March 09, 2007

Thank you very much for that very kind introduction. Good afternoon to all of you.

It is a pleasure to be here attending the Alberta-California Energy Conference at the University of California, Berkeley.

I would like to thank Rita Ross of the Canadian Studies Program and Russ Kalmacoff, President of the UC Berkeley Club of Canada, the organizers; and Canadian Consul General Marc LePage, for the co-operation and assistance of the consulate and for their support of the Energy Network Roundtable.

The Canadian Studies Program at Berkley provides an excellent opportunity for energy executives, academics and government representatives from both of our regions to share fresh ideas on our energy potential, challenges and alternatives.

The United States and Canada have shared a longstanding relationship that is unique in the world. Our countries are united not just by the world’s longest, safest, un-militarized border or the world’s largest commercial relationship. We are united more importantly by family, friends and shared values.

These connections are the same ones that make our assistance to each other in times of need instinctual and automatic. Whatever the cause – be it hurricane, ice storm, forest fire or terrorist attack, Canadians and Americans help each other out immediately, generously and without thought of receiving in return.

That is what good friends, neighbours and families do. They help each other and they stand by each other.

But our relationship is more complex than standing side by side. Our two countries are deeply enmeshed in countless ways.

Our cross-border ties in energy are particularly striking. As your Energy Secretary Samuel Bodman put it: “…we are linked by 22 oil pipelines, 84 natural gas pipelines, and 91 electric transmission lines.”

Energy Secretary Bodman reminded us of those links while visiting Canada last summer, the first time in our history that an Energy Secretary had visited Alberta’s oil sands. His trip reinforced the fact the United States looks increasingly to Alberta for energy security.

As well as proximity – continental kinship – and a shared interest in energy security, the strength of our energy ties is built on supply and demand. The United States is the largest energy consumer and importer in the world. It consumes 20 million barrels of oil a day.

Canada is the largest energy supplier to the United States of oil, natural gas, uranium and electricity. The Alberta oilsands contain 170 billion barrels of recoverable oil, making our Alberta’s reserves second to only Saudi Arabia’s.

We both see eye-to-eye on the importance of a market-based approach to energy resources. Our oil sands are an outstanding example of developing this. Growing from a mere concept in the early 1980s, they were transformed to today’s production of a million barrels a day, on the way to three million or more by 2015.

Both our jurisdictions must play an important role in technology, innovation and collaboration as a means of addressing global environmental challenges and finding clean energy solutions.

For example, partnering with the private sector to pursue the possibility of capturing and storing carbon dioxide in geological forms such as oil fields.

On Tuesday of this week the Calgary Herald reported Alberta Premier Ed Stelmach’s Conservative Cabinet discussed its own pipeline and storage system which would cut emissions from other industries such as Alberta’s coal-fired plants, among the largest contributors to global warming in Canada. And yesterday, Alberta became the first Province to introduce green house gas emissions legislation.

Bill 3 “Climate Change and Emission Management Amendment Act” and its accompanying “Specified Gas Emitters Regulation” state companies that emit more than 100 thousand tonnes of green house gases a year must reduce their emissions intensity by 12% starting July 1, 2007.

The specified Gas Emitters Regulation details how companies can reduce their emissions intensity. These compliance options include making operating improvements, buying an Alberta-based offset to apply against their emission total or contributing to a new government fund that will invest in technology to reduce green house gas emissions in the Province.

Prime Minister Harper supported the Premier’s initiative with a $155.9 million federal contribution from the Canada ecoTrust to help start the Alberta government’s new network to trap the oilsand’s carbon dioxide emissions and pump them underground.

President Bush’s recent State of the Union address signaled increased funding for the Advanced Energy Initiative. This initiative focuses on research and development to encourage technological breakthroughs in areas such as energy and transportation.

The address made specific mention of research into plug-in and advanced hybrid vehicles and funding increases for the Biofuels Initiative. The President’s 2008 Budget steps up funding for advanced energy technologies to reduce dependence on foreign oil and to change the way Americans power their homes and businesses.

Similarly in Canada, we have invested $2 billion in a number of ecoENERGY Initiatives – a set of focused measures to help Canadians use energy more efficiently, boost renewable energy supplies and develop cleaner energy technologies.

We see a $230 million investment in the ecoENERGY Technology Initiative as fostering the next generation of clean technologies that will help us break through to emissions-free energy production and use. The ecoENERGY Technology Initiative focuses on priority technology areas such as:

• CO2 sequestration and storage,
• Clean coal,
• Clean oil sands production,
• Advanced vehicles including fuel cells and plug in electric vehicles,
• Renewable and other clean energy,
• Next-generation nuclear
• And bioenergy.

In addition, $1.5 billion is being provided for Canada ecoTRUST, just mentioned, a new national, third party trust to support provincial and territorial initiatives aimed at taking real action to reduce greenhouse gas emissions and air pollution.

Through the Canada ecoTRUST, each province and territory can fund projects that are specific to its strengths and needs.

We enjoy energy, and energy has given us the ability to have the rich society we have today and the social benefits we derive from it. There is no denying the importance of energy and our need of it. The fact is that given the scale by which we produce and use energy in the world today and the infrastructure we have in place, carbon energy sources, fossil fuels, will supply most of the world’s energy for the foreseeable future, and by that I mean the next 50 to 100 years.

As Jim Donihee of Canada’s National Energy Board reported last October:

“It is expected that there will continue to be rapid growth in the development of Canada’s oilsands. There are, however, issues and uncertainties associated with the development of the resource. The rate of development will depend on the balance that is reached between the opposing forces that affect the oil sands. High oil prices, international recognition, geopolitical concerns, global growth in oil demand, size of the resource base and proximity to the large U.S. market, and potentially other markets, encourage development. On the other hand, natural gas costs, the high light/heavy oil price differential, management of air emissions and water usage, insufficient labour, infrastructure and services are concerns that could potentially inhibit that development of the resource.”

Oil Sands projects are extremely capital intensive even with the smallest projects requiring sizable amounts of investment – hundreds of millions – to billions of dollars – with years between initial investment and profitable production. The cost of capital projects in Alberta and in the oil sands region in particular, is rapidly rising. We have already seen projects deferred or cancelled due to the massive escalation in expected building and construction costs.

The cost of labour is rising. There are acute shortages of skilled labour in Alberta and solutions, such as the use of foreign labour and bringing in temporary workers are costly.

Other input costs, particularly natural gas, have risen – The number one issue on the operating cost side for oil sands developments is natural gas usage. Higher gas prices in recent years have translated into much higher operating costs.

And, there are social costs – you will be hearing more on these challenges from this afternoon’s distinguished panel.

Albertans are feeling the strain. Rising consumer costs, shortages of employees and the inability to access services and skilled labour – like engineers, construction workers, plumbers, and electricians in a timely fashion.

When it comes to home repairs in Alberta, there are a lot more “do it yourselfers” these days.

Canada’s New Government is addressing these challenges, but more lie ahead. There is, as you heard this morning, a broad spectrum of Canadian political opinion. Some of it wants to slow down – or all together stop - oil sands development. This political opposition is a significant challenge, especially given the current political arena.

There is an isolationist streak in Canada that wants to limit growth and leave the resource undeveloped; to save it for future domestic use.

There are legitimate concerns that the impacts on the watershed, particularly the Athabasca River, are too great; that too much natural gas is used; that too much CO2 and other greenhouse gasses are emitted.

And there are politicians themselves. There are a wide range of partisan ideologies currently represented in the House of Commons, an issue that is emphasized in the current minority federal government. With control of only forty percent of the seats, the ruling Conservative government does not have the votes to defeat a united opposition in Parliamentary matters. A prime example of this can be seen with the House Natural Resources Committee that I chair. With a majority of votes held by opposition parties, the committee’s fate is often in their hands. It can lead to uncertainty.

Stéphane Dion, the leader of the largest opposition party, the Liberal Party, has said that “the uncontrolled development in the oil sands is anarchic and bad for the environment and the economy.”

The Liberal energy critic Mark Holland thinks “we need to stabilize the oil sands. We are not going to allow companies to exploit that resource, to pump it out as fast as you can and give it to the Americans…”

Jack Layton, the leader of the socialist NDP and his energy critic Dennis Bevington: have called for a moratorium on oil sands development. Last week Mr. Layton said we are “raping and pillaging” without a plan.

So, clearly it won’t be business as usual, but neither will it be ‘no business at all.’

Canada’s New Government believes in responsible development. Canada is a secure, stable, source of energy for the foreseeable future, but we need to meet demand while reducing our environmental impact.

It doesn’t make sense for us to pursue solutions independently.

It was Canada’s last Conservative Government, under the leadership of Brian Mulroney, which ushered in the Free Trade Agreement between our countries, an agreement that has been a boon to both our nations. Prime Minister Mulroney understood that cooperation was in the best interest of both our countries.

It is only logical for us to collaborate as well in developing new energy technologies.

In this area, we have a history of collaboration through international fora such as the International Energy Agency, the G8, the Asia-Pacific Economic Co-operation, the Carbon Sequestration Leadership Forum, the International Partnership for the Hydrogen Economy and other organizations.

As Chairman of the House of Commons Standing Committee on Natural Resources, I have seen first hand how Natural Resources Canada values its cooperation in science and technology with the U.S. Department of Energy. And I am delighted with the openness and eagerness to work together, that is shown by your Energy Secretary, Samuel Bodman.

Nevertheless, the opportunity to collaborate on a more strategic level needs to be strengthened. We must define common goals, we must provide the appropriate legal frameworks for science and technology collaboration, and we need to coordinate resources in order to carry out increased collaboration.

The North American Energy Working Group Experts on Energy Science and Technology under the Security Prosperity Partnership are addressing two of these issues at present.

The experts are engaged in negotiating a trilateral energy science and technology agreement among Canada, the U.S. and Mexico. This agreement will provide a legal framework for intellectual property protection, exchange of resources and transfer of funds.

Secretary Bodman’s recent speech to the California Educational Researcher’s Association Conference reinforced that fact that one of the most urgent issues faced today in the United States is energy security.

Canadians and Albertans in particular want to supply a clean energy supply. Together, we can address the issues of clean air, climate change, environmental sustainability and economic competitiveness.

But to get there we need to push forward with science and technology. We’ll get there faster and with greater success if we work together.

It has been an honour to have had this opportunity to address you today.

Thank you.

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