NOVA SCOTIA HOUSE OF ASSEMBLY
NATURAL RESOURCES AND
Tuesday, April 23, 2019
Shale Gas Development
Printed and Published by Nova Scotia Hansard Reporting Services
NATURAL RESOURCES AND
ECONOMIC DEVELOPMENT COMMITTEE
Suzanne Lohnes-Croft (Chair)
Hugh MacKay (Vice-Chair)
Hon. Pat Dunn
[Hon. Lloyd Hines replaced Rafah DiCostanzo]
Legislative Committee Clerk
Chief Legislative Counsel
Department of Energy and Mines
Simon d’Entremont - Deputy Minister
Sandy MacMullin - Executive Director, Petroleum Resources
HALIFAX, TUESDAY, APRIL 23, 2019
STANDING COMMITTEE ON
NATURAL RESOURCES AND ECONOMIC DEVELOPMENT
THE CHAIR: Order, I call this meeting of the Standing Committee on Natural Resources and Economic Development to order. My name is Suzanne Lohnes-Croft, Chair of the committee, and I am also the MLA for Lunenburg.
The committee today will be receiving a presentation from Simon d’Entremont, Deputy Minister and Sandy MacMullin, Executive Director of the Department of Energy and Mines. I’ll ask committee members to introduce themselves.
[The committee members introduced themselves.]
THE CHAIR: We have the clerk, Darlene Henry, with us and Legislative Counsel, Gordon Hebb.
I’d like to remind all people in the room to have their phones on silent or vibrate and that only media are allowed to take pictures or videos during the meeting. The committee will be hearing from invited witnesses only. Members of the public are invited to observe the proceedings.
The washrooms and coffee can be found in the anteroom, and in case of emergency we will exit through Granville Street entrance and proceed to the Grand Parade Square by St. Paul’s Church.
Members and witnesses are to wait to be recognized by the Chair so that we’re able to pick up for recording purposes.
I will now invite Mr. MacMullin and Mr. d’Entremont to make their opening comments and introductions.
SIMON D’ENTREMONT: Thank you very much. Good afternoon and thank you for inviting us to be here today. I am Simon d’Entremont, the Deputy Minister of the Department of Energy and Mines. With me today is Sandy MacMullin, Executive Director of the Petroleum Branch within the department.
As you know, Nova Scotia has a moratorium on high-volume hydraulic fracturing in shales. Part of the role of the department is to do research that provides government with information to make policy decisions about our onshore petroleum resource potential. In recent years much of that work has centred on the development of our onshore atlas. This extensive volume of work helps us understand our geology, the size of our resource potential, where it is likely located, and its economic potential.
To date, we have studied two of seven areas of the province that we know have the right geology to contain oil and gas. Our findings indicate that Nova Scotia could have significant petroleum resource potential. A safe estimate is there is 36 trillion cubic feet of gas potential, of which seven trillion cubic feet would be recoverable. Of course, that depends on world market prices, and it’s important to remember that it is spread out over a very large surface.
Our work also provides no guarantees that exploration and development would be successful. Our province doesn’t have a lot of data to draw on and the more exploration experience you have, the more definitive we can be about the resource potential. Since 1970, Nova Scotia has had 54 exploration wells drilled in the onshore; only 34 of these wells exceeded a depth of 1,000 metres and 18 of these have a modern suite of data. Even with limited exploration in onshore Nova Scotia, natural gas remains an important part of our energy future. Natural gas powers some of our industries and heats our homes, schools, and hospitals.
Until recently, most of our supply came from the offshore. Over the last 20 years, we’ve safely retrieved 2.1 trillion cubic feet of natural gas from the Sable Offshore Energy Project. As a result, the province received nearly $4 billion in payments that helped fund roads, schools, rural Internet, and much more.
Now that the Sable Offshore Energy Project and Deep Panuke have produced their last gas, Nova Scotians will have access to the gas they need by other means. In 2017, government amended the Gas Distribution Act to give the URB the authority to consider long-term pipeline contracts. As a result, Heritage Gas has signed a 22-year contract to bring gas from central Canada to Nova Scotia. Clearly this is a subject that has many perspectives and positions. It also has significance for Nova Scotia’s energy and economic future.
I welcome the opportunity to discuss the matter further and we’d be happy to take your questions.
THE CHAIR: Any remarks, Mr. MacMullin?
SANDY MACMULLIN: No, I’m fine, thank you.
THE CHAIR: Although the committee does not receive submissions from outside groups who are not invited witnesses, we have received a submission from NOFRAC regarding today’s topic. This topic is considered tabled for members information only.
We will begin questions with the PC caucus. Mr. Dunn.
HON. PAT DUNN: Thank you, Madam Chair. Thank you for being here today to answer some questions. Again, it’s a topic of great interest mainly because we’d just like to know what the research is saying today. We’d like to know of any accurate information that may be out there.
We certainly realize that there’ll be no drilling tomorrow or five years’ time or maybe never, but I think it’s an obligation that we have in representing many of our constituents that we get educated, that we know what’s going on out there in this particular industry, especially when you’re dealing with potentially a $60 billion industry.
Basically, that’s where we’re coming at: just trying to see what research is saying now compared to what it was saying a few years ago. We know they’ve been drilling for the past 60 years across the world and so on.
Studies conducted by the Environmental Protection Agency and the Groundwater Protection Council, whose job is to promote the protection and conservation of groundwater, found that there have been no confirmed incidents of groundwater contamination from this particular process.
Keeping that in mind, both sides of this issue have developed, in my opinion, the art of effective or persuasive speaking or writing, especially the use of figures of speech. What is your opinion of so much dialogue that appears to be sometimes lacking meaningful content? There are so many articles out there. There’s so much information and research that if you were putting it on the scale, you get to the point: Who do I believe? What is the actual truth?
SIMON D’ENTREMONT: Those are all great questions in that community conversation and community dialogue around this issue is extremely important. People have difficulty sometimes in finding sources of information and what they should read and what they should try to understand in terms of this issue.
There are certainly views on both sides of the issue and it’s not uncommon to have those conversations. Different communities have different positions, so there’s lots of peer-reviewed material, academic material, in terms of getting information that people can get their hands on to try to better understand what role onshore gas has. We do our share within the department in terms of just doing good science and good geoscience which is good for us and good for the province.
We do geoscience, for example, in our Mines division around where there might be uranium, even though we don’t mine uranium, in that it leads us to know where the radon risk is highest. Then we can create maps that create good information for public health purposes. Continuing to do the science is our contribution from the provincial government to help academics and geoscientists continue to understand what the resource looks like, which builds just good science, a good base for us in the way we do our business.
PAT DUNN: Thank you for that answer. As I mentioned before, in one form or another this process has been used since the 1940s. Of course, there’s a new process with a high-volume process now that I think was used in Canada, I believe, for the first time in 2005.
Does our province have a solid scientific grasp of its groundwater resources or has there been enough research available to draw firm conclusions about any impact on communities?
SIMON D’ENTREMONT: I’ll start. I think we continue to build our knowledge base about our resources. Some of the best practices around what we do, including in our mining shop, include having a good knowledge of the water and its constituents before you undertake developments so that you have a reference case, a place to go back to. We continue to build our case.
It also is very geography-specific, in that some of the work we have done with our atlas and our research is around certain parts of the province. Other parts of the province have less potential. Because it’s so geography-specific, it’s hard to give one specific answer. Different parts of the province have different amounts of science and understanding of water.
Sandy, do you have anything to add?
SANDY MACMULLIN: I think when you’re talking about freshwater, you’re talking about two things: what exists in aquifers and then what’s on the surfaces in the streams and the rivers. Certainly on potable water, for those wells that are drilled, Energy and Mines has a database that has been developed that is fairly accurate on where water wells exist across the province and how deep they are. Subject to check some of the quality of the water, I think from a hydrologist’s standpoint, we have a pretty good knowledge of where the freshwater is in Nova Scotia. It’s pretty much all over the place, in streams and rivers all over the place.
THE CHAIR: I’ll move on to the NDP caucus. Ms. Chender.
CLAUDIA CHENDER: Thank you, Mr. d’Entremont and Mr. MacMullin, for being here today.
My colleague’s question made it sound as though this was all up in the air, but there are a few givens. One is that we have a ban on fracking in the province, which I think is important to state at this juncture. I’ll also note for the record that we voted against bringing this topic to this committee for that very reason. While I respect that the department continues to do scientific research on the geophysics and the geology of Nova Scotia, which makes perfect sense, it does not appear to me or my colleagues that we should be having this conversation at all.
Given that we are, another one of the givens is some good science around fracking. I would draw your attention for your comment to a 2014 study from the Council of Canadian Academies commissioned by Environment Canada. It found that the geological conditions in Nova Scotia are not conducive to common practices of fracking, wastewater disposal in particular. At many drill pads, the wastewater is injected underground into wells that are sometimes shallower than the production wells but still much deeper than the freshwater aquifers, often into depleted oil and gas reservoirs or saline aquifers. If this were attempted in Nova Scotia, according to this study, it would likely result in groundwater contamination.
You may or may not be familiar with the specific study I’m speaking about at the moment, but the real question is: Is this worth the risk, in your opinion? Either of you could comment on that. We have a ban. We have science that shows that at the very least, this is likely dangerous and may well interfere with groundwater and have many environmental repercussions. Is it worth reopening the conversation on fracking, in your opinion?
SIMON D’ENTREMONT: As the Wheeler report pointed out a few years ago, its recommendation for the province was that before undertaking this type of work, you should carefully study a number of elements, including participation from the community and the science around water and disposal, around the environment, around noise, and a number of things. Water was predominant and took a strong place in that report. I think citizens’ concern around water is one of the primary issues that needs to be addressed.
We have a good regulator with the Department of Environment, which has Acts and laws regarding water and water quality. We would need to make sure that those are doing their job and that we have confidence that they can do the job. As you pointed out, a lot of the issues around environmental management are geology-specific. Understanding our situation here is important and continues to be important as we keep doing all of our work around resource development.
SANDY MACMULLIN: A couple of things. Just a point for clarification: the ban is on high-volume hydraulic fracturing in shale and not a widespread ban on fracturing, because that would capture geothermal energy enhancement for groundwater flow. It would also capture something called hydrofracking, which is just basically doing hydraulic fracturing for freshwater, which happens down in the southern part of the province. That’s just a point of clarification.
On the Council of Canadian Academies, you took an excerpt. My comment on that would be the more you know about the geology of your region the more you can say about its capacity to be able to manage the oil and gas industry. For instance, up in Cumberland County, we have hardly any penetrations at all into the Horton Group, for example, so we can’t tell you for certain whether or not there are saline aquifers there that are deep, that you could dispose of industrial waste water. The more you know about an area, the more you can say, and one of the things that we can say about Nova Scotia is that we have something like maybe 134 wells drilled, not a lot of them very deep. We heard a little earlier that, since 1970, 54 have been drilled; about 34 have been deeper than 1,000 metres.
I think it’s fair to say that it’s fair to raise some doubts about the ability of Nova Scotia, say, sandstones to exist in deep formations that could accept industrial waste of any sort including frack water, but it’s also to say that there could very well be. We don’t know yet, because we don’t have a lot of information.
CLAUDIA CHENDER: I would just restate my original question - thank you, those are helpful clarifications - but is it worth the risk? Given this and other reports, given the Wheeler report, given the ban, given the general community consensus - with I understand some exceptions in certain geographical regions that may stand to gain from exploring this practice - is it worth the risk to open up this conversation around fracking?
SIMON D’ENTREMONT: I’d say currently our situation is we have a ban and we’re not considering reopening it. It’s not a question we’re asking ourselves right now. We just continue to do good science and continue to prove our understanding of our geology, our water, and so on, so that we can continue to do good science in the future.
CLAUDIA CHENDER: Thank you.
THE CHAIR: Mr. Maguire.
BRENDAN MAGUIRE: Thank you for being here today. I just kind of want to ask you about the process. We’re going to hear a lot from different individuals, politicians, and Parties about the lack of fracking and, as you stated, there is a moratorium in place. We’re hearing concerns from individuals around the table today and outside, but has any municipality or community ever formally approached your department to request fracking in their backyard?
SIMON D’ENTREMONT: We don’t have any formal requests. We have casual banter with people when we’re out in the community, talking at business events, and with people who are looking to understand the mechanics of the state of fracking in Nova Scotia, but no formal requests.
BRENDAN MAGUIRE: Aside from what we’re hearing here today and what we’ve heard in our own little political bubbles, the general community - I mean, when the Wheeler report was done, I think the public was very loud and direct about their feelings on this. But outside of this, to be clear, you’re not hearing any requests for fracking from communities, municipalities, or businesses - nothing formal.
SIMON D’ENTREMONT: We’ve had nothing formal from municipal governments, for example. We continue to have conversations. People are interested in talking about it from time to time, and part of our job is answering questions when people come to us and letting them know the state of play.
THE CHAIR: We’ll turn it over to the PC caucus. Ms. Smith-McCrossin.
ELIZABETH SMITH-MCCROSSIN: Thank you very much for coming today. Can you explain to us a little bit of information around the coal bed methane, and what are the prospects of that here in Nova Scotia?
SANDY MACMULLIN: We have a number of coal basins in Nova Scotia. A few of them that come to mind that have had some recent coal gas-related activity are Donkin and Sydney Basin in the offshore and East Coast Energy in the Pictou area, and they currently have a production licence with us. We’ve had some activity up in the Springhill area over the years. I think it’s fair to say at this point that there’s far more potential in unconventional than there is in conventional and coal gas, but the potential for all three areas is significant.
What we don’t know - and this is important, because the work that the atlas has demonstrated says that we - I like to make a distinction between potential resources, resources, and then reserves. Three different things. Potential is “could be there, not sure.” Resources is “it’s there but we’re not sure it’s economic.” Reserves is “it’s there and it’s economic.”
We’re not able to put our hand on our heart and say today that we have reserves. We are able to put our hand on our heart and say that we have significant potential.
THE CHAIR: Excuse me, you took a photograph. (Interruption) Can you please delete that from your phone?
SANDY MACMULLIN: We do have one company actively pursuing coal gas in the Foord seam in the Pictou area, and that’s East Coast Energy.
ELIZABETH SMITH-MCCROSSIN: Does the 2014 legislation prevent coal bed methane development, and is the extraction method different from shale gas?
SIMON D’ENTREMONT: I can take that one and you can jump in afterward. Coal bed methane is not covered by the moratorium that covers high-pressure hydraulic fracturing in shale. The two main issues there: it needs to be in shale, and it needs to be high pressure. There are other types of fracturing that can use nitrogen gas or in coal beds, for example, and those are currently allowed.
SANDY MACMULLIN: The only thing I would say is that, as Simon said, you often find that you need different kinds of mediums in order to stimulate gas production from coal. It is not the intensity of high-volume hydraulic fracturing that gave rise to the public outcry back in the 2010s. It’s often nitrogen that’s used, and as we know, the air is about 79 per cent nitrogen.
There’s a fear that sometimes if you use water, it will plug up the existing natural fractured system - in coal you have primary cleats and secondary cleats. It’s already fractured. It is not something that has been banned, the same as hydro fracking for freshwater and for geothermal. Those things are not banned.
THE CHAIR: Ms. Roberts.
LISA ROBERTS: Thank you. I welcome this opportunity to ask some questions. It seems to me that the conversation about fracking after the Wheeler report went quiet for a number of years. We invested a lot of time - I think Nova Scotians across the province invested a lot of their energy and their goodwill to participate in a process that arrived at a conclusion, and for a time, that conclusion was accepted.
It seems to me that the question of fracking is back on the table and back in public conversation, largely as a result of the publication of the Nova Scotia Onshore Petroleum Atlas. I’m wondering, given the juncture we’re at, and given the increased and ever- increasing public anxiety around climate change and the science around how dramatically and how urgently we need to be transitioning to a green low-carbon future, including as it relates to energy, can you share if similar scoping or opportunity documents have been prepared for renewable energies? Where is the solar or wind or tidal atlas that Nova Scotia has put public resources into producing?
SIMON D’ENTREMONT: Certainly, we have a tidal strategy. We have a lot of policy work that has been done within the province to try to quantify the size of the tidal resource, for example. We do have a decent understanding of the size of our solar resource which we’re looking to exploit. Interestingly enough, some people don’t think solar is a good option for us because we’re not a sunny climate, but Germany has 30 per cent less sun than we do and produces 8 per cent of their energy from solar.
We are looking at the resource potential in green and renewable resources. We set a target of 40 per cent renewable energy by 2020, which we will surpass. We have a GHG reduction target of 45 per cent to 50 per cent under 2005 levels, which we plan to meet. We have done a lot. We have installed the second most wind of any province in Canada after P.E.I. We’re very proud of our efforts to green the environment, reduce greenhouse gases, and reduce our reliance on traditional fossil fuels.
Natural gas does play a role in there. When you’re making policy around energy, the more tools you have in your Swiss Army knife to choose from, the better off you are generally. Natural gas, not from the ground here but that we get from pipelines and other areas, is an important part of our energy mix.
Natural gas is important actually as an enabler of putting renewables on the system. When you put up wind, tidal, and solar, it’s not on 24/7, so you need a backup resource. Natural gas plays that role. We continue to do policy work around making sure we have access to natural gas coming from other sources as well, like pipelines, now that the offshore is not producing our natural gas. We’re working all those levers as well. It’s good energy policy for us to do so.
SANDY MACMULLIN: I’ll add to that. We certainly have wind maps of Nova Scotia. You cross-reference those wind maps and your energy maps for where you have infrastructure. I think it’s fair to say that those departments of government that have resource stewardship responsibilities do their best to map out where the resources are and their confidence around the size and location.
In the case of the onshore atlas, that was a project that had its infancy in 2009. In 2014, when the Wheeler report came out, I believe, it identified in one of the chapters the lack of understanding of what the potential was. What that did at the time was, it enhanced the importance of completing the atlas work - at least completing that first stage of the atlas work. I think it’s also fair to say that as your information and knowledge grows about whatever natural resource you have, you update your understanding of it, so you keep it a living document. That’s the intention.
SIMON D’ENTREMONT: If I could have a follow-up as well, the province has endorsed an open data approach. Rather than keeping all the data that we collect to ourselves, let’s make it publicly available for citizens, science, and academics to tap into and do some of our work and some of our policy work and some exploration of the issues for us or with us. Making our data and our science public is good public policy on many fronts.
LISA ROBERTS: I just want to follow up on the comment you made about how we need natural gas resources in order to add more renewables to the grid. As I have been following the public conversation, I’m wondering if that is still fully the consensus or if there are not also conversations about this being why we have to really get serious about talking about battery potential, also about smart grids and interconnections of grids across different time zones, and maybe also about how we manage demand so that we are adjusting to our natural environment somewhat, as opposed to just thinking that we need to be continuing to contribute greenhouse gas emissions into our exceedingly vulnerable atmosphere at this point in order to do more renewables.
I just want to challenge you a little bit on what I heard. I’m hearing that it’s actually time to leapfrog over that step and get to where we can actually see a future for the next generation and the next.
SIMON D’ENTREMONT: That’s a great point. By the “we,” I mean “big picture we.” I think there’s a whole portfolio of activities and energies that are needed.
Like you say, batteries are going to be a huge enabler as well as demand response and smart grids. They’re all part of the solution. Different particular areas of the world can advance at different speeds. In some areas where the cost of batteries is prohibitive, or they have fewer options, like in Europe, if they don’t have enough natural gas, they might go back to burning coal to back up their renewables and start going backwards.
It’s a big jigsaw puzzle, and every jurisdiction is going to be a little bit different. There’s not a strong consensus. It’s all one or the other. I think many people believe it’s a pragmatic approach to putting on as many renewables as you can. Where you can’t do it economically or without driving energy poverty even further for those people who are already paying huge bills, you try to have a balanced approach. Different jurisdictions will look at it differently.
Clearly, we are moving down the path of putting more renewables on our system. Greener energy is part of our future, and now we’re coming to a point where it’s getting easier and better to do that. It used to be that putting non-emitting sources came at a huge cost. People were pushing up against energy poverty and, having paid as much as you can for an energy bill, putting more onus on them will start becoming a problem. Now some of the renewables are coming in at competitive prices, which is really opening up a lot of options for us to continue to put non-emitting sources into our energy grid and making great options for us.
The movement towards electric vehicles and these things will happen. I think government has a role for setting their right policy and enabling conditions to make sure that happens and that we move it along. I think we have done a pretty good job here in Nova Scotia. We still have a way to go, but we started in a pretty tough spot, and now we have made a lot of progress.
SANDY MACMULLIN: I understand that the Holy Grail is energy density in batteries. If you can solve putting more energy into the same volume or even smaller volume, then you have something which is quite attractive. There’s a huge amount of research going on globally on energy density and batteries. I think we all hope that that will be successful. It’s getting closer, but we’re not there yet.
To take an example of another jurisdiction, maybe about three weeks ago, Germany decided that it would set a new target for 2040, which is 65 per cent to 80 per cent renewable energy by 2040 and to get off coal, nuclear, and oil completely. The backstop for that would be natural gas. Natural gas in Europe is effectively seen as a battery until technology to store renewable energy progresses to the point where that becomes a lot more reliable and can fill the gap when the sun isn’t shining and when the wind is not blowing, or it’s blowing too hard.
These are conversations we have all the time within the Department of Energy and Mines - with the renewables group, with the oil and gas group, and with Simon - to look at our situation and our postal code, to see where we can maximize the opportunities for renewable energy and those things that we can’t because we’re not a California.
THE CHAIR: We’ll move on to the Liberal caucus. Mr. Irving.
KEITH IRVING: I’m interested if you could expand a bit more on the energy mix. You explained that it is valuable to have many tools in the toolbox. Clearly things have changed for us. We were getting significant natural gas resources for consumers in Nova Scotia. Can you explain to me where we were with those natural gas resources in terms of the percentage of our energy mix, where we are now, and maybe talk a little bit about whether that gap has been replaced by renewables now that we’re replacing natural gas with that? How much now is coming from out of province in terms of natural gas? What’s the effect of that to the cost of energy for Nova Scotians? Where’s that gas coming from? Is that frack gas? Just expand a bit more on the energy mix: where we were, what we’ve come through, and maybe where we’re going.
SIMON D’ENTREMONT: I can start off here, and Sandy can finish. In terms of our current state of play, where we’re at, if you’re thinking of the impact of energy sources on greenhouse gases, for example, in Nova Scotia currently about 45 per cent of our greenhouse gases come from electricity production, primarily coal; 45 per cent comes from gasoline and heating oil; and it’s 10 per cent for everything else. That’s currently the mix that we have for greenhouse gases.
That’s why we’re advancing technologies around solar. We have our solar incentives program. We have solar for community buildings that we’ll be putting into place. We have the second most wind power on the system in Canada, after P.E.I. Of course, we have continued to install some electric vehicle chargers and so on. We continue to work to reduce our greenhouse gas footprint. That’s kind of the big picture of where we are currently.
Sandy, do you have more information on natural gas supply?
SANDY MACMULLIN: I clicked on the Nova Scotia Power site before I came over here, just to see what was instantly being generated and what has been happening over the last 24 hours. It also shows you that in 2007, we had something like maybe 2 per cent renewable energy in Nova Scotia. Now we’re in excess of 25 per cent, and Nova Scotia Power projects that by 2040, we’ll be at maybe 41 per cent renewable energy on an annualized basis - not an instantaneous basis but on an annualized basis.
By 2040, Nova Scotia Power also projects that there will still be a fair amount of coal use as well as natural gas, probably less natural gas than we used in the past because we had it right next door, and it was at a pretty good price. That volume is not available to us currently. Natural gas right now largely comes from western Canada, although I expect some can sort of get back hauled through the Marcellus Shale and come to Nova Scotia. You can’t really trace the molecule. It all gets blended, but I would be surprised if there wasn’t a healthy percentage of gas that came from hydraulic fracturing and coal and conventional coming from western Canada. There’s no question that the future of the industry in North America for natural gas is going to be hydraulically fractured gas. The conventional stuff is depleting, and the shale gas is staggering, the potential there. Likely, the future is going to be hydraulically fractured gas from Canada and North America.
That’s why, maybe 12 years ago, we were all wondering where we were going to put the LNG regasification terminals. North America was running out of gas. Today, it’s just the opposite; it’s where are we going to locate the LNG gasification terminals to export it to other parts of the world, particularly those parts of the world that also have their greenhouse gas targets and they need natural gas to backstop more renewable?
KEITH IRVING: The lack of local supply now has changed our energy mix and been replaced by renewables. Is that a fair statement? Were we at 10 per cent natural gas when we had it available locally, and we’re down to 3 per cent, and renewables have helped replace that? That gets into the question of affordable energy at an affordable price.
SANDY MACMULLIN: I think at one point in time, Nova Scotia Power could have been consuming 90 million cubic feet a day. I would have to check these numbers, but you’re probably talking between 10 per cent and 20 per cent at one point in time, the power that would have come from natural gas.
Again, Nova Scotia Power would flip back and forth depending on what their emission targets were as well as what the most inexpensive fuel is for them, because they have an obligation to generate power for the ratepayers in the most cost-effective way. That doesn’t mean that because natural gas is available to them, they’re going to use it. They’re going to look at their options.
There’s no question that we had more to draw from, potentially, when we had as much as 500 million cubic feet a day being produced from the offshore. Nova Scotia Power has entered into contracts to secure - I think I have the number right - maybe 30 or 40 million cubic feet a day. I’d have to check that number. I think you’re going to find Nova Scotia Power projects that natural gas will be part of the energy mix going forward for some time.
SIMON D’ENTREMONT: Just a quick point. In the long term, I think the future is also that renewable natural gas is going to become part of the mix. There are ways to recover methane from landfills and biological processes, so for many of these companies in the transmission business or in the gas business, there’s a new suite of renewable natural gases that will become part of the mix.
For example, there are some closed-loop business arrangements where methane is recovered from landfills and used to power the trucks that collect the garbage and bring it back to the landfill and is a self-sustaining loop. Those types of things will become part of our mix in the future, very favourably.
THE CHAIR: Mr. Dunn.
PAT DUNN: Across North America in recent years, new innovations in technology in the process have enabled oil and natural gas producers to unlock vast amounts of new energy supplies, thereby creating new jobs, lowering the consumer price, and so on. My question is, and it’s just maybe an opinion: Will Nova Scotia be under any pressure to develop its unconventional oil and gas resources in the next 10 to 20 years because they are facing a dwindling population and very serious fiscal challenges?
SIMON D’ENTREMONT: I think natural gas is one of those tools in that Swiss Army knife of energy tools. As we continue to open up new areas like solar, like we’re working on tidal - those will give us the opportunity to diversify and to have less reliance on any one particular fuel.
We also have the opportunity through increased capacity for organizations like Heritage Gas to buy more gas from abroad and bring it to the region, so we have other tools at our disposal.
Sandy, anything else there?
SANDY MACMULLIN: I think it’s fair to say, and I mentioned this earlier, that there’s a lot we don’t know about our resource endowment for natural gas in the onshore. It’s not as if you’re likely to have a gold rush mentality in a scenario where somebody was to just say that the moratorium was lifted. It would not likely be a gold rush mentality, because careful decisions need to be made based on new information. Whether you thought it was important for the economy or not, I think it’s hard to project that it would make a big difference in the short term. You need to acquire more information to better understand and assess your risk and go from a potential resource to a resource and then on to reserve.
We have people exploring now that are not doing high-volume hydraulic fracturing in shales. The progress is steady, but it’s slow. The only thing I think might change that would be if an LNG project was proposed for the onshore - that might cause companies to come forward and say they’re interested in trying to see what the resource potential is, but we’re a ways away from that yet. I don’t think it’s going to be a doom-and-gloom situation.
PAT DUNN: When we look across the country, seeing the western provinces and so on - looking at their mapping, their studies, their reports, their technology that they’re using - how much of that is of any use to us in Nova Scotia? You mentioned earlier about geography-specific, that our rock formation is probably different or may have some similarities. What they’re doing in other jurisdictions, does it really hinder or help us?
SANDY MACMULLIN: A number of different areas can be addressed in answering that question. First is regulatory experience and how long this technique has been used in various jurisdictions across Canada, which is from Ontario right through to B.C., for over 50 years. There are modern-day codes of practice, and the rock mechanics are very well understood, and the geologies are very well understood particularly in British Columbia and Alberta. They’re able to build on that database and make pretty confident stipulations as to how deep you’re allowed to do hydraulic fracturing and how shallow you’re not.
There’s a wealth of regulatory practice that exists in Canada that can be tapped into for hydraulic fracturing. In fact, just for conventional activity, we tap into that already and have been for some time.
There have been advances in technologies over the years. For example, Apache down in the Permian Basin doesn’t use any water at all; they have come up with a technique that allows them to not use freshwater. There are advancements all the time because it’s a competitive situation and there are a lot of areas in North America that are water-challenged, and they have to come up with new methods.
I think that in terms of our own geology, it’s fairly unique. The closest proxy we have for that - and in fact, it’s better than a proxy, it’s the same geology - is in the Sussex area of New Brunswick and also the Moncton area, Stoney Creek, that has oil production since probably 1910.
There are some learnings that we can have, but we really need to collect more data so that you can better understand your rock mechanics and better understand your geology, and then you’d be in a situation to be able to optimize any proposed activity.
SIMON D’ENTREMONT: The other thing that other jurisdictions do that’s helpful for us to at least keep an eye on, even if our situation is different, is the other parts of the spectrum around allowing development and supporting types of resource development, whatever the sector. That includes best practices in regulation, transparency around reporting for environmental measures and so on. These are always interesting things for us to learn from other jurisdictions and to keep an eye on as well.
THE CHAIR: We’ll move over to the NDP. Ms. Chender.
CLAUDIA CHENDER: I think our position is relatively clear. Our questions and positions point to the idea that we’re much more interested in this conversation about transitioning to renewables and climate change than we are in any conversation about hydraulic fracturing.
I want to go back to this conversation about potential resources, resources, and reserves because those categories are often presented in all natural resource sectors as sort of fixed. As you’ve described, you have potential resources; you think they’re there, you know they’re there, they’re economic.
I want to suggest that the third piece - “they’re economic” - is a very subjective calculation actually, so my question is: Is there any way in which the Government of Nova Scotia and this department has any kind of more broadly full-cost accounting for the economic viability of a natural resource reserve, in particular natural gas? It may be that some company comes along - maybe there’s an LNG project proposed, maybe there’s not; who knows? - and says, here are the numbers, it’s economically viable for us to do this. We’ve seen the onshore atlas, here are the reserves, it’s economically viable. They’re not taking into account greenhouse gas emissions. They’re not taking into account climate change. They’re also probably not taking into account groundwater. They have to, but really when it comes down to it, that’s not their interest. They’re definitely not taking into account local property values. They’re definitely not taking into account local biodiversity.
Are you taking that into account? Is there a way in which your department or any other piece of government is looking at things in that more full-spectrum way to make sure that we’re making the right decisions when we come up against a reserve?
SIMON D’ENTREMONT: These are great questions. Just for the committee to understand the concept of the three different measures that we use: there’s this much resource in the ground; you can get this much out of it with the physical processes you have of the day, which can change over time; and this much can be taken out profitably.
CLAUDIA CHENDER: Right.
SIMON D’ENTREMONT: The definition of “profitably” has a different lens, admittedly, I would say. The private-sector lens is: How much can we get out profitably and make a rate of return off it? That’s something that will change over time with the economics, both regionally in prices and currency fluctuations. That will change.
I do think we take a holistic view, as government. For major projects, we have a kind of one-window approach where we bring all the departments and try not to make decisions with just the lens of the department - try to take the big picture. The same thing with resource development. The Department of Environment, of course, a very important partner; the Department of Lands and Forestry around Crown land; the Department of Business over environmental impacts - we try to make balanced decisions about what’s in the public interest, and the public interest goes beyond what is economic, from a private-sector perspective.
“Economic reserve” is the language we use to suggest that companies would be interested because it hits their minimum benchmarks, but in terms of our policy-making, we have to take a broader view than just what makes companies money. It’s good for them to do that, and that’s the way their business works, but we also have to look at the public policy interest of the importance of that resource to us and the impacts and so on. I hope we do that.
SANDY MACMULLIN: The first comment, about whether it’s potential resources, resources, or reserves - it’s fair to say that it’s all subjective. As you get more toward reserves, it becomes less subjective, because you know more information. In fact, my background is reserve engineering, so it’s how much is in the ground, how many wells you need to get it out, what the production rates are, and what facilities you might need. You know the most about something after you’ve left it, so that’s kind of how it works.
We haven’t had a situation in the onshore yet that we’ve been able to take any company right through to a normal development plan where rates are approved, determinations of economics have been made, and they’re allowed to proceed. But I would say that, if we got to that point, we would use many of the same kinds of things that would happen in the offshore.
In the offshore, you can make a discovery, but there’s no guarantee that you’ll be allowed to develop it. You’ve got to be able to demonstrate that it’s economic, that it’s commercial. There’s a test for that, and it’s not a simple test. You have to file a development plan. What’s your capital cost? What’s your operating cost? Show us that or show the regulator that. You’ve got to go through the Canadian Environmental Assessment Act process to demonstrate that the activities that you plan and the fluids that you’re going to be using to drill, the disposal of produced water from offshore activity, the disposal of cuttings, and all those things do not exceed an environmental hurdle of any sort.
It’s a very rigorous process that’s involved in the offshore, and if you don’t make the grade, you don’t get the authority to develop it.
We haven’t had that situation in the onshore yet, but I can’t imagine it would be any different, because you’re talking about developing a resource that has the same kind of approach, whether it’s the onshore or the offshore.
CLAUDIA CHENDER: Just to poke a little bit, I would say that from an engineering perspective, it becomes much more objective as you move towards reserves, because you have all that data. But I still would suggest that it remains subjective, because there are so many unintended consequences that, as you say, you don’t know until you’ve left the project. These are the unintended consequences that I think we are voicing concern about here.
I guess my follow-up question is - you said that there is a test in the offshore. Presumably there would be a similar test, although it sounds as though - and rightfully so, we currently have a ban on the practice. Maybe that test isn’t in place now. But my general question is, Mr. d’Entremont, you spoke of a broader lens. We’ve been hearing a lot about these lenses that government applies; we hear about a gender lens, we hear about an environmental lens. We do a lot of FOIPOPs to find out where these glasses are that people put on and we don’t get anything back, so I guess my question is: How is that lens applied?
Is there rigour, is there a test, is there a way in which everything we know about climate change is brought to bear in a systemic, traceable way on these conversations and, if so, what does that look like and how can we find it?
SIMON D’ENTREMONT: I think it happens a lot through the conversations and dialogue between our departments, and our government is at its best when we remove the traditional silos that we’ve all heard of and we consult our colleagues in other departments where they have other subject-matter expertise that we bring to bear.
I think the point you’re going to is that decisions around these types of things are not simply quantitative, meet a certain number. Policy decisions of government are more complicated than that and you have to take into consideration all the benefits, all the impacts, and make very wise decisions. I think consulting with our subject-matter expert departments and colleagues in other places is part of how we do that.
We bring them together, often we have working groups that work together to collaborate on and try to provide the best analysis that we can to find out what our options are and to make sure that we have a very holistic view of that.
I think, as a small jurisdiction - I used to work for the federal government and we used to say all the time, it would be nice to work for a small provincial government where everyone knows everyone. Wouldn’t it be easier?
It’s still not easy, perhaps, but it is part of good policy-making. Our citizens and our companies and all our partners expect, as a provincial government, we can act as one and have a holistic view of things in our policy-making, and hopefully we deliver that for citizens, our companies, and whoever else we deal with.
THE CHAIR: Mr. MacKay.
HUGH MACKAY: Thank you very much, Madam Chair. First, I’d just like to say it’s good to see such a good turnout from the public here today, and I’m glad that you’re out here. Thank you, because citizen advocacy and positioning are important for us to hear.
I’d also like to say thank you to the department for coming out here to work with us on exploring more information. Certainly, it’s quite clear that this government’s position is that there is a moratorium on hydraulic fracking and there are no plans to change that moratorium. That being said, I think, like any issue, whether it’s coastal protection and adaptation or aquaculture or other issues that one addresses as the technology changes, we must look at those changes in technology and see how it fits within moving our province forward.
One of the local media outlets today quoted a study done at Dalhousie University. I guess it was done and turned over to an energy authority in rural Nova Scotia: “Considering the current state of hydraulic fracturing technology, there is limited environmental risk associated with the hydraulic fracturing process . . . However, there are significant risks associated with the storage, treatment and management of chemicals, chemical waste and wastewater which can result in chemical contamination through either airborne pollution or drinking water contamination.”
I was just wondering, has the department had access to that, as yet, and are there any comments as to what was raised here on the fact that this Dalhousie report is saying that the hydraulic fracturing technology has limited environmental risks? I’m assuming that means the process, itself, does not, but some of the ways we manage the outcomes of that do have risks. How are you looking at that and examining that? I was hoping you could comment on that.
Madam Chair, I will table that article.
THE CHAIR: Thank you. Who would like to take that?
SIMON D’ENTREMONT: I can start off. I think what the article quotes is something that many experts believe is that the risks from things like hydraulic fracturing, actually most of them are not happening under the ground with the actual process of hydraulic fracturing but from all the other processes that go into having a large operation: you are transporting things, you’ve got roads, you’ve got air quality, you’ve got leakages at the surface, you’ve got water treatment issues, and so on. Of all the spectrum of things that people have concerns about when it comes to hydraulic fracturing, many of them are actually at the surface and not underground. I don’t think that’s counter to some of the thinking that’s taking place in many jurisdictions. The proper regulation of things like fracturing actually includes more things above the ground than it does below the ground.
SANDY MACMULLIN: I haven’t read the report. I’m going to go and look it up. I saw that article this morning.
Subject to getting more context and reading the report, which I haven’t done, I think it’s fair to say that the actual incidence of any issues taking place as a result of the actual hydraulic fracturing activity itself, I’m inclined to agree with that conclusion. It’s all of the circumstances around the activity, because the activity includes everything from acquiring seismic all the way to putting something in production, so there are a lot of steps in between.
As Simon said, with any kind of industrial fluids, depending on what the activity is, you always have to handle them carefully, no matter where you have them, whether it’s the oil tank outside your house or whether it’s dry cleaning locations and these kinds of things. There’s always a risk that if you don’t handle them properly, you can have some trouble. That’s true. I wouldn’t disagree with that either.
I think the technology has progressed quite a bit. It’s driven by water shortages. It’s driven by competition. It’s driven by a lot of different things. Yes, technology has changed over time.
Again, I’d have to read the report in detail and see what was looked at. It’s hard to argue with those comments in that paper, because I think they’re fairly motherhood kinds of things that most people who are knowledgeable about the industry would agree with.
HUGH MACKAY: Thank you for the comments. Risk management is something that this government takes very seriously, and we see it throughout government. We see it at our Public Accounts Committee quite often dealing with risk management.
I look at something like the aquaculture sector, for example, which I think suffered badly from misinformation and missteps 10 years ago, perhaps. Now, as a result of the government putting a moratorium on some aspects of the aquaculture sector, we have established what are generally recognized as the most rigorous aquaculture regulations in the entire country, the most stringent rules that will govern this. I would expect that any sort of advances in hydraulic fracturing would do something similar.
Can you speak to what you might be doing in regard to risk management, looking at this, should communities come forward with proposals to examine hydraulic fracturing on a local basis? Has a risk management process started within government to look at this?
SIMON D’ENTREMONT: In terms of risk management approaches, good regulation always means - one of the commonly-used approaches is when the risk is big, you have a big stick; when the risk is small, you have a smaller stick. You take a risk-based approach to managing your risks. We already do a lot of risk management in terms of environmental risks through our stringent environmental regulations and our oversight.
There are also some new emerging ways of doing risk management where citizens play a role. We’ve looked at different approaches where you have community monitors for resource development projects that report back to the community. Transparency is often a good mechanism to manage risk, in that you hold developers accountable to the public for their results of water testing and these types of things as well.
There are a lot of good practices that we’re already using. Of course, emergency preparedness is full of good risk management techniques, but there are also some new developing mechanisms. We continue to look at those in other jurisdictions and talk to people about it to see if we can always continue to improve the way we do it.
I’ll ask Sandy to talk specifically about the onshore business.
SANDY MACMULLIN: You had mentioned about risk management and misinformation and what we are doing to manage risk. I think it’s fair to say that the Wheeler report is very instructive in terms of its advice in assessing the level of risk, the seriousness of it in a small, medium, and large case. If you look to the report it does a pretty good job of identifying those things that would be considered in a red area versus a yellow or green area.
We’ve been working on the regulations associated with the moratorium, and still are. That has been our primary focus related to hydraulic fracturing in the onshore. Now we have other kinds of activity in the onshore that it doesn’t apply to, but that has been our primary focus. When you’re talking about going into the risk management of individual items such as how deep you should be before your hydraulic fracturing in shales is allowed to be considered, that little detail is not something that we’re working on now. In order to do that you have to be of the view that the hydraulic fracturing moratorium is going to be lifted and away you can go, you can start to do that work. But when you prioritize your work, you look at where you are now, where your priorities are, and how you allocate your resource time - not spending a lot of time looking at sort of the minutia of risk management at a time when we still have a moratorium. Hopefully that’s helpful.
THE CHAIR: We’ll move over to the PC caucus. Ms. Smith-McCrossin.
ELIZABETH SMITH-MCCROSSIN: Last year your department released the onshore atlas and it was written that there was between $20 billion and $60 billion of potential resources. You referred earlier to potential resources, resources, and reserves. I’m just curious, this $20 billion to $60 billion, in which category would that be placed? How confident is the department in the reserves estimate that was released in this onshore atlas, and has there been any additional work done to confirm those estimates?
SIMON D’ENTREMONT: The $20 billion to $60 billion is the biggest number, the actual amount of the resource that’s there. The reserves or the economically retrievable number is quite a bit smaller than that, maybe $7 billion.
I’ll pass it on, maybe to Sandy, to talk about what other work has been done on the atlas.
SANDY MACMULLIN: The work that was done on the atlas is based on an industry standard approach to assessing the potential of an area that doesn’t have a lot of data. You see a large gap, $20 billion and $60 billion; that’s three times - that’s a big range. Probabilistic methods, called Monte Carlo analysis methods are used to try to come up with that range. They talk about numbers like P10, P50 or PMean, and then P90 - so a 10 per cent chance that it’s at least this; a 50 per cent chance that it’s this; and a 90 per cent chance that it has to be at least that.
The numbers are all potential because we haven’t found the resource yet. We have found areas where resource exists, but we haven’t found anything that we can say that we can put some volumetrics to in terms of an individual field size. There’s no question that we have tested natural gas in the onshore before and we have produced oil, albeit chasing after mineral oil at the time, but active oil seeps to exist in the onshore.
The numbers could range very much on what you put to the value of the gas. If it’s valued at $3 per 1,000 cubic feet or valued at $12 per 1,000 cubic feet, that’s four times, so the numbers could be quite big. The numbers are not insignificant.
Again, you go back to the Wheeler report, and I think it was Chapter 2 that said there’s not a lot of information there. Again, this is a project that began in 2009 and was ramped up in 2013, as I said, largely because the Wheeler report basically said, what’s the size of the prize here? It could be a lot more, or it could be a lot less. We just don’t know. It’s our best effort to date based on information we have and some analogues.
ELIZABETH SMITH-MCCROSSIN: In some discussions that I’ve had with people in the oil and gas industry, they have indicated to me that it’s not just the reserve but that so much of it depends on the agreement that is made with the private sector itself and what arrangements are made.
My next question is: What are some of the royalty and development regimes that exist in other jurisdictions? Is there a sense of how much our province could collect in potential royalties, rights, or development agreements?
SANDY MACMULLIN: There is regulation that exists on how royalty is calculated, for coal gas versus conventional/unconventional, and you lump in shale gas with that as well. For coal gas, it’s 5 per cent of the wellhead value; in other words, where it’s sold less the transportation costs from where it comes out of the ground. That’s standard, depending on where you happen to be in Canada and a lot of places around the world - not everywhere, but in a lot of places around the world.
For conventional, which includes shale gas - and this is something that is not well understood - there is a two-year royalty holiday, for royalty purposes, for the first project on a lease. It doesn’t mean that every project has a two-year royalty holiday; it just means the first project does. That goes back to the 1980s. I don’t know what the thinking was back then on that. It could be that it was trying to draw investment into the area because the geological risk was quite high.
It’s a fairly simple calculation. If you think you’re going to get 500 billion cubic feet out of that project, and you have $3 gas per 1,000 cubic feet, multiply the two numbers together and divide by 1,000; take 10 per cent of that, and you have a number. The number could be quite big, but it’s all hypothetical right now because you have to find it first. As I said, it might not be there.
Other jurisdictions in western Canada, some of them might sell their own oil, some of them might use a posted price, and some of them might use actual sales proceeds. It depends on circumstances, but it tends to be a percentage of the value of the gas that comes out of the ground, valued at the wellhead.
THE CHAIR: We’ll move over to the NDP caucus. Ms. Roberts.
LISA ROBERTS: My ears kind of stopped at the use of the phrase “the size of the prize.” Of course, whether it’s a prize or not is all based on one’s perspective. Who would see it as a prize? I imagine it would be the private-sector interest that is deciding that doing work in this area is worth it to its shareholders. Of course, the perspective of residents living adjacent or even the broader Nova Scotia population - increasingly, I would say the generation that my kids are growing up in - might see that activity from a very different perspective.
I want to briefly ask you - and I don’t know if Mr. MacMullin could speak to this, to kind of describe what the prize looked like when we actually did have some shale gas hydraulic fracturing activity in Nova Scotia, which was Triangle’s activity around Kennetcook. You just shared something that I hadn’t realized, that there’s this moratorium on revenue streams or on collecting any public money on the first project in the first two years. That project was only active for two years, as I understand it, and the prize for Nova Scotia was being left behind with 20 million litres in waste water as a result of a fairly junior company eventually going bankrupt after coming to Nova Scotia to undertake that work.
It’s sort of a story where it often feels like I only get part of the narrative and I don’t really know what the government and the Department of Energy would say now about that experience. What did we learn from that whole experience, what I understand is our only experience with hydraulic fracturing in Nova Scotia? Actually, I would like to hear that story from the department’s perspective.
SANDY MACMULLIN: When an oil and gas company - and I would think that it’s probably the same for other resource sectors as well - looks at making an investment in any area, the sophisticated ones and the ones that generally know what they’re doing, look at it on a full-cycle basis; fully risked. They look at geological risk, they look at financial risk, they look at regulatory risk, they look at political risk, they look at price risk, they look at a lot of different factors. They develop economic models that address all these risks. They risk them appropriately and they crunch out a risk rate of return.
If your project meets, say, their top 10, for lack of a better expression, you might get investment that year; if it doesn’t, you won’t. That’s basically how it does it so a company like Elmworth would look at the area that they’re active and they would do an assessment and make a decision as to whether or not they want to bid and to prosecute acreage that they might pick up.
The two years was an exploration phase. The royalty holiday that I was talking to applies to the production phase, so there’s a timing issue there. One is not relevant to the other. By the way, there’s another misconception, and I’ll put this on the record because it needs to be explained. While it is true that shale gas wells decline quite quickly from 100 per cent to maybe 35 per cent of production, they have a long tail on them and not all projects come on at full rate.
There’s a misconception on how the economics work I think, generally, in the public domain. What I couldn’t tell you is what Elmworth’s risk rate of return was on their project. That’s something that is proprietary to companies. That’s just the way it is. But what I can tell you is that decisions are made based on a fully-risked investment right from expiration all the way to abandonment. That’s how it works.
SIMON D’ENTREMONT: If I can add a kind of “what did we learn,” I think some of the things we put into other parts of our resource development activities in the province, like mining and so on, are hopefully things that we’ve learned from that. That includes having companies post reclamation bonds to make sure that they’re covered; if companies go bankrupt, they’re covered for the cost of reclaiming the site and bringing it back to its original state. We base it on good science, that we have good active environmental monitoring, good citizen involvement, that we have the support of communities, and we have the support of First Nations.
I don’t know whether or not those are the things that didn’t go well with that project, but those are some of the winning conditions that we want to see when we do resource development around the province. We need to do those things really, really well if we’re going to meet the expectations - a high lofty bar of expectations of citizens - around how seriously we take our stewardship responsibilities for the province and that we deliver on that to the satisfaction of what citizens expect.
LISA ROBERTS: I guess the opposite of chasing investment from an oil and gas company looking to make returns for its stakeholders is publicly-led investment that increases the energy security of all Nova Scotians. There are all sorts of activities, some of which the department is just starting on. I think of the $2 million in the budget this year for energy retrofits of low-income rental properties. Where the Sable gas wells have been depleted, $2 million to retrofit low-income rentals in Nova Scotia strikes me - I’m sure I could spend that money on my constituency in a year and barely scratch the surface of what we could do in terms of increasing efficiency.
That is the sort of work that we are interested in talking about more at another meeting of this committee where our proposed topic is green jobs. The Green Economy Network has calculated that more than 30,000 jobs could be created in Nova Scotia over five years through major investment in energy efficiency and renewable energy and clean public transit.
In terms of the department, where is the energy going? We know what the future looks like, and frankly, some days it looks kind of scary. We can be putting our energy towards making sure that we’re addressing energy poverty in a way that isn’t holding us into old ways of working. Sometimes the conversation around energy poverty is, oh, we have to discontinue burning coal because otherwise electricity rates are going to go up. I think that’s a really short-sighted way to be tackling energy poverty in this province. I’d love to hear what you think.
SIMON D’ENTREMONT: It’s a great question, and you may be surprised to find we don’t disagree. We do resource development in that we’re pragmatic around the fact that we need plastics for these things in our pacemakers. We do mining that we need rare earths for our phones. But the reality is that Sandy’s shop has a budget of a few million dollars. Our mining division has a budget of about a few million dollars. We’re going to easily spend $30 million this year on green energy initiatives like solar, HomeWarming - where we do free energy estimates for low-income people at Efficiency Nova Scotia - and doing electric vehicles.
The reality is that I have more people in the Department of Energy and Mines working on reducing our reliance on emitting fuels and greenhouse gases than we do developing the natural resources that we have. We’re practical and pragmatic about the fact that the natural resources are there and an important asset for the province and that the world is continuing to use these while reducing their reliance on them, and at the same time, while reducing reliance, we’re investing heavily both in staff time and in financial resources to actually deliver on that agenda.
We’re pragmatic that we’re not going to work ourselves out of a job immediately, but the reality is that I think it’s a great marriage within the same department to have the department that’s driving down greenhouse gases and reducing our reliance on fossil fuels, the one that’s also developing it. They’re both an important part of doing good energy policy and us doing a good job for the environment and for our stewardship as well.
THE CHAIR: We’ll move over to the Liberal caucus. Mr. Maguire.
BRENDAN MAGUIRE: I guess we’re probably coming close to another round of questions after this, but I do want to continue on with what MLA Roberts was talking about. This is the Department of Energy and Mines, and energy comes from many sources. I would like to know - in particular, you touched on the misconception about solar in Nova Scotia, that we don’t have the climate for solar.
I know Efficiency Nova Scotia had launched a program where, along with the federal government, there was up to a $10,000 rebate on solar insulation in your home. I want to dig into that and find out how many people have actually taken advantage of it.
To be fully open and transparent, I did use it myself, and I found we’re about 78 per cent solar now at my house. It did take a while for the process. It was a long process to go through. From start to finish, it was about 14 months from the moment we applied to the moment the insulation actually happened.
What I would like to know is: Is this a program that’s going to be maintained going forward? How many people take advantage of it? How can we continue to put these kinds of programs on the table, not just for people who can afford it but for everyone?
One of the questions we talked about before was, especially in HRM and in urban cores, there’s a large percentage of the population that live in apartment buildings and things like that. How do we make these programs widely available and ensure that everybody has access to them?
SIMON D’ENTREMONT: These are great questions. We’ve been experimenting with some pilot programs, like solar for community buildings. We have done some community buildings where we kill two birds with one stone in that we reduced the energy footprint of an organization, but we also enhanced the economic viability of these not-for-profits, for example, that have fewer energy costs to cover because it’s hard enough to pay your bills.
In terms of our solar programs for residential, I don’t know the exact numbers, but I think we’re planning to have about 2,000 applications over the first few years of the program. We received - don’t quote me on this - something around 1,200 expressions of interest in the first few months, I think. We were going down the road of maybe being over-subscribed.
It is true that we need to be cautious of just allowing diversification and reducing greenhouse gas emissions by those who can afford it. People living in energy poverty is a real issue for us. Forcing solar on people who can’t afford it and raising their energy costs - Atlantic Canada already has the highest levels of energy poverty in the country, so trying to make sure you balance your energy policy decisions in a way that doesn’t put too much upward pressure on that is important for us.
We try to minimize that through programs at Efficiency, like HomeWarming. I mentioned that we spend $12 million a year - a small public service announcement here - on free assessments and free upgrades for low-income Nova Scotians, of which 60 per cent or 70 per cent are going to seniors - I’m wearing my Seniors hat. That’s what we’re doing in terms of making sure that we balance the issue.
One of the challenges, as you mentioned, of getting solar benefits to renters is that they don’t own the home, and it’s harder to establish a link between a residential apartment building, for example, lowering its impact on greenhouse gases and making sure that that is passed on to renters. We have run some pilot programs where, in return for agreeing not to raise rents more than a certain amount, people can have access to solar.
There are also some other models we’re looking at. There are models that are more like co-ops. You establish a solar farm, and people who are renters can actually buy a small share in the farm. Then their direct energy bill, as a part owner of the co-op, gets reduced by the amount of their investment or investment made through a social enterprise on their behalf. There’s some different models there, and we are exploring those. They make a lot of sense.
Sometimes you run into some economic discrimination where maybe an under- represented community has had a landfill in their community maybe because they had a smaller voice to say something about it. There’s a piece of land there that’s going to sit there underutilized. What a great place to put a solar farm, right on top of it and maybe right a social wrong by giving the people who had to bear the brunt of a previous wrong get to be early adopters of a new benefit. We should be looking at those types of things, and we are.
BRENDAN MAGUIRE: The other point that was raised here when it comes to green systems is obviously storage capacity and the cost of batteries in particular. I don’t know if they have gone down much over the years, but they are still extremely expensive. We were looking at some batteries, and I think they’re completely out of most people’s price range.
The price and the technology of those batteries - are we at the mercy of the private sector when it comes to that? Collectively, as a government and as a population, what can we do to reduce that and, at the same time, maybe increase the capacity of those solar batteries?
SIMON D’ENTREMONT: We are at the mercy of the private sector, but trends are on our side. If you map anything from microchips to wind power to solar to any environmental technology and put it on a graph, it does this. Microchips have gone down, a 50 per cent reduction in cost every three years for the last two decades. The reality is that a battery is a huge enabler, and I’m confident we will see the price go down. The trends of technology development through things that you learn, economies of scale, better pricing, and more competition will drive those down.
In the future, there may be this really attractive triad of investments in people’s homes where you have solar in your home, you have an electric vehicle that you charge with your own solar, you have a battery in your home that you use to back up that solar, and when your power goes out, you have backup power from your battery as opposed to a generator.
There’s a nice marriage of investments there that will probably harmonize and work well, but the price needs to come down. We need to make it affordable for more Nova Scotians so we can all take advantage of it.
THE CHAIR: We’ll move over to the PC caucus. Mr. Dunn.
PAT DUNN: Thank you, Madam Chair. Earlier you mentioned a new suite of renewables - the solar title, Heritage Gas Limited, and so on. You also mentioned coal bed methane at the same time.
I guess I’m just curious where the department’s position is on coal bed methane now. What’s happening, if you could expand on that?
SIMON D’ENTREMONT: Coal bed methane is an allowed practice right now. Basically that’s our position. Sandy, do you have anything to add?
SANDY MACMULLIN: It’s a business-as-usual thing. Most coals have methane associated with them. Whether it’s ultimately pre-draining methane out of a coal mine in the offshore to capture it rather than vent it or it’s using techniques that probably came out of the 1990s, out of the U.S., on how to optimize removal of gas from coal seams and wells, it’s basically methane. It’s almost pure methane. That is a potential feedstock for Heritage customers, Nova Scotia Power, or anybody who has a need for natural gas.
There’s nothing that’s done that’s exceptional in terms of government policy on coal gas. It’s been the same for a long time.
PAT DUNN: Just very quickly, are there any safety concerns with that process?
SANDY MACMULLIN: I think any time you’re drilling a well, again, whether it’s a water well or whether it’s for geothermal purposes or for oil and gas purposes, you have to make sure that you have people who know what they’re doing, and you have to make sure that you have people who isolate zones, who can communicate between zones through a proper drilling practice.
I think that the pressures associated with coal gas operations are much less than conventional activity or coal gas activity, so from a safety perspective and from the perspective of the safety of the workers on the surface, it’s not as severe, although it’s always a dangerous situation when you have an industrial process on the go.
It’s much less intensive in terms of pressures that are used to open up the existing cleaning system in coals. Different fluids are used, so there’s less risk. But there is risk.
THE CHAIR: We’ll move over to the NDP caucus. Ms. Roberts.
LISA ROBERTS: We just finished the Spring session of the Legislature, during which one of the bills that came forward and was passed in the end was related to Nova Scotia Power and increasing its potential to seek investment from outside Canada. Am I right about that? (Interruption) Yes.
As we were thinking about that legislation and what we were going to say about it, one of the questions that we raised around our caucus table was, what are we getting back from Nova Scotia Power as a partner, effectively? Is it the partner we would choose? Not necessarily. But it is the partner we have in Nova Scotia in terms of really making the transition toward the energy future that we know we need to get to in terms of renewables and sustainability and greenhouse gas reductions.
I’m wondering if you could share a little bit about what co-operation we’re getting in terms of the cutting-edge stuff around managing our load so that we can get more renewables on the grid, in terms of demand-side management, and in terms of working with Nova Scotians to allow the sort of stuff that you just mentioned. Like that solar co-op, I love that idea. Is that something that Nova Scotia Power is ready to work on, or are they wanting to hold onto the power to generate what’s on the grid, which they sell? I would like to ask about that.
SIMON D’ENTREMONT: Nova Scotia Power is running a prototype for batteries right now. They have our regional grid hooked up to batteries, and we have had conversations around the role that batteries could play in supporting business and communities. They have also recently gotten approval from the URB for smart meters. Smart meters are meters that are connected to your devices in your home, or can be, that do allow for demand-side management and other types of practices. In the future, we might have a mechanism, if a customer is willing, to turn off a hot water heater that you’re not using for a couple of hours and so on.
Technologies do have a way forward for us in helping us clean up our energy system and provide good options for citizens going forward as well.
LISA ROBERTS: How will we push for better and more? Understanding the urgency, from a citizen’s perspective, in some ways it seems like we took the pressure off in terms of moving forward when the government dropped COMFIT and stopped accepting new COMFIT applications. I’m going to get the language wrong, but when we reduced the size of the project in terms of renewable energy projects that are going to go on the grid, we lowered the size of a total potential project. All of that seemed to go against moving as fast as we can towards more renewables.
SIMON D’ENTREMONT: The province has various tools at its disposal. Some of them are legislated policy goals, or regulated policy goals, like the renewable energy standard that we have of 40 per cent by 2020. We also have aspirational goals that we set up regulations to support in terms of limiting the amount of emissions of one thing or another. Then we have projects like tidal that we continue to advance and, if they’re successful, will become part of our energy mix, greening our environment, and continuing to support reducing our emission of greenhouse gases.
THE CHAIR: We’ll move over to the Liberal caucus. Mr. Irving.
KEITH IRVING: I want to speak a little bit about the business environment, which energy fits into so critically. I understand the development of our energy mix is very, very complex, and you plan years in advance. For business, we went through a period in which we had very high energy costs as we transitioned to more renewables, but we as a government, over the last five years, have been able to stabilize costs for energy for Nova Scotians and businesses.
In the Valley, the Valley REN has been working with the manufacturing sector to look at the various barriers to expansion and job creation. They see good potential in terms of potentially hiring 604 new people over the next five years. One of the hurdles that the manufacturing sector in the Valley has is with respect to energy and energy costs. They’re interested in having a discussion about a natural gas lateral or something into the Valley. I’m reminded of all this because driving Highway No. 101, you see the Irving trucks bringing the natural gas to Acadia, which was seen as a more cost-effective way to heat our university. Is that worth exploring?
This whole issue of getting affordable energy to rural Nova Scotia so that we can maintain and grow our manufacturing sector, is it worth having that investigation into the natural gas lateral or other distribution systems that can create stability and electricity at a reasonable cost for the manufacturing sector?
SIMON D’ENTREMONT: Business competitiveness, in terms of them being successful in creating the types of jobs we want in rural Nova Scotia - being competitive on energy costs is one of the inputs they need to consider. You mentioned natural gas. The reality is natural gas has a strong place in a lot of these industrial processes that need a lot of heat. Natural gas has an advantage in those types of processes, so it’s very important for them.
Propane is being used, trucked around a bit, even in large scales as well, and it’s price competitive. It’s always helpful for us to look at our energy mix options - like I said, keep as many tools in the tool kit as you can. Any type of business case that comes forward, we’re happy to talk with folks and do some research or look into any of these new business cases and see whether or not there’s any perspective. Of course, there needs to be the business case, there needs to be a critical mass, and so on. We’re happy to have those conversations any time that we need to.
SANDY MACMULLIN: I don’t have much to add to that, other than that back in 1999, a gas market development fund was created to help encourage natural gas markets in Nova Scotia to push them off more expensive and dirtier fuels. We have a Gas Distribution Act. The owners of infrastructure have a regulated return.
If there is a new developing market in the Valley, normally the process would be, if the market was large enough, then either Heritage Gas or someone could come forward looking for a gas distribution franchise to move that gas there. The market has to be sufficient enough to justify the cost of putting the lateral in.
That being said, we’re open anytime to having conversations with anybody about energy options - be they renewable or non-renewable - particularly from a business development perspective. Part of what we do as a department is talk to people about options. I would say they need to come forward and identify that they’re interested in having a discussion about some of their energy options. Maybe there are other options for them that they’re not aware of.
SIMON D’ENTREMONT: Just to add, for some of these, the URB of course plays an important role as the regulator of many of our energy pieces. Depending on what companies would want to do and making sure it was for the benefit of current ratepayers and so on, the URB would have a role there as well from a regulatory perspective.
KEITH IRVING: Just a quick supplementary. When you bring the URB into the discussion, do you bring them in at the early phases of a conversation around an expansion of a distribution network, or are they more at the table once a project has some sort of feasibility behind it? It sort of goes back to this question of the public good and all the various returns - there’s the economic return for Heritage Gas to get return for their shareholders, but there’s also an economic development return for the public good in rural Nova Scotia.
SIMON D’ENTREMONT: I can’t speak for the URB in detail, but it’s not unlikely that companies looking to do things that require the URB’s approval will seek their advice early on. For us, consulting with the URB, not in the middle of a hearing, but just policy discussions - they have a lot of expertise, and they can help us do that.
THE CHAIR: I think we’re sort of at the end of our meeting, so I’ll ask you to do closing statements. Mr. d’Entremont.
SIMON D’ENTREMONT: Thank you very much. It has been a pleasure for Sandy and I to be here and have an interesting conversation, lots of great questions and engaging questions. As was mentioned earlier, we continue to do good science and good policy work on behalf of the province and its citizens, and we hope to continue to keep doing that.
THE CHAIR: Thank you very much for being here today.
We have just one item of business, and that’s our next meeting date, which is May 28, 2019, with NOW Lunenburg County. Our witness will be Ms. Tina Hennigar, who is the project coordinator. It will be at our regular time, 1:00 p.m. to 3:00 p.m.
No further business? This meeting is adjourned.
[The committee adjourned at 2:45 p.m.]