put our record out front, have the discussion, have
the debate, and where we can find need for change, we implement
change. And it not that anything has remained static, neither
the development of the resource, nor the regulations that
surround it. So it is an ongoing process. There is dynamic
tension. We still import in excess of 700,000 barrels a year on
our east coast a day. And I believe that we can replace that
with oil sands crude. Once we do that, that oil sands crude
will then go into eastern markets in Canada and we will also
find a gateway to foreign shipping. In fact--and I thank the
U.S., for Congress to give that permission to build that
pipeline from Cushing to the Texas Gulf Coast because that is
going to increase the abilities for your refineries to use
Canadian crude and not crude from hostile jurisdictions that
really want to take the money they gain from selling oil to you
and use it against your interests.
Mr. Bilbray. Now, I remember we were negotiating with
Mexico about an oil line back in the '70s and the '80s and
there were those that stood in the way. That oil now, instead
of being transported through a pipeline, is being transported
through trucks and tankers. And actually, a lot of those
tankers are going into Houston as we speak. My question though
is you have pointed out--who is Canada's number one trading
partner in the world?
Mr. Smith. You are.
Mr. Bilbray. Who is America's number one trading partner in
the world?
Mr. Smith. We are.
Mr. Bilbray. So we are sort of tied together here from that
aspect of it. My question though is it appears to me when I
look at the Keystone pipeline that the problem with the
administration is not the EPA, is not the water quality control
people. There is no controversy on that side. It comes down to
a 5-foot artificial barrier called the international border
between Canada and the United States and that the issue is not
issuing the permit for you to bring a pipe up to your side of
the border and for us to bring a pipe up to our side of the
border. That is what is being held up here. So my question is,
is it true to say that this issue really is not about the
environmental impact in the United States, not the
environmental impact on our water or resources in the United
States, but more an issue about the United States trying to
impose a regulation onto Canada and hold Canada to change its
environmental policies and that the State Department--not the
EPA--will not allow you to connect to a pipeline on our side
unless you change something on your side of the border?
Mr. Smith. We are continuing to provide a safe, secure,
reliable, geopolitical, sensible stream of product to a nation
that needs the product desperately.
Mr. Bilbray. Thank you.
Mr. Whitfield. The gentleman's time is expired.
At this time, I recognize the gentleman from Texas, Mr.
Olson, for 5 minutes.
Mr. Olson. I thank the chair and welcome the witnesses. I
am sorry you are here today because of election-year politics.
It was clear that something changed this past fall with the
President's handling of the Keystone XL pipeline. The
Department of State wanted the pipeline. The labor unions
wanted the pipeline. The environmental activists didn't want
the pipeline. The President ruled and deferred the decision
because of the elections coming up this November. But one thing
we have learned since that time is the Keystone XL pipeline is
safe. Why else would the administration approve the first
portion of it being built from my home State of Texas up to
Cushing, Oklahoma, unless it was designed to be safe? Why would
they do that? And the President still has an opportunity to do
what is right for the economy, approve the full Keystone XL
pipeline now. Unfortunately, he is still being misled by the
environmental activists and the Hollywood elites.
The Keystone pipeline, not the XL pipeline, but the
Keystone pipeline already brings Canadian oil sands crude
across the border, across that aquifer in Nebraska and to Wood
River in Patoka, Illinois. The exact same oil is flowing
through the pipeline right now across the border to the United
States. The protesters that surrounded the White House are
waging a new war against Canada's oil sands. It has happened
already. And as we have heard from the witnesses today,
Canada's oil sands present an incredible opportunity for
American energy security. Coupled with White House Press
Secretary Carney's admissions that we have ``world-class,
state-of-the-art refineries on the Gulf Coast,'' we can ensure
Americans have access to affordable energy for our children and
our grandchildren.
My first question is for you, Mr. Smith. Some claim that
the Keystone XL pipeline is designed to ship oil from Canada
through the United States to our ``world-class, state-of-the-
art refineries on the Gulf Coast'' and out to Asia. But if you
simply look at a globe you would see that Canada's west coast
is much closer to Shanghai than it is to Houston. And on the
same globe you might find a pipeline connecting Alberta to the
Gulf of Mexico is a lot longer than a pipeline connecting
Alberta to the Pacific. Why is the Keystone XL pipeline being
proposed?
Mr. Smith. Well, Honorable Member, I was here when Keystone
I was approved and had its presidential permit. Oil sands crude
has been reaching markets in the United States since the 1980s.
It continues to grow. Production continues to grow. It creates
opportunities, it creates jobs on both sides of that border,
and I believe that ultimately we can have a North American
answer to energy security and independence with reasonably
priced energy prices that will stimulate economic recovery in
both countries.
Mr. Olson. How does building a pipeline through the U.S. an
efficient means of accessing Asian markets?
Mr. Smith. Each time you touch a barrel of oil, it becomes
worth more money and thereby more expensive. So if there is a
market closer, that is where the shippers go. That is where the
producers would like to provide that produce. So it is a reach
to think that you would move into a big ship that has a
proclivity for a spill and it is also very expensive. So I
would be very surprised, particularly in light of refinery
closures on the northeastern side of the United States that oil
reaching the Texas refinery complex would go anywhere else but
the United States of America.
Mr. Olson. Yes, sir. Thanks for that.
One more question for you, Mr. Dammer. We have heard from
Mr. Smith on how Alberta achieved basically energy independence
and the positive effects that oil sands have had on their
economy. And I saw a very similar thing in my home State of
Texas about 3 weeks ago with the Eagle Ford Shale Play. A
little different source of energy, it is true oil and true
natural gas, but the exact same thing is happening in many
cities across Southeast Texas. In very underprivileged cities,
underprivileged counties, one example in Dimmit County the
sales tax revenue has gone up 300 percent, the property tax
revenue has gone up 400 percent making a real difference in the
quality of lives of those people in my home State.
And I mean if the United States had the same attitude
toward oil shale, do we think we could have similar results
across the country, not just what you experienced in Alberta
and what we are experiencing in Texas?
Mr. Dammer. Yes. Absolutely. As I said in my testimony,
there are over 30 companies working on oil shale R&D here in
the United States, and many of them have shown a lot of
promise. Shell is working in situ; Chevron, Exxon, some of the
larger companies are spending billions of dollars in trying to
release the huge reserves that are locked in the Permian Basin.
I think the problem we have here in the United States is we
have no national program similar to the one that they put
together in Alberta that directs the types of research and
development toward these resources. We throw programmatic EIS
at it, we do oil shale regs and then we revoke the oil shale
regs and then we do another programmatic EIS. And that is why I
brought up the fact that we have on the books a law, Section
369(i), that calls for a national program to develop these
resources. And I think if we followed the presets of that law,
we would safely and comprehensively start to develop those
resources.
The reason why Shell is having so many problems in Colorado
is they have no assurance that they will ever get out on the
Federal land.
Mr. Olson. I am over my time, Mr. Chairman, but I want to
thank our witnesses from Canada. As a former military veteran,
thank you for standing beside us in the War Against Terror. I
know over 200 of your brave men have given their lives beside
us in Afghanistan. I really appreciate that. We will stand
beside you. I yield back.
Mr. Whitfield. At this time I recognize the gentleman from
New York, Mr. Engel, for 5 minutes.
Mr. Engel. Thank you very much, Mr. Chairman.
I really have an open mind about this. I believe very
strongly that the United States can never be totally free in
our foreign policy and such similar matters unless we wean
ourselves off of oil that we get from unfriendly nations, and I
think that Canada certainly is the friendliest nation. So I
think that there is potential there, but I am concerned about
the environmental difficulties. So I have just a couple of
questions.
Canadian tar sands obviously aren't regular oil. They are
highly corrosive and very carbon-intensive. And obviously as
lawmakers we have to evaluate the immediate health and
environmental consequences of tar sands production, weigh our
obligations to leave full functioning ecosystems for future
generations and consider our responsibility in terms of adding
greenhouse gas emissions to our planet. I take those
responsibilities very seriously, and obviously, everything is a
balance.
In January 2012, Canada became the first nation to withdraw
from the Kyoto Protocol. Now, we have never joined it so in a
way people that live in glass houses shouldn't throw stones.
But when Canada withdraws from it, I wonder why. It makes me
suspicious. Every oil sands developer claims they can clean up
the bitumen production with better technology, but from what I
have seen--and please correct me if I am wrong--this technology
doesn't yet exist, and the hard truth is from what I can see,
the energy industry hasn't been really investing much in
innovation.
And I say this because according to Forbes, big energy
companies devote barely 0.3 percent of their sales to research
and development and many have ended their R&D programs. And if
the technology worked really well, it would use less energy and
steam over time to produce more bitumen. But exactly the
opposite has happened. In the late 1980s, 2.38 barrels of steam
was considered to produce a barrel of in situ bitumen and in
2010 the steam industry average increased to 3.3 barrels. So
that is a 50 percent decline in efficiency over a 20-year
period. So I don't know. You look at the energy companies, they
profit from commodity price increases, not ingenuity. So it is
almost a disincentive for them to come up with these things. So
I am concerned about development without proper fiscal,
political, and environmental safeguards, and I would be happy
if anyone would want to comment on what I have just said,
either people from the industry or others as well. Mr.
McCaffrey?
Mr. McCaffrey. Sure, I would be happy to.
Just speaking from our own company's perspective, our
numbers are we design our plant for steam-oil ration of 2.8,
which are the numbers you are referring to. We are currently at
a 2.4. We are targeting to get down to 2. We have got
technology that we think can be implemented now and that we are
working on getting implemented to drive us in that direction.
And some of the other companies in the area are also moving in
that direction and they are being successful at it. So the
technology that may have changed over time would have been
cyclic steam technology is now steam-assisted gravity drainage,
and that is a far more efficient process. And directionally, we
are seeing good gains in that area.
Mr. Engel. Mr. Dyer, didn't you in your testimony say that
the tar sands are not getting cleaner and that technology is
expensive and therefore that is the reason? Would you disagree
with what----
Mr. Dyer. Yes, that is correct. There have been
improvements since 1990, as I mentioned, but in the past 6
years we are starting to see declining intensity. I think, you
know, if the industry is confident that improvements will still
happen and we have innovation there, I think you would see them
embracing the ability to demonstrate that through regulation
and through low carbon fuel standards that would enable low
carbon fuels to compete.
Mr. Engel. Let me ask you this question. And anyone who
wants to answer it may. What happens if these pipelines are not
built? Will Canada continue to produce tar sands oil for the
U.S. and Canada? Will it run out of customers before it runs
out of product? What happens if this is not built? Mr. Smith?
Mr. Smith. Thank you, Honorable Member. Yes, we will
continue to increase production in this process. They will find
alternate markets. Oil is a fungible commodity, which means it
can be exchanged around the world on a computer transaction or
a moment's notice, and I believe that more and more of that
will happen. They will find outlets for direct shipment either
to the east coast or through--there is a pipeline, the Kinder
Morgan Trans Mountain pipeline that was built by Becton back in
the '50s. That line has a corridor and can be doubled in size
without great difficulty. That takes care of 400,000 barrels.
500,000 barrels can go to eastern Canada to replace foreign
import that we import. So we can find a market for a million
plus barrels.
It is also important to mention that we have received tens
of billions of dollars of investment from sovereign-owned
companies from around the world, including China, Korea, and
the Middle East. So in fact they are realizing that we have a
fungible commodity.
I just also want to talk to you briefly--and Dr. Isaacs may
want to supplement. We have a fund in Alberta that has
contributed over $230 million simply in the last 3 or 4 years
to better improving technologies for greenhouse gas reduction,
energy efficiencies, and better practices in the oil sands. Our
surface disturbance in the oil sands today is about the size of
the city of Tampa. The size of the oil sands deposit is about
the size of the State of Florida and we will be reclaiming
that. And I am not sure that Tampa will ever get reclaimed. So
we have a mine plan that goes forward every time and they have
to provide reclamation programs to get things back equal to or
better than--which is the watch word of the Department of
Environment.
Mr. Engel. Thank you.
Mr. Whitfield. The gentleman's time is expired.
At this time, I recognize the gentleman from Virginia, Mr.
Griffith, for 5 minutes.
Mr. Griffith. Thank you, Mr. Chairman.
I guess I am somewhat curious. If the oil sands are going
to be used anyway even if we don't build the pipeline, then I
guess I am kind of curious as to why all the opposition to the
pipeline, and I am wondering if any of you all can--start with
Dr. Isaacs. Can you give me some explanation as to why, if the
oil sands are still going to be used, why someone would oppose
this pipeline coming into the United States? From a U.S.
perspective--I know you all are mostly Canadians but can you
all understand that?
Mr. Isaacs. No, I can't understand that.
Mr. Griffith. Can you understand that, Mr. Dammer?
Mr. Dammer. No, I don't understand that at all.
Mr. Griffith. Doctor?
Mr. Nenniger. I am sensitive to some of the issues but I am
not sure that is the right way if, you know, you are concerned
about carbon emissions that really is effective.
Mr. Griffith. All right. Mr. McCaffrey?
Mr. McCaffrey. No, I don't understand it.
Mr. Griffith. Mr. Smith?
Mr. Smith. We are already shipping 1.7 million barrels
south and also if I were receiving oil, I would want it in the
safest way possible in the newest infrastructure possible.
Mr. Griffith. Let me touch on that in a minute, Mr. Smith.
I have heard previous testimony about shipping it the way that
we are shipping it now in the United States, we actually have a
bigger carbon footprint than if we build the pipeline. Is that
accurate?
Mr. Smith. Well, if you bring it in by tanker load, when
you go quantity to quantity, the increased amount of emissions
from tanker traffic than by pipeline.
Mr. Griffith. All right. And you talked about safety as
well. Is there more likelihood of accidents if you are doing
the tankers?
Mr. Smith. Well, it is your safety program, Honorable
Member, and it will be a pipeline built by Americans,
supervised by Americans and made safe by Americans. That
includes union and nonunion labor.
Mr. Griffith. All right. I appreciate that.
Let me ask you as well, Mr. Smith. You know, we always hear
that the U.S. possesses only 2 percent of the world's proven
oil reserves. Now, we know that that is because proven reserve
estimates only account for oil fields that are currently being
produced. However, not long ago Canada had a similar proven
reserve figure to ours. Did your government accept that
Canada's proven reserves in 1994 should mean that there should
be no new oil exploration?
Mr. Smith. No, it did not. What it meant was that we had to
find a way to publicly quantify and qualify these reserves. The
oil sands reserves are based on public record of 56,000 wells
and 6,000 cores. Drilling records and core samples remain
intact today and they can be viewed by anybody from this
community. And I believe that much of the criticism that we get
from the oil sands is our own fault because we are too
transparent, we might be too apologetic, we might be too
Canadian.
Mr. Griffith. Well, I am not sure I would go there,
especially as an American. I don't want to accuse you of being
too Canadian. But, you know, does this not say to us that the
United States can learn that if we go out there and we look for
new ways to discover new ways to use what we have in our
country that we can in fact discover new ways to use what we
have and come up with a greater percent than the 2 percent that
we always hear bandied about in the press when the President
tries to give us math lessons?
Mr. Smith. One of the great things that Canada and the U.S.
share is technology development, innovation, and germination
and pollination between companies. And whether it is horizontal
drilling, measurement while drilling, hydraulic fracking,
production of gas from shales, production of liquids from
shales, production of oil from shales, these technologies are
shared across the border. The 49th Parallel doesn't mean much
when you are moving technology throughout. And I think that the
Bakken Field in North Dakota is a very good example of that.
Mr. Griffith. So you would generally agree with me that we
probably have greater than 2 percent if only we would use our
resources, is that correct?
Mr. Smith. Yes.
Mr. Griffith. Yes. Dr. Isaacs, your testimony states that
only the U.S. and Canada are the only developed countries that
can dramatically increase oil production. There are other parts
of the world that are producing large amounts of oil and will
experience some growth, but are any of the other countries in
the world that are expanding their growth, are they committed
to producing oil with comparable environmental sensitivities to
that of the United States and Canada?
Mr. Isaacs. I don't believe they are.
Mr. Griffith. And so would I be correct in believing that
by not allowing the United States and Canada to expand our use
of our natural resources, we may in fact be creating a greater
problem worldwide with pollution than if we are allowed to use
with our sensitivities to the environment are allowed to use
our natural resources? Is that true?
Mr. Isaacs. I think it is very possible, yes.
Mr. Griffith. I appreciate it and I yield back my time, Mr.
Chairman.
Mr. Whitfield. At this time I recognize the gentleman from
Louisiana, Mr. Scalise, for 5 minutes.
Mr. Scalise. Thank you, Mr. Chairman, and thanks for having
this hearing on the American Energy Initiative. I know this has
been a series of hearings that we have had on this in addition
to the legislation that you have brought forward through this
committee to help our country become more energy independent.
And at the end of the day when we look at the skyrocketing
price of gasoline and projects are it is only going to go
higher, I think most people recognize that supply does have a
factor in price. You can't ignore that basic fact of economics.
And we have done a lot of things in this committee not only to
increase the supply in America, to open up more areas that are
currently closed, but also to create what would be hundreds of
thousands of new American jobs that would go along with it. And
of course here with the Keystone XL pipeline proposal, I know
we have seen projections that on the low end there would be
20,000 new jobs created, over $5 billion of private investment
that would be brought in, not this Federal stimulus program of
spending money we don't have but actual private investment to
build this pipeline.
Mr. Smith, if you can address the jobs issue because there
have been some that have criticized that not enough jobs have
been created or that the 20,000 number is not accurate--I have
heard it is even higher but there are some suggesting it is
lower as if only a few thousands new jobs is a bad thing, they
oppose that. If you can address the jobs issue on what the
estimates are that Keystone would create in America, the United
States.
Mr. Smith. Well, what we do know is that economic recovery
is always based on reasonable energy prices or energy prices
that are more competitive than the balance of world markets. To
construct that pipeline, it is my understanding that it is a
shovel-ready project, requires no taxpayers' dollars, and the
number of direct and indirect jobs have been wildly debated.
And I believe that the number of 20,000 immediate jobs in a
country with 8.3 percent unemployment would be significant.
Mr. Scalise. 20,000 immediate jobs. And in the long-term,
what estimates do you have there?
Mr. Smith. I think the long-term is probably more difficult
to calculate because as you move into economic recovery with
reasonable and secure energy prices, you do ramp up over all
economic activity. So I have heard in the range of 50,000
indirect.
Mr. Scalise. Great. And, you know, of course some,
including the President are suggesting they need more time for
environmental concerns and all of that. And of course one of
the facts that they leave out is that even if the President
were to approve Keystone, which, you know, has been on his desk
for over 3 years and there have been environmental studies that
have suggested it would be a positive thing to do, each State
would have to permit it, even Nebraska where, you know, there
has been a lot of attention given to Nebraska's route. The
State of Nebraska would still have to issue a permit before the
pipeline could be built even if the President said yes, which
of course the President has not. Is that correct?
Mr. Smith. That is my understanding.
Mr. Scalise. Yes. And so, you know, as the President tries
to say he is for an all-of-the-above energy strategy, you are
not for all-of-the-above if you say no to Keystone and so many
other things that we have seen him say no to.
There is one final question as a follow-up to my colleague
from Virginia asked on this 2 percent--because I know the
President said this; others have suggested that in America
there is this finite 2 percent amount of all the world's known
reserves. And of course in Canada they were using similar
numbers even going back to 1994 numbers before of course some
of the new technologies came out. And as many know, you know,
that known number of reserves only counts where there is actual
production. If you are shutting an area off to exploration,
there could be a vast amount of reserves that are there; we
just don't know about them because the Federal Government won't
let them go there. How did you all address that in Canada when
you had a similar kind of smaller number of known reserves
before the new technologies were allowed to advance?
Mr. Smith. Well, Honorable Member, that is an important
distinction. The resources are managed by each individual
province/state if you will. They have an independent
jurisdiction and the Federal Government is basically forbidden
by the constitution to interfere in the orderly development of
those resources or the trade and commerce of the provinces with
those resources. So my direct experience was transparent
records, environmental surveillance, a keen and strict
regulatory process, and an ability to communicate that
throughout the jurisdiction. Even with this great amount of
debate, continually polls across Canada support the orderly
development of the oil sands.
Mr. Scalise. Well, thanks. And then the final question, Mr.
McCaffrey, if you look at Canada's oil field discovery, it
increased their proven reserves by an order of magnitude of
multiple times over. Can you kind of give your commentary on
how this was accomplished?
Mr. McCaffrey. I think it is through the advancement of
technology. We continue to see incredible improvements in terms
of the recovery factors and being able to demonstrate those
recovery factors. And I think it really echoes the point of the
sheer size of that resource that is commercially recoverable.
And we have a large number of customers from the U.S. right now
on the Gulf Coast that are very interested in connecting with
the supply. So as this supply has come on, as it continues to
improve in efficiencies, there is a vast majority of the
refineries on the Gulf Coast that have come up on a regular
basis saying we need the crude; we have got to get the crude.
And that is the only thing is the pipeline that is preventing
the customer from getting the supply it needs.
Mr. Scalise. Well, thank you all for coming and thanks, Mr.
Chairman. I yield back the balance of my time.
Mr. Whitfield. Thank you, Mr. Scalise. And I want to thank
those members of the panel for being here today. We appreciate
your testimony very much. And I do think that this hearing
brought to a clear focus the different policies in Canada and
in the U.S., and because of Canada's policies they have gone
from a net importer to a net exporter. And we recognize that
there are many groups that sincerely do want to stop the
exploration, production, and use of fossil fuels, but the
reality is for our transportation needs we don't have any
alternative right now. So this hearing has really been helpful
and we appreciate your expert testimony.
And with that I will adjourn this hearing and we will keep
the record open for 10 days for any materials that need to be
admitted. Thank you.
[Whereupon, at 12:12 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]

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