THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, December 1, 2022
The Standing Senate Committee on Energy, the Environment and Natural Resources met with videoconference this day at 9 a.m. [ET] to study emerging issues related to the committee’s mandate.
Senator Josée Verner (Deputy Chair) in the chair.
[Translation]
The Deputy Chair: Honourable senators, my name is Josée Verner. I am a senator from Quebec, and I am the Deputy Chair of the committee.
Today, we are conducting a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
[English]
Now, I would like to introduce the members of the committee who are participating in this meeting: Margaret Dawn Anderson, Northwest Territories; Marty Klyne, Saskatchewan; Mary Jane McCallum, Manitoba; Julie Miville-Dechêne, Quebec; and Karen Sorensen, Alberta. I wish to welcome all of you, and the viewers across the country who may be watching our proceedings.
Today, we are meeting to continue our study on the Canadian oil and gas industry. For our first panel, we welcome from the Canada Energy Regulator, or CER, Jean-Denis Charlebois, Chief Economist; and Genevieve Carr, Chief Environmental Officer. From the Canadian Climate Institute, or CCI, we welcome Dave Sawyer, Principal Economist. Welcome, and thank you for being with us. You each have five minutes to deliver your opening remarks, and we will begin with Mr. Charlebois.
[Translation]
Jean-Denis Charlebois, Chief Economist, Canada Energy Regulator: Thank you very much and good morning, senators.
My name is Jean-Denis Charlebois, and I am the Chief Economist at the Canada Energy Regulator. I am joined by my colleague Genevieve Carr, the Chief Environmental Officer.
[English]
I want to acknowledge that I am speaking to you from Montreal, the traditional territory of the Kanien’kehá:ka or Mohawk, a place which has long served as a site of meeting and exchange amongst nations.
I will speak to two of the CER’s distinct roles around, first, project assessments and decisions and, second, our role related to the provision of energy information. At the CER, we work to keep energy moving in Canada while enforcing some of the strictest safety and environmental standards in the world. The commission of the CER is a court of record responsible for making independent adjudicative decisions and recommendations on pipelines, power lines and offshore renewable energy projects under federal jurisdiction. In making a decision or recommendation as to whether a project is in the public interest, our commission is required to take into account a number of specified factors, including the extent to which the project hinders or contributes to Canada’s ability to meet its commitments in respect to climate change.
In doing so, the commission considers the magnitude of a project’s direct greenhouse gas, or GHG, emissions and proposed mitigation, associated upstream emissions, its net-zero plan and the applicability of federal laws and policies, in combination with other factors determined by our legislation. As part of the ongoing evolution in the energy sector driven by the transition to a low carbon economy, the CER continually adjusts to the wide range of conditions applicable to our regulated sector. This includes, for example, updates to our regulations, filing guidance, work on technical standards for the transmission of hydrogen in pipelines and changes to pipeline usage.
The CER also plays an important role in providing timely and relevant energy information and analysis to support the energy conversation in Canada through our energy information core responsibilities. We monitor energy markets on an ongoing basis and produce a series of publications on energy issues, such as energy trade, energy supply and demand and pipeline utilization. We also model scenarios of how possible energy futures might unfold for Canadians over the long-term in our Canada’s Energy Future series. The next iteration of the CER’s Energy Future report will include scenarios where Canada meets net-zero emissions by 2050 and will be published in late spring 2023. Our models and scenarios are based on the best available information and assumptions about future policies that may be set by federal and provincial governments. As a regulator, the CER does not set policies to achieve Canada’s net-zero goals. Rather, the CER implements federal policies to the extent they relate to our mandate.
Energy is an important part of the Canadian economy, contributing 8.1%, or $168 billion, of Canada’s GDP. Energy products made up about 18% of Canada’s total exports in 2020, and were valued at almost $100 billion. In our most recent Energy Future analysis, global demand and resulting prices for oil and gas are the key drivers of our supply projections. In our scenarios, future demand and prices are linked to the pace and stringency of climate policies, both domestically and abroad. Energy prices are central to the investment decisions and production volumes simulated by our models. In a future where global demand for fossil fuels begins to fall due to increasing climate action, we see lower prices compared to scenarios where demand is higher.
Our modelling also shows how the energy transition affects the entire Canadian energy system by incentivizing new energy systems to emerge. Some examples of how that transition could play out in terms of opportunities for Canadian workers include the construction of new energy infrastructure such as wind, solar and nuclear power generation; construction of power lines; building carbon capture and storage facilities; electrifying heating systems for homes and businesses; and improving energy efficiency.
[Translation]
Thank you for the opportunity to speak to you about the work of the Canada Energy Regulator, particularly its role in the energy transition. We look forward to your questions. Thank you.
The Deputy Chair: We’ll now hear from Dave Sawyer.
[English]
Dave Sawyer, Principal Economist, Canadian Climate Institute: Thank you for having me. I’m excited to have a pencil here because I’m an economist and I like sharp pencils. It’s good to see. Thank you.
I am going to talk about further policy action that is needed to align Canada’s oil and gas emissions with net zero and Canada’s 2030 aspirations. We at the Canadian Climate Institute have launched a new initiative called 440megatonnes.ca, which is the total emissions needed to hit our 2030 targets. The purpose is to track and implement Canada’s emissions reduction plan in progress to 2030, and looking at how we can achieve emission reductions and our emission reduction aspirations, not just with good technology but also with good policy. We need good governance in the country to achieve those objectives. As part of good governance, this includes solid accountability frameworks with independent review and analysis.
At CCI, we will continue to provide independent assessments of Canada’s progress on reducing emissions and energy technology deployment, catalyzing investment and driving down emissions. My remarks on oil and gas stem from this 440 megatonnes initiative.
The upstream oil and gas sector, comprising oil sands, conventional oil and natural gas production, need to drastically reduce emissions if Canada is to limit greenhouse gas emissions to 440 megatonnes by 2030. Unfortunately, our analysis indicates that existing policies are not enough to contain the projected growth in oil and gas emissions this decade.
Further policy actions such as successfully implementing an oil and gas emissions cap and tighter methane controls will be essential to making the deep and rapid reductions required to bring the sector in line with Canada’s 2030 target. Using the institute’s new interactive Pathways tracker, and based on our independent assessment of the federal Emissions Reduction Plan, or ERP, we have two important observations to share with you.
First, existing and legislative policies that have already been implemented are not sufficient to address rising emissions in the oil and gas sector. In our simulations, 2030 emissions for the sector are well above 2021 levels and well above 2005 levels. They’re not peaking with existing policy, but, in fact, they’re growing.
Second, additional measures will be required to contain the projected growth in oil and gas emissions this decade. Announced and developing policies included in Canada’s Emissions Reduction Plan will need to reduce emissions from the sector by more than 44 megatonnes, which is about 30% below current levels. There is a heavy lift of policy needed to hit the future targets we have set for ourselves.
Sector by sector — or subsector by subsector — for oil sands and upgrading, additional policy will undoubtedly be needed to contain the projected 20 megatonne rise in oil sands emissions anticipated this decade. Projections are uncertain — they’re always off somewhat — but we see significant growth in the emissions coming out of the sector in the future. However, our projections show that emission reductions coming out of the oil sands sector and upgrading are not very significant or large — and even under announced and developing policy such as the oil and gas cap coming from the Emissions Reduction Plan. This is to say that there are challenges for the oil sands sector to significantly reduce emissions, but there are options, as I’m sure you will hear later from Mark Cameron from the Pathways Alliance who will be a witness here later in these proceedings.
This is not to say the oil sands sector cannot commit to deeper constraints on their emissions in the short term. There is a mix of technology opportunities available today including methane control, solvents, carbon capture utilization, storage and fuel switching, but policy still needs to be flexible to allow technology to be incentivized and also to send long-term signals that the sector has to do more.
Over the longer term, blue and green hydrogen provide good opportunities as do small modular reactors, but at the institute, we call these wild cards. They are not safe bets. There are unclear technical availabilities, unclear costs and their potentials are out in the future. In the longer term, there are wild card technologies, and in the shorter term the safer bets are more limited for the sector.
Let’s also not assume that the carbon policy is bad for all Canadian producers. Our modelling and analysis consistently shows that if the U.S. moves on carbon policy, the cost of reducing emissions from shale oil plays in the U.S. is quite high and there are opportunities for Canadian producers to grab a larger share of the U.S. market. The idea that the Canadian producers can be the marginal barrel does play out in the analysis. It’s not always a bad news story for carbon policy in Canada.
There is good news in the sector, of course. In the short term, both upstream natural gas and conventional oil have significant opportunities to reduce emissions. In the same analysis and modelling, we see a lot of reductions coming in natural gas and conventional oil. When we think of emission reductions, we don’t just think of the oil sands sector, but we have to think of a much broader and comprehensive sector with varied abatement opportunities and varied costs. We have to look across the sectors to see if we can get emission reductions from various places.
We’ve been looking at carbon policy a long time. Under the Harper government, we had a policy called Turning the Corner. We had upgrades under Prime Minister Harper to that policy from 2009 through 2011, and we’ve continued to look at policy for the sector for almost 20 years. We know what the policies are and what the technologies are.
What does a policy package look like to drive this forward? Remove fossil fuel subsidies. We’ve been talking about this for a long time — simple policy to roll forward, hard politically. I get it.
Implement and evaluate tighter methane regulations. The federal government is moving on this in cooperation with the provinces, but there has to be some sort of alignment between the provinces and the federal government on these equivalency agreements to ensure equivalent outcomes. We don’t have a line of sight on emission reductions coming out of these equivalency agreements and out of the methane regulations in particular.
Develop the oil and gas cap. This is a big chunk of policy that needs to happen, but it has to be recognized that such a cap is an ongoing policy experiment and there needs to be flexibility in design. There are a lot of unknowns for the sector and a lot of risk, so we have to take it slow and be flexible. This is not to say we can’t send long-term signals, but we have been smart in policy design.
Continue to invest in research and development, and look at developing and investing in industrial clusters. This is basically helping carbon capture utilization and storage pipelines to get off the ground, to look at waste heat sharing — all kinds of stuff to basically help industry reduce their emissions.
Finally, we must recognize that the competitiveness risks are real in terms of other producers gaining Canadian market share, but we’ve had this problem for a long time, we’ve had carbon policy for a long time in the country and we’ve largely dealt with this issue. Alberta does it through their large emitter program. Policy can do industry a big favour and push it toward producing the lowest emission intensity barrel it possibly can, and help it compete as emissions fall consistent with a net-zero trajectory while markets and demand also fall.
Canadian producers can continue to thrive in such an environment. They have the technological know-how and are very sophisticated, but they will need to do so with the lowest emission intensity policy, and this is where policy can help to push it forward. That’s it. Thank you.
The Deputy Chair: Thank you very much.
Senator Sorensen: My first question is for Mr. Charlebois. Canada’s investment tax credits, in part as a response to the U.S. Inflation Reduction Act, may offer significant economic benefits to advance nuclear, other clean energy and hydrogen projects, which is good news for the industry. The 2030 Emissions Reduction Plan, which includes $9.1 billion in new federal spending to meet Canada’s climate targets, does not include additional spending to support emissions reductions in the oil and gas sector.
I’ve had many meetings with members of the private sector in Alberta who have made public commitments toward reaching net zero. Is the federal government meeting with and consulting with producers in the industry, for example, the Pathways Alliance? Is there a plan to support the alliance with their strategy?
Mr. Charlebois: Specific to your question, my colleagues from Natural Resources Canada and Environment and Climate Change Canada will be better positioned to talk about the engagement and the support that they are contemplating for the industry specifically. The Canada Energy Regulator, as I mentioned, does not develop policies and does not actually support the oil and gas sector specifically. We rather model the policies that are in place to see where the energy system evolves in the future. With all due respect, your question would be better for the policy departments.
Senator Sorensen: I have a second question for Mr. Sawyer. Your whole presentation was kind of a response to my question. Just a few weeks ago, the federal and Alberta government said they would contribute $300 million and $160 million specifically to encourage Pennsylvania-based Air Products and Chemicals Inc. to build a $1.6‑billion hydrogen facility outside of Edmonton. This is one of the largest steps to date toward decarbonizing the oil sands. It is encouraging news.
But we know carbon capture and storage is seen by many to be a temporary solution. What other actions and commitments do you think need to be taken by the government toward investing in the evolution of energy and net-zero future?
What I heard was lots of conversations around policy. So if that is the biggest thing they need to do, I’m curious as to where you are with your advocacy on that side of it. But if there are other things the government needs to be doing, I would like to hear about that as well.
Mr. Sawyer: When we look at the policy package that is being implemented across all sectors in oil and gas in particular, we see a lot of policy. We have Alberta’s output-based pricing system, where compliance payments are being funnelled back into technology development, and that’s being prioritized by the industry.
The Carbon Capture, Utilization, and Storage, or CCUS, tax credit is a fairly significant uplift for those first movers who can move forward. There is a big challenge around CCUS and regulatory environments. There is no application for a CCUS facility in front of an Alberta regulator right now. We have this policy package and funding, but there are also these other barriers that are difficult to move the technology forward.
When I look at the policy package, there are a lot of opportunities there to push it forward. Finance is a big piece. There’s a lot of money being thrown in oil and gas. Talk to other sectors, they’re not getting that money. Other provinces, they’re maybe not getting that money.
I think we have the oil and gas sector cornered with policy and finance. We just need to get going on it, and lay some certainty down.
Senator Sorensen: Thank you.
[Translation]
Senator Miville-Dechêne: Thank you for that complex and nuanced presentation. You talked about eliminating subsidies to the oil industry. You seem to be saying that the federal government’s policy is scattered and doesn’t seem to allow for real progress.
More simply, what are the promising and unpromising avenues? Do we need to eliminate subsidies faster than expected to turn the corner and limit emissions that are harmful to climate change?
[English]
Mr. Sawyer: Yes. There is sort of this merit order of policy about what we should implement first, and the first thing we should do is remove subsidies because it’s adverse. We call them inefficient subsidies that lead to —
Senator Miville-Dechêne: Is it all subsidies or inefficient subsidies?
Mr. Sawyer: It’s an open question. This is a really — speaking of nuanced field.
Senator Miville-Dechêne: Yes.
Mr. Sawyer: Some would say technology subsidies for industry prolong the life of the assets and lead to more emissions ultimately, so we should not be doing that at all — should not be supporting technology deployment at all. Some would say that.
Others would say if we have emission-reduction goals, we shouldn’t be reducing the costs of operations so you get more output, more operation. The economists would say it is an inefficient outcome.
When we give the sector money, their balance sheets look better, returns on investment are higher and you have more activity and, therefore, more emissions. We say we should remove those subsidies and let the sector settle into a nice equilibrium where they are happy with where they are.
So remove fossil fuel subsidies. Help with regulatory barriers is another one, so helping CCUS move forward more quickly. There are these big technology plays that require regulatory approval. Approvals — and the regulator can do a better job of this — take a long time. We can look to streamline those operations.
When I think about the next policy we want to do: carbon pricing. It’s very efficient, sends a broad-based signal across the entire economy — we have that. This sector is covered. Then we can get into sector-by-sector regulations, including the methane regulation, which is a high priority.
We’re doing all that. We just need to get on with it more quickly.
Senator Miville-Dechêne: What about the fact that, with what’s happening in Europe, now there is more demand for all of that? There seems to be some contradiction between the idea of limiting our emissions and the fact that we’re selling more to people who need oil. Yes, we are more efficient with one barrel, but we do more. Is there an answer to that? We live in a free market.
Mr. Sawyer: Europe and the U.S. will be moving toward more trade barriers toward Canadian exports. There’s already talk of border carbon adjustments. It’s a policy in Europe right now. They will target certain products. The U.S. has a lot of competition between states in terms of carbon policy. We can see them, say California, starting to differentiate oil products based on emission intensity and controls in play.
The market is moving toward a bunch of constraints ultimately that could choke out and shutter in production. That’s a ways out, but it is a risk. The industry, and policy really, needs to drive the industry toward reducing that emission intensity.
Finally, even in a net-zero world where we see demand falling incredibly, there’s going to be assets that are retired and there has to be investment. Canada can continue to be an oil producer in a net-zero world, but you have to be ultra-low-emitting producers to do that. You have to position yourself to compete in that new world.
Senator Miville-Dechêne: Finally, “ultra-low,” what does that mean to a layperson like me if you compare it to what’s happening now?
Mr. Sawyer: With net zero, we ultimately have to go from our emissions now — in this sector, 170 megatonnes — down to 0 in the lifespan of one and a half pipelines. Three vehicles. It’s a short time period to 2050. You’re thinking about a decline rate that’s quite rapid on the emissions and the emission intensity.
Senator Miville-Dechêne: Is it doable?
Mr. Sawyer: Doable. It’s a stretch, yes. That’s why we need to get going.
Senator Miville-Dechêne: Thank you very much.
Senator Klyne: Welcome to our guests. Thank you for your opening remarks. I have a couple of questions for Mr. Sawyer, and then one for Ms. Carr or Mr. Charlebois.
Your references to the policies, policy package and, largely speaking, the upshot I took away from that was the policies are not sufficient, as are the results, which would suggest they’re not effective. You have a focus on that with the policy package. You named five of those: remove fossil fuel subsidies; methane emission reduction; the oil and gas cap; continued research and development; develop an industry cluster — that’s a methodology to get everybody in the same tent, I assume — and then the competitive risk.
Regarding this, you’ve got the sphere of that oil and gas sector, which everybody gets caught up in with all of these policies, but who is driving these? Are these mutually exclusive? Do they all have their own paths? At the same time, there will be areas of overlap and are inextricably linked.
You talked about track plans, so I assume there is a plan. Are there specific entities that are steering this, trying to get the stakeholders to collaborate, consult with one another and look to academia and others who can help push the agendas along?
In regard to who might be driving each one of those, is the message getting out there to the folks in those different buckets, if you will, that there is some pain or leverage? What happens if you don’t? I’m sure they’re all considering that question, and would look at it as leverage or pain to want to participate and be successful. For them to do that, that answers the question of what’s in it for them, but also what’s in it for the country and the globe as it goes to climate change?
I’m wondering how all this works. Who’s tracking this plan and reporting on it?
Mr. Sawyer: That’s a great question. We get hung up, in climate policy, on technology and policy, but governance really matters.
My opening comments about accountability frameworks and the Canadian Net-Zero Emissions Accountability Act is a good start in that direction.
We have this policy package in play that is squeezing carbon emissions all over the place in a single sector, coming from a carbon price, technology subsidy, methane regulations, federal and provincial jurisdiction and overlapping policies. There’s a lot going on.
One of the things we need to do is start taking stock of those policies and assessing their effectiveness, and then their efficiency. Some of them overlap, and therefore impose costs and don’t reduce emissions. The more we start to tune the knobs and dials on these policies to drive emissions down, the more the overlapping policy really comes into play. It’s a big deal.
We need better independent oversight. We need the Commissioner of the Environment and Sustainable Development regularly taking stock. You need academia and independent review of these policies. We need a better governance frame.
Of course, industry knows what they’re facing. They’re consulting. They’re harried in terms of who they’re consulting, and how much. There is a lot of policy going on. Generally, they are aware of the direction it’s going in.
What is in it for them? There are a lot of opportunities here. Yes, there are costs. Yes, there are balance sheet costs, but there is an ability to avoid costs. There is also the ability to thrive, develop products and move more quickly than somebody else.
If you can get CCUS off the ground that results in a significant emission reduction that is saleable, there are all kinds of overlapping incentives that you can gain. That carbon price, for example, is rising $15 a year. What other asset is rising at $15 a year, climbing from $50 today to $170? If you can move on that, you can help your balance sheet. There are going to be winners and losers, absolutely. But there are winners, and that is a big incentive.
Senator Klyne: Ms. Carr or Mr. Charlebois, thinking about competitive risk, as far as I can assess, when it comes to the environment, our oil and gas sector in Canada — and globally — has a reputation for best practices in exploration, extraction and distribution. When it comes to human rights and people working in those sectors, we also have a great reputation for human rights. It makes me wonder. We know how we can get product to the East Coast. Why do we continue to buy from Venezuela, Russia and some other questionable sources? What are you finding out there? Why are we not able to get competitive and sell our own products into the east of Canada?
Mr. Charlebois: Thank you for the question. I will take it, and my colleague Dr. Carr will be able to supplement.
In terms of the incentives for the eastern provinces to continue to get supply from global markets, it really comes down to connectivity with pipelines as it relates specifically to oil.
We have seen, for example, the Line 9 pipeline from Enbridge being re-reversed in 2015-16, which allowed more crude oil from the West to reach eastern markets, specifically in Ontario and Quebec. That said, this is not sufficient to meet the current demand for those specific markets where there is, arguably, most of the refining capacity in Canada. In that context, those refiners and buyers of oil need to rely on global markets to supplement their oil supply.
In terms of natural gas, we have seen the development and very important growth of natural gas production in the northeastern United States over the last 10 years. Because of the proximity with the centres of demand, again in Ontario and Quebec, it makes it more cost-effective for those natural gas buyers — the local distribution companies, for example — to get their natural gas supply through short-haul transportation, essentially supplying from the northeastern U.S. as opposed to Western Canada.
That’s not to say that natural gas production in Western Canada cannot reach market. We see this actually occurring to a very large extent on the West Coast, as well as supplying local demand specifically in the oil sands.
Senator Klyne: On the periphery of all of this, I want to ask: If routes like Panama or the Arctic are off the table, is there any further discussion being had about a northern energy corridor?
Mr. Charlebois: Those discussions would happen at the policy-maker sphere, so to speak. Again, my colleagues at Natural Resources Canada could speak to those potentials that they are discussing with promoters.
In the case of the Canada Energy Regulator specifically, we don’t have any applications for pipelines that would serve those northern routes at this time. When we receive such applications — if ever — we will definitely assess them in a timely manner.
Senator Klyne: Thank you.
Senator Anderson: Thank you to the witnesses. My question is for Mr. Charlebois.
You spoke about project assessment and decisions. You spoke about having the strictest and safest decisions, and looking at what hinders or contributes to Canada’s commitment, the magnitude, the net zero and applicability of other factors.
My question to you is: Can you explain how Indigenous rights holders and rights of self-determination fit into the CER project assessment and decisions given the mandate letter to implement the United Nations Declaration on the Rights of Indigenous Peoples and to work in partnership with Indigenous peoples to advance their rights?
Mr. Charlebois: Thank you for the question. My colleague, Dr. Carr, will be well positioned to answer it.
Genevieve Carr, Chief Environmental Officer, Canada Energy Regulator: Thank you for the question.
Before I start — because it is the first time I have spoken — I want to acknowledge that I’m speaking to you from Calgary today, which is the traditional territory of the Treaty 7 peoples in southern Alberta, and that the city of Calgary is also home to the Métis Nation of Alberta Region 3. It is a privilege to speak to you.
Senator, if I understood your question correctly — and I welcome follow-up as I try to address it — you’re interested in how the regulator considers the rights of Indigenous peoples, primarily at the outset anyway, in terms of its assessment of projects.
The Canadian Energy Regulator Act, when it came into force in 2019, made explicit the importance of implementing the United Nations Declaration on the Rights of Indigenous Peoples. There are several places in the act that require consideration of Indigenous rights, including one — and it is an important factor — for the commission in its consideration of project proposals before it, and other authorizations that come before it.
The commission conducts hearings in a way that invites participation from Indigenous peoples. Since the establishment of the Canadian Energy Regulator Act and the Canada Energy Regulator in 2019, the regulator’s role as an agent of the Crown was formalized in that legislation.
In addition to the commission’s independent adjudicative process on applications, we now house a Crown consultation coordinator that will consult with Indigenous peoples who may be impacted by projects under the authority of the regulator, and is actively intervening in commission-led processes to reflect the interests, concerns and rights of Indigenous peoples that the Crown consultation coordinator hears in their consultations with Indigenous peoples.
Senator Anderson: I am cognizant of a project in the Beaufort Delta region with the Inuvialuit Regional Corporation that is undergoing significant delays due to the CER process.
Can you advise what those delays could be, and how long they would implement a project, specifically in a region that is very reliant on natural gas — as well as the communities that are highly reliant on natural gas, who also have outdated equipment that is reliant on oil and gas — and the impact that this could have on a region where the equipment has a three-year lifespan left?
Ms. Carr: Senator, I believe you’re referring to the Inuvialuit Energy Security Project.
Senator Anderson: Yes.
Ms. Carr: What I can tell you about that, I am aware — and it was in the media, in fact — that there is a dispute between Inuvialuit and the regulator in terms of jurisdiction and authority.
The CER is the regulator for this project in the Inuvialuit Settlement Region. The regulator has a collection of responsibilities and sees that the authorizations and requirements that it sets out are reasonable given its requirements to consider a number of factors, including the environmental protection of the project.
Senator Anderson: With all due respect, we are stewards of the land. It is on Inuvialuit land claim lands. It is a project funded by the Inuvialuit. As part of the history, our area is one of the most highly affected areas by climate change. We are very cognizant of that. That is first and foremost in our decision making.
We are also left with the oil and gas work that happened in our region in the 1980s. We have an artificial island that’s degrading. We have over 50 sumps in our region. We have infrastructure littered across my home community of Tuktoyaktuk. We have a metal barge sitting in our waters.
With all due respect, I want to heighten and make you aware that the decisions that are being made by the Inuvialuit on Inuvialuit land for Inuvialuit people have a huge implication on our standard of living, on employment opportunities, on our high rates of suicide and on addressing issues that we have been facing in regard to the natural gas that is currently available to us in the region. Thank you very much.
Senator McCallum: Thank you for your presentations. Welcome to the people who are here with us today.
My first question is to Mr. Charlebois. When you talk about having timely energy information, there is currently a two-year lag in reporting Canada’s greenhouse gas emissions. How does the lack of real-time emissions estimates affect Canada’s capacity to develop emissions reduction strategies and policies? How is the federal government designing its emission reduction measures to account for the lack of real-time estimates of GHG emissions?
Mr. Charlebois: Thank you. Your question goes to a large extent to the timeliness of data. The question of timing always needs to be balanced against the accuracy of such data, especially as it is relied upon to develop policies, and in our case modelling.
In the case of GHG estimations, as you can appreciate, accounting for emissions across the country — all sectors, all provinces — requires a fair amount of effort, and this is the responsibility of our colleagues at Environment and Climate Change Canada.
At the CER, we do not model emissions, specifically. In order to fully answer your question, in fact, I couldn’t go beyond what I just said in terms of intentions of having more timely data. This is really for our colleagues at Environment and Climate Change Canada.
Mr. Sawyer: This initiative at the Canadian Climate Institute called 440Megatonnes.ca is looking to fill a gap on information about the progress toward our climate targets. There is a significant lag in the emission inventory, as you note, and it makes tracking progress really difficult.
Also, those total emission numbers, it’s hard to back up and see what’s driving those in terms of heat pump deployment or converting off-diesel generation of electricity. It’s hard to know the individual actions going on.
One thing we need to do as a country is get more skilled at understanding these intermediate outcomes — the electric vehicle sales, the heat pump penetration, the fuel that’s being switched out — understand how it is changing in a timely manner and then look at how it is aligned with our emission reduction aspirations. We have to get much better at tracking progress, much better at understanding how policy is driving individual outcomes, not just total emissions, and then course correct as we go. We’re offside; let’s fix that. This isn’t happening there, we thought it was going to happen; let’s fix that.
The cycle of evaluation and feedback needs to be strengthened in the country, and it becomes really important with all the policies we have. The federal government has a big agenda. We have identified at the Canadian Climate Institute 100 policies that the federal government is implementing alone. There are another 300 provincial policies we’ve identified, and $80 billion in climate finance. We’ve listed all of these policies on our website.
There is a lot going on. As we’re rolling out all this policy, we have to get better at tracking the policy, and that’s good governance — the elements that need to step up.
Senator McCallum: For Mr. Sawyer, what part does the Canadian population play? When we look at the new liberal market economy, the individualization that goes with that and the consumerism, where does this fit in the picture?
Every time I drive my vehicle, I think about it. I’m alone in the car. We don’t talk about that enough. What part do we play as Canadians in helping move this?
Mr. Sawyer: Information always helps move us along and understand where we need to go. We often focus just on policy. We need a carbon tax, and then the economist will say when you’re holding the pump in your hand you will think about the cost and think about your driving choice, as you have said. What’s often missing is the information about what to do about it.
What is the payback on an electric vehicle? Will I make my money back on it, and when? Do heat pumps work well in cold Ottawa weather? Are wood stoves okay? What are the emissions associated with wood?
One of the things we used to do is just do information programs. There’s the Rick Mercer commercial, the One Tonne Challenge. Everybody laughed at it. I liked it because it got parents talking about carbon policy. We didn’t have actual policy at the time, so everyone said information is weak. We need to flip that around now and get good at communicating the benefits and the opportunities.
The last thing I will say is climate impacts. You just mentioned the North. We did a study recently called Damage Control, and we were looking at the economic costs of a changing climate. Who has the largest impact in the country per capita? The North because of the permafrost, country food and all kinds of stuff going on. Putting that information out there helps, so we need more information.
[Translation]
The Deputy Chair: I have a question for you, Mr. Sawyer. My question is related to the third objective of the study, which is to address the effects of transition on workers. You said in your notes that you wanted a faster transition. Has your organization assessed the effects of your proposals on the various workers in the industry?
[English]
Mr. Sawyer: That’s a fair question. We track employment, and employment usually falls in some sectors and rises in other sectors. There are technology purchases. Low-carbon technology leads to more employment, so there is a net effect that goes on across the economy.
From a policy perspective, one thing we don’t do really well in the country is have specific, targeted policies for groups that are in trouble, that are affected by the transition or affected by climate change. Instead, we have broad-based Employment Insurance-type policies that help everyone, and we have moved away from targeted policies. Given this transition that goes on, we have to be more thoughtful about targeting policies and programs to help the workers and help the transition.
We’re not doing a great job in the country on this, but we’re starting to understand it. We talked about it quite a bit I think.
[Translation]
The Deputy Chair: I believe your website has the different initiatives that have been taken in Denmark, Scotland and New Zealand. I imagine that there are ways of doing things that could be very positive for us in this transition.
[English]
Mr. Sawyer: This is complex stuff. I often say if somebody says they have carbon policy figured out — “Oh, we need to do this” — I would say they don’t understand the problem. There’s a lot going on, and it is quite complex.
Understanding what’s working in the country, we need to look internally at programs within the country that are useful and scale those up. Of course, we also have to look outside the country and see what’s working. As I said, we also need to be a little more thoughtful about it. This really isn’t my area of expertise, so I can’t speak in depth about it.
Senator Klyne: A question for the regulator and potentially Mr. Sawyer, who may want to offer some comments. I am wondering about the progress update on the Trans Mountain Expansion, if the whole route is fully approved and how construction is coming along in Burnaby for the terminal.
Are these two going to come together online at the same time? I understand it already has 20-year contract commitments, and before this even started, Burnaby was already overcommitted in contracts. Hopefully, the expansion of the terminal will assist. But also, at the expense of the repairs, are the pipeline and the terminal going to come online at the same time and be available to move product?
I know it will increase the amount of production, but, overall, what does it mean for Canada? Is it a good thing with respect to climate change that we would be exporting and moving product offshore?
Mr. Charlebois: Thank you for the question. The construction of the Trans Mountain Expansion is ongoing. The information we have is that the project is tracking for mechanical completion during the second half of 2023. Mechanical completion means that oil will start flowing in a phased manner, depending on the segments and on the connectivity with the Burnaby terminal. It will not be a one-off switch from one day to the next, there is a ramp up to it that will unfold in the second half of 2023.
This will increase the export capacity of oil for Canada to the extent of 590,000 barrels per day, which is fairly significant. This is something that has been supported by long-term contracts for producers. In terms of the impact that this has, obviously, it allows Canadian producers to reach global markets. We see this playing into the long-term projections of oil production in Canada, which we see, based on our projections, peaking around the early 2030s, and then start decreasing. Oil production is obviously an amalgamation of all the production of individual producers, and we see that peaking in the early 2030s.
Senator Klyne: Mr. Sawyer, did you have any comments around that project?
Mr. Sawyer: No comments.
Senator McCallum: Thank you. I wanted to go back to the remark that Senator Klyne made about a northern energy corridor. When the Energy Committee went to Quebec, I think it was two years ago, the question of pipelines going through Quebec was brought up. The province had refused to consider any more pipelines being built to transport to the east coast, and then there was no more. That was the end of the discussion.
It is a very different conversation that we have when it involves Indigenous people and having pipelines going through their territory. We look at the northern energy corridor that I have heard about going through Churchill, and the chiefs in that area, who are in the Treaty 5 and Treaty 10 territories, have not even been consulted.
It’s also the rail line. I’ve ridden that rail line. I was on it in August. I lived in Churchill, so I came in and out. It is going through land that is wetland, it’s marsh, there is a purpose for it and to transport oil through there — when the train is going so slowly because of the terrain, and now the permafrost is melting as well. Do you have any comments about the issue of the pipelines going across the country?
Mr. Charlebois: Let me offer this: What we’re talking about here are huge infrastructure projects, typically in the multi-billion-dollar range. Those require extensive planning engagement with local communities and local Indigenous people, as well as market participants that would use that infrastructure, including provinces. These are fairly complex infrastructure projects to develop, and to the extent that, for example, the northern energy corridor is being considered by promoters, those promoters will need to do their due diligence, both on the commercial side and on the engagement and consultation side of things.
To the extent that such energy projects are regulated by the Canada Energy Regulator, our expectations and requirements as it relates to engagement are very clear. History will tell that if a promoter is not doing a good job, and even exceeding expectations in terms of engagement, it will actually delay the project rather than streamline anything. I’d be happy to take other follow-up questions, but that’s what I would offer on those large infrastructure projects.
Senator McCallum: Mr. Sawyer, can Canada’s oil and gas sector meet its emissions reduction targets from the 2030 Emissions Reduction Plan without reducing oil and gas production?
Mr. Sawyer: That’s the question, isn’t it? Carbon policy, when we add costs, usually results in some output loss. Some balance sheets can’t survive. The trick is for us to be really careful with our policy and not lead to those really adverse competitiveness outcomes.
When I look at the oil and gas sector, there are significant emission reduction opportunities, there is a tonne of technical know-how, great sophistication, and that’s happening in the backdrop of market headwinds — challenges with falling demand and being the marginal producer in a shrinking market. There are a lot of challenges for the sector. The market is driving output down, ultimately, with net zero. The question is whether carbon policy and business investment can decarbonize that oil so it can compete in that constrained world.
[Translation]
The Deputy Chair: I’d like to thank all the witnesses who have committed to being here with us this morning.
[English]
Thank you for being here. We will set up our second panel.
[Translation]
Fellow senators, we will proceed with the second part of our meeting.
[English]
On the second panel, we welcome David Billedeau, Senior Director, Natural Resources, Environment and Sustainability, for the Canadian Chamber of Commerce, and Mark Cameron, Vice President, External Relations at Pathways Alliance.
[Translation]
Welcome and thank you for accepting our invitation. You each have five minutes for your opening remarks. We’re going to start with Mr. Billedeau, followed by Mr. Cameron. Go ahead, Mr. Billedeau.
[English]
David Billedeau, Senior Director Natural Resources, Environment, and Sustainability, Canadian Chamber of Commerce: Honourable senators, thank you for the opportunity to attend today’s discussion on behalf of the Canadian Chamber of Commerce.
Canada’s oil and gas sector plays an important role in ensuring the country’s economic prosperity, energy security and sustainable development. In terms of economic impact, in 2020, our collective oil and gas sector provided $105 billion to Canada’s GDP and maintained nearly 400,000 jobs across Canada. The production sector alone is expected to contribute $50 billion in taxes and royalties in 2022. This annual revenue to governments is vital for the development and maintenance of Canada’s infrastructure, such as roads, schools and hospitals.
At the same time, Canada’s oil and gas sector accounts for approximately 27% of the country’s total greenhouse gas emissions. Therefore, it is vital to have a strategy to decarbonize while maintaining the economic benefits of continued production. With that said, the sector is broadly committed to sustainable development and reaching Canada’s 2050 net-zero target.
Canada’s oil and gas sector has continuously reduced emissions intensity over the past years without far-reaching regulatory requirements to do so. Moreover, oil sands firms have committed to pursuing projects valued at nearly $25 billion to reduce emissions and improve energy efficiency of operations by 2030. In effect, Canada’s oil and gas sector is poised to demonstrate global research, development and deployment leadership for the most advanced decarbonization technologies.
As the industry continues to evolve, so too does its workforce. Per Statistics Canada, as of 2019, 36% of the sector’s workforce was female, 26% belonged to a visible minority group, nearly 10% identified as being Indigenous and the sector is a primary employer of new Canadians. In sum, the sector is providing strong middle-class employment opportunities for all Canadians, and has a positive economic and employment impact in almost every region of our country.
Canada’s oil and gas sector is also positioned to support global decarbonization efforts and energy needs. Ongoing conflict in Europe has reinforced the need for Canadian leadership to support international energy security. At the same time, Canadian energy products hold significant opportunity to displace carbon intensive alternatives within international markets.
Since 2021, the Canadian Chamber of Commerce has been working with members of its Net-zero Council, a multi-sector collective of business leaders committed to net zero, in order to ensure Canada’s pathway to net zero is competitive, enhances investment, creates jobs and promotes innovation. To that end, I appreciate the opportunity to table three salient recommendations from the Net-zero Council’s recent report on how Canada can reach its emissions targets.
First, Canada should develop a detailed green skills plan to unlock the opportunities that net zero will bring. Delivering on net zero while capitalizing on economic opportunities will require a workforce strategy that includes a comprehensive set of employment and skill projections to identify gaps across domestic industries, including oil and gas, and geographies.
Second, Canada should increase overall net-zero funding, and do more to reduce risk and address barriers to private sector investment. The chamber encourages the Government of Canada to directly fund innovative climate technology programs, secure co-investment through public-private partnerships, deliver support for research and development projects and reduce risk in private sector investments in clean technologies. The need to better compete for investment capital is heightened due to the recent U.S. Inflation Reduction Act.
Third, Canada should consider a holistic picture of emissions and predicate sector environmental policies on global emission reduction opportunities. To that end, the federal government should promote and strengthen Canada’s energy sector to reduce global supply chain-related emissions of products, materials and businesses. Yet Canada stands alone as one of the world’s primary oil and gas producers that is hindering the success of its domestic energy industry through decarbonization strategies that create added costs, regulations and pathways that do not consider financial or technical viability. Such actions reduce our ability to compete globally, and result in the loss of market share to OPEC and other non-democratic, non-free market nations.
In closing, the Canadian Chamber of Commerce encourages this committee to recognize that the oil and gas sector is committed to combatting climate change and reaching emission reduction targets. Moreover, there is boundless potential for Canada to drive global transitions to net zero. However, partnerships between the private sector and government are ultimately required to advance these ends. Thank you again for your time and consideration. I look forward to our discussion.
[Translation]
The Deputy Chair: Thank you. Mr. Cameron.
[English]
Mark Cameron, Vice President, External Relations, Pathways Alliance: Thank you very much, senators, for the opportunity to speak to you today. My name is Mark Cameron, and I am the Vice President of External Relations for the Pathways Alliance. Pathways Alliance is a fairly new organization. It represents the six largest oil sands producers in Canada: Canadian Natural, Cenovus, ConocoPhillips Canada, Imperial Oil, MEG Energy and SunCor, which collectively operate about 95% of the oil sands production in Canada.
Firstly, I recognize that our industry is a significant contributor to Canada’s emissions. We represent about 10% of the emissions in Canada as Mr. Billedeau mentioned — 27% of emissions for oil and gas as a whole. We know that we are part of the problem, but that is also why it is imperative that we are part of the solution.
The Pathways Alliance is really the next step in the evolution of the industry toward greater action on climate. Over the last decade, Canada’s oil sands companies have cooperated through Canada’s Oil Sands Innovation Alliance — which has dealt with not only climate issues, but issues related to air, water and land — and put $1.8 billion into over 1,000 different technologies. Our companies have invested about $10 billion in technologies over the past decade in various forms of research and development, much of which is directly related to reducing emissions.
We’ve been able to reduce our emissions intensity, that is the emissions per barrel of oil, by about 22% since 2009. However, we recognize that reducing the intensity of our emissions is no longer enough, and that we have to reduce emissions on an absolute basis, which is why we’ve developed a plan to reduce emissions by 22 megatonnes per year by 2030 with a commitment to achieving net zero by 2050. In order to achieve this, we will really need collaboration with all levels of government, First Nations partners and industry working together in order to achieve such an ambitious goal.
I’m here today to talk to the Senate about what our plans are and how we can actually be a contributor to reducing emissions in Canada. As Mr. Billedeau mentioned, the oil and gas industry is a significant contributor to Canada’s economic growth. In fact, it is estimated that this year alone oil and gas will contribute $50 billion in taxes and royalties to all levels of government, and $9 billion in corporate taxes, which is about 13% of Canada’s corporate taxes as a whole coming from this one industry. It is imperative, even as we reduce our emissions, that the industry remains strong, healthy and competitive as a whole.
We’re faced with significant competitive challenges. We’ve seen the Inflation Reduction Act in the United States putting in place significant support for carbon capture and storage, but really all forms of technology ranging from hydrogen to small modular reactors to batteries. For Canada to be able to compete for capital, and compete for talent as we seek to decarbonize, we will have to put in place equivalent measures. We were happy to see in the Fall Economic Statement that the government did indicate that they would do whatever was required to continue to compete with the United States and others.
We’ve already received significant support from the federal government through the investment tax credit, which was introduced a couple of years ago, but we will need additional support for operating costs. We’ll also need regulatory and policy support to really make this plan possible.
I would be happy to talk more about our plan and what the Pathways Alliance companies are doing. Thank you very much for your time.
[Translation]
The Deputy Chair: Thank you very much for your testimony.
[English]
Senator Sorensen: Thank you all for being here. I have much respect for both of your organizations. I’m going to ask a question about alternative or nuclear power.
Mr. Billedeau, you recently wrote an article in Policy Options stating that embracing nuclear power is a key element of reaching net zero. You said given the environmental footprint and local community pushback on new hydro infrastructure and the transient nature of other renewables such as solar or wind, nuclear can provide clean, reliable energy consistently.
Mr. Cameron, Pathways Alliance has also publicly stated that the development of small nuclear reactors, or SMRs, is a cornerstone of decarbonizing the country’s oil and gas sector.
I will ask you both to expand on your comments and your thoughts. If you could, in those responses, touch upon the concerns that Canadians hold with regard to their views on nuclear energy, and how those concerns could be reassured.
Mr. Cameron, do you want to start?
Mr. Cameron: Sure. Small modular reactors are an extremely interesting technology from our point of view. Essentially, the oil sands process — and the reason that it is so carbon-intensive — uses large amounts of mostly natural gas to generate steam in order to extract the bitumen from the sand where it is mixed in. This is a very energy-intensive process.
One alternative would be replacing natural gas with small modular reactors to produce the power and steam that’s necessary. There are a couple of SMR technologies that are quite promising in that you have to have the right size of reactor, the right production of heat and power. There are a couple of technologies that are in the current Canadian Nuclear Safety Commission design process that look promising for the oil sands.
Right now, carbon capture is the only technology we can use to reduce emissions. We think by the mid-2030s SMRs could be a significant alternative, and perhaps more economically competitive. That’s something we’re actively looking at.
As you mentioned, the public concern is an issue. There’s never been nuclear power in Alberta. Obviously, there would be an extensive public engagement process and consultation process, particularly with First Nations. It would be necessary in order for something like this to come to fruition. It is definitely something that we’re interested in looking at for the mid-2030s time frame.
Mr. Billedeau: If I can build on that response.
Senator Sorensen: Yes, please.
Mr. Billedeau: Thank you for the question.
As Mr. Cameron noted, SMRs have significant potential to not only decarbonize certain sectors of our economy, including oil and gas, but also Canada’s emerging critical minerals sector.
Nuclear, more broadly, has the opportunity to decarbonize Canada’s wider carbon footprint. Of course, the Canadian Chamber of Commerce supports nuclear. But it is also important to note that the Canadian Chamber of Commerce also supports other forms of energy production.
It’s important to understand that there’s no single solution to Canada’s decarbonization problem or pathway. Nuclear has proven over the years that it is both a safe, efficient and clean form of energy production.
The main hurdle here for advancing nuclear isn’t technological. There are obviously new technologies coming down the pipeline like SMRs, but those engineering problems can be squared away fairly easily, especially as Canada has a strong track record in this space.
The main issue, as you’ve identified, is public acceptance. As was previously indicated, I think Canada has to engage in a strong education, engagement and consultation strategy and initiative to engage with the public to assuage any concerns.
Canada, again, has an excellent safety record with respect to its nuclear energy industry. That has to be better communicated to the public. The benefits of nuclear in terms of the cost of production for energy, but also its relative emissions in comparison to other forms of energy production — those benefits have to be clearly communicated.
Senator Sorensen: Thank you very much to both.
[Translation]
Senator Miville-Dechêne: My first question is for Mr. Billedeau.
It seems to me that there are a few contradictions in your point of view, since at the same time, you’re a free market enthusiast, and the chambers of commerce, in general, are more in favour of the free market. We’re all talking about fairly large subsidies here. Would you support the elimination of all direct and indirect subsidies to the fossil fuel industries so that it’s consistent with your economic philosophy?
[English]
Mr. Billedeau: I think the chamber does not support the elimination of subsidies and financial supports for the oil and gas sector. It would be exceedingly difficult for the oil and gas industry to compete for future investments without strong financial partnerships with government, particularly as other jurisdictions across the globe provide ample financial supports for their energy sectors.
Given the significant costs of decarbonization technologies, it makes sense for government and industry, who share the same goal of decarbonization, to share both cost and risk.
Senator Miville-Dechêne: You don’t see a contradiction between your general philosophy about a free market and this particular sector, which contributes to climate change?
Mr. Billedeau: Forms of subsidies through programs like the Strategic Innovation Fund and other green programs are aligned with World Trade Organization requirements, for example, and are fairly standard across other energy-producing nations. I don’t think that there is a discrepancy there between having industry and government partner financially on major infrastructure projects and energy projects and the chamber’s position for a strong, free market.
[Translation]
Senator Miville-Dechêne: To achieve net-zero emissions by 2050, you have asked the federal government to fund your project up to 70%. You want subsidies that reach 70% of your project to achieve net-zero emissions.
That 70% target is quite striking —
[English]
It looks pretty high. Can you explain why you arrived at this particular figure? When citizens see that, how can they think it’s reasonable? Shouldn’t you put a little bit more from your pocket? What are we talking about here? Because we’re talking about $75 billion. This is pretty high. Please tell us about it in lay terms.
Mr. Cameron: Sure. I don’t think we’ve ever put out a number like 70%, but obviously we are looking for significant support. If you look around the world at what is happening in Norway, the Netherlands or the United States, they are putting that level of support on the table for their industry. The Longship Carbon Capture and Storage project in Norway has 75% support, both for capital and ongoing operating costs, and the 45Q tax credit, which was essentially doubled under the Inflation Reduction Act, provides $85 U.S. a tonne for a 10- or 12-year period after the construction of a carbon capture and storage project. These are very large subsidies compared to what Canada is offering.
I think we have to distinguish between subsidies for the oil and gas industry for our production, exploration, marketing, et cetera, which I think it’s perfectly legitimate for the government to say that we don’t want to be in that business anymore, you can compete on your own two feet. But when we’re talking about decarbonization, first of all, we’re not just talking about the oil and gas industry, but every industry. The carbon capture and storage tax credit would apply to the steel sector, the cement sector and other sectors. We’re competing internationally.
If we’re looking at decarbonization to meet Canada’s 2030 and 2050 goals, we’re going to have to compete with what’s happening in the U.S., Europe and China. Unfortunately, that means that Canada must invest along with those other countries.
When you look at the $75 billion cost for decarbonization and the Pathways plan, if we were to simply reduce our production gradually to zero by 2050, we would lose about $2 trillion in economic activity — a $75 billion investment in decarbonization to preserve $2 trillion in economic activity for Canada.
Senator Miville-Dechêne: You said it’s not exactly 70% of your investments you’re trying to have paid by the government. What is it?
Mr. Cameron: We haven’t got a definitive number because we’re talking about different programs for the provincial and federal government, the NZA program, the investment tax credit, contracts for difference and royalty programs provincially. When you add it up, it might be in that ballpark, but we haven’t put a number on it.
Senator Klyne: I have a question for both of our representations on the panel here. Welcome and thank you for your opening remarks.
Mr. Cameron made the comment about collaboration which sparked something in my mind here. My question is going to focus on the Regional Energy and Resource Tables that are under way. Prior to these tables being announced, my take on what was happening was why didn’t the federal government take a whole-of-government approach to climate change, which I viewed as hoisting targets and policies upon industry and very much an inside-out approach to business?
With the announcement of the Regional Energy and Resource Tables, this now takes on a whole-of-the-nation approach, including advance consultation with stakeholders of the federal, provincial and territorial governments, industries and Indigenous partners, which pretty much captures your observation there, Mr. Cameron.
My question around this is the substantial footprint and impact that your alliance would have, plus the membership of the Canadian Chamber of Commerce. The first round of these tables is meeting with provinces to identify two to four significant projects that the federal government and provinces could work on together. That’s a substantial leap forward of consultation, wanting to work together and collaborate. Another second round would involve bringing the industries and the Indigenous partners to the table.
Are you knitted into this process or do you see yourselves being at the table? Are the provinces representing you at these tables in terms of the first round in identifying projects that some of your members or your alliance could be working on to lever what I might call the wheelbarrows of money and getting our taxpayers’ money back into the GDP of looking for monetizing opportunities, and at the same time dragging things over the climate change goals?
Mr. Cameron: We think the regionalized resource tables are a good initiative, and we’re very complimentary of what Minister Wilkinson is trying to do. Currently, the provinces of Alberta and Saskatchewan are not part of the Regional Energy and Resource Tables process, which is unfortunate but obviously there are political tensions between those governments.
We have very strong dialogue with both the federal and provincial governments and with Indigenous communities. We certainly look forward to being a part of that process or any other process, but we’re in active dialogue with Natural Resources Canada, Environment and Climate Change Canada, the provincial ministries of energy and environment. We’re fully engaged, and we do see this as a process that is going to require everyone at the table — the federal government, provincial governments, Indigenous communities, labour and other actors have to come together.
This would be an industrial project on a massive scale — 35,000 jobs between now and 2030, building a 400-kilometre pipeline, a carbon sequestration area that could store a gigatonne of carbon, 16 different carbon capture facilities and all that has to happen in the next 10 years.
Senator Klyne: That’s pretty exciting. Thank you.
Mr. Billedeau: To answer the question, the chamber isn’t currently involved in the round table discussions, but we do support the initiative.
It’s important to highlight that last year Canada’s Commissioner of the Environment and Sustainable Development put out a series of lessons learned over Canada’s decades-long experience addressing climate change and environmental issues. The number one take-away and recommendation from that report was stronger leadership and coordination are needed to drive progress toward climate commitments.
The chamber fully supports that message. Addressing climate change requires leadership and coordination between Ottawa and federal organizations, as well as provincial, territorial and municipal governments and, of course, the private sector. To that end, I commend the Government of Canada’s initiative on this project, but while we’re not currently involved, we do hope to engage as the months go by.
Senator Klyne: Thank you.
Senator Batters: Thanks to both of you for being here today and for your important testimony. I particularly appreciated hearing from Mr. Billedeau about the massive number of jobs that this oil and gas industry provides in Canada. He stated the number of 400,000 jobs. I’ve seen a number as high as north of 522,000 jobs in Canada, and the huge dollar figure of $105 billion that the oil and gas industry contributes to the Canadian economy.
Given those two very significant factors, I don’t think that the oil and gas industry can, in any way, said to be a, “subsidized industry.” It’s a very significant contributor to the Canadian economy.
My first question to Mr. Cameron is: What are the biggest misconceptions about the Canadian oil sands and the industry’s ability to help Canada achieve its climate goals?
Mr. Cameron: Great question. There is a perception, certainly, in parts of Canada that don’t have as much experience with oil and gas or internationally that the oil sands are a particularly dirty, dangerous or problematic form of oil and gas production. Really, the reason for that is quite simple. It is an energy-intensive process, and, therefore, with current technology, that means it is an emissions-intensive process. The process is really well understood. It’s getting better every year. We’re bringing costs and emissions down. We have a 22% reduction in emissions per barrel over the last decade. We have a clear plan to get to net zero.
Sometimes we see international insurance companies in Europe singling out the oil sands, along with coal, by saying, “This is an industry that we won’t invest or won’t insure.” We don’t mind being held accountable for our emissions, and many of our projects are at or below the North American average for emissions intensity. But there is no issue with the type of production. The issue is how can we do it better? How can we get those emissions down?
It’s also the fact that 96% of Canada’s petroleum reserves — and we have the third- or fourth-biggest petroleum reserve in the world — are oil sands. When you talk about the Canadian oil and gas industry, the vast majority of the Canadian oil and gas industry is the oil sands, at least in terms of its future potential.
Another thing is that oil and gas production around the world declines at about 6% per year. There is a constant effort for new exploration and finding new sources of petroleum. With the oil sands, we don’t have to find it. It’s there. We know where it is. It’s just a matter of how we do it more efficiently, more economically and in a more sustainable manner.
Senator Batters: I’m from Saskatchewan, so I have a particular interest in the issue of carbon capture and storage technology. Also to you, Mr. Cameron, the oil and gas industry proponents have been asking — and maybe this is where the 70% number comes from — for a 75% investment tax credit from the federal government in order to spur investment in carbon capture and storage technologies. That would reduce upfront capital costs involved in constructing this critical technology. But the government’s announcement fell short, promising only a 50% tax credit.
Many in the industry have stated that that size of a credit means that some of these planned projects won’t go ahead. Can you comment on how important it is for this technology to be developed, and what kind of impact you think it could have on emissions from the oil and gas industry?
Mr. Cameron: I have seen that 75% number in the newspaper. That was never our request. We didn’t ask for nor expect a 75% investment tax credit, and we were quite happy with the investment tax credit that the federal government announced a couple of years ago. But things have changed since then. That was to keep pace with the section 45Q tax credit in the U.S., which has now more than doubled. While the investment tax credit helps with the upfront capital costs, we’ve seen prices of electricity and natural gas go up, so our operating costs will be more significant for the project than the capital costs. That is why we’re looking for some support on the operating side.
If the carbon markets are working in a completely functional manner by 2030, that may take care of it. We may be able to sell carbon credits to more than recuperate our operating costs, but we don’t really know how those markets will evolve. That’s one reason we’re talking to governments, and why the federal government is talking about the idea of carbon contracts for difference. That would essentially guarantee a certain price floor for future carbon credits.
Senator McCallum: Thank you for your presentation. I wanted to go back to Mr. Billedeau’s use of the term “sustainable development.” I don’t know the amount of subsidies that are given to the oil and gas industry for research and to start to help with this issue.
I want to go back to talking about reclaiming and mitigation of land, especially in the oil sands. In 2017, there was an article that said that, since 1967, only 7% of the land — 60 square kilometres — has been permanently reclaimed. Out of that, one square kilometre was in the oil sands. As you know, with the oil sands, a lot of wildlife is being impacted, as well as Indigenous people and their culture, their livelihood and the land they need for harvesting.
There are no financial incentives for industry to comply with this condition. It allows operators to set their own plan and revise it every three years. No operator has ever been in non-compliance with its own reclamation objectives. We know that money was given to look at the abandoned orphan wells. They just announced that, two weeks ago now, with mining and how they are going to reclaim the land.
Can you comment on that and the failure to restore land? It seems that this area is just getting bigger. What is industry’s plan to mitigate? You are looking at GHG emissions. We need to look at what is happening at the end as well.
Mr. Cameron: I completely agree that the reclamation of land, dealing with the issues of water, tailings, caribou and wildlife — these are critical issues. Our industry puts aside billions of dollars for ultimate reclamation activities. We work closely with governments, Indigenous communities and academics through the Oversight Committee of the Oil Sands Monitoring Program. I mentioned the work that Canada’s Oil Sands Innovation Alliance, known as COSIA, has done. COSIA invests extensively in work around land and water reclamation. I don’t have the figures in front of me, but I know that a lot more than one square kilometre has been reclaimed.
The plan is ultimately for these projects to be put back into place in a condition as close as possible to their original condition. We work very closely with First Nations. There is something like $5 billion worth of contracting that has gone to First Nations communities through our six companies. There are companies that are active partners in some of our projects, whether it’s the new Enbridge pipeline deal that was announced or the Suncor tank farm agreement.
There are active First Nation partnerships with almost all the First Nations in the region. Obviously, they are very concerned about water and wildlife, but we are very actively engaged and spending hundreds of millions of dollars in those areas.
Senator McCallum: Do you have a report that you can send us on how much has been reclaimed?
Mr. Cameron: Yes, sure. I can send you a report.
Senator McCallum: That would be good.
Mr. Billedeau, did you have a comment?
Mr. Billedeau: I can’t comment on the specific 7% figure you’ve highlighted. I will commit to reviewing that in more detail, but I also take the opportunity to highlight that sustainable development, of course, means meeting the needs of current and future generations. By and large, the oil and gas industry in Canada has been aligned with that viewpoint in their operations. The chamber believes that as the industry continues to evolve and decarbonize, there will continue to be opportunities for Indigenous engagement and partnership.
There are a number of examples, some of which my colleague has just mentioned, but I will do the same by highlighting work by Cenovus, which has committed to a minimum of $1.2 billion in spending with Indigenous businesses over the next five years.
There is sustainable development from an environmental perspective that I believe the industry has a strong record on, but there is also sustainable development from a financial lens that the industry equally is a high performer on. Thank you.
Senator Anderson: Thank you to the witnesses. My question is for Mr. Billedeau. If I am correct, the Northwest Territories has 23 of the critical minerals deemed important by the federal government. How relevant are critical minerals to achieving net zero, and are there regulatory barriers to access?
Mr. Billedeau: That’s a great question. Critical minerals are essential inputs to reaching net zero. They are required to decarbonize our transportation sector and to advance renewables. They are essential inputs to Canada’s energy future and to Canada’s low-carbon future.
In terms of regulatory barriers, the chamber is working with a wide number of members on its Critical Minerals Council initiative to identify barriers to growth and development in that space. Obviously, one of the main impediments to growth here is that the majority of mineral deposits are located in remote northern parts of our country, so things like grid infrastructure and how to power mines and extraction sustainably are major challenges that require significant collaboration between private and public sector individuals.
There are a series of other challenges, and the chamber is working with its members. We are also looking forward to the Government of Canada’s forthcoming critical minerals strategy, which will hopefully lay out a pathway to the development of our natural resources.
Senator Anderson: I am going to switch focus to follow up with Senator McCallum’s question. When you talk about sustainable development and the responsibilities of oil and gas in regard to responsible extraction and reclamation of land, is there any policy in regard to historic extraction and abandoned infrastructure sums that you are aware of?
Mr. Cameron: I can’t speak to the orphan wells issue because that is more in the conventional oil and gas sector, but when it comes to the reclamation of mines or tailing ponds, we are accountable for the historic activities that have gone on. We do set aside funds for reclamation. We are working with the federal government on policies on water return.
We fully acknowledge that all the activity that has happened in the oil sands in the past 40 years is ultimately the responsibility of the companies that were operating those assets or that have taken them over through mergers and acquisitions, which is most of our members. We fully acknowledge that there are historic responsibilities.
Mr. Billedeau: While I can’t comment on this issue in depth right now, I can commit to engagement with a few of our chamber members after this discussion and following up to support a more holistic review of this issue for the committee going forward.
Senator Anderson: Quyanainni. Thank you very much.
Senator Miville-Dechêne: I have a question on carbon capture technology, and it’s a follow-up to my earlier question. Are there any significant private investors in the sector of carbon capture technology? Or is the bulk of financing coming from governments?
Mr. Cameron: The bulk of financing would be coming from our companies and from government. There are private sector interests in part of the financing, but these projects right now are not projects that are going to be generating the rates of return that private investors are looking at to be involved in.
In the United States, with the generous tax credits they have there, I know there are private sector companies that are getting involved in those projects because they do see a path to a commercial rate of return. Right now, we’re not making money on these projects. We’re making money on the production of oil and gas, but these projects would not be economical in and of themselves. That’s the kind of investment opportunity that private capital is looking for — in things where they would see a rate of return for their investment.
Senator Miville-Dechêne: At the same time, there are large foreign investors that are exiting Canadian oil and gas. What does this say about the commercial viability of the industry?
Mr. Cameron: There are some foreign investors and companies that have withdrawn, and there are others that have come in. Oil and gas and the oil sands are still very attractive investments. We’ve seen over the past couple of years the stock price and investments do very well for our company. Obviously, no one knows what the size of the future oil market will be, and different investors around the world are making different assumptions, but we have a lot of international investment in the Canadian oil and gas sector and the oil sands.
But you were asking about specific investment in CCUS projects —
Senator Miville-Dechêne: What would you need as a private enterprise to invest in carbon capture technologies?
Mr. Cameron: If there was something equivalent to what the U.S. has with a 45Q-style tax credit, where people would know exactly what the future return was in terms of dollars per tonne captured, that would probably bring more private capital to the table.
Senator Miville-Dechêne: Does our guest from the Canadian Chamber of Commerce have anything to add?
Mr. Billedeau: Going back to the original question about CCUS industries, Mr. Cameron’s point about the industry and government being made investors is accurate, but it’s also worth highlighting that whether it’s CCUS or hydrogen we are starting to see nascent private sector stakeholders crop up in Canada. I want to emphasize that there is an opportunity for Canadian private sector leadership in the CCUS space.
Mr. Cameron: There is a lot of private investment in CCUS technology in developing the next generations of technology for CCUS. It’s more the investment in projects where there is a gap.
Senator Batters: My question is Mr. Billedeau. In September, the Canadian Chamber of Commerce published a response to Environment and Climate Change Canada’s discussion paper centred on capping and cutting greenhouse gas emissions within the oil and gas sector. The response states: “The Canadian Chamber of Commerce opposes the directions being considered to curb oil and gas sector emissions.” Given your dedication to net zero, can you further explain your position?
Mr. Billedeau: The chamber’s general response to the proposal put out by Environment and Climate Change Canada centres on two main points.
First, the Canadian Chamber of Commerce believes that establishing sector-by-sector regulations risks proliferating a litany of different policy tools that will ultimately create regulatory uncertainty. Instead, we believe that efforts should be placed on advancing broad policy tools to support national decarbonization. This would, in effect, allow each sector of our economy to develop and deploy their own net-zero strategies.
The second principle-based response to Environment and Climate Change Canada’s proposal is that Canada has already established a regulatory framework to transition to net zero, and the chamber feels that we need to give it time to work instead of constantly changing the goal posts and associated regulatory provisions.
Existing policy measures, such as the federal carbon tax, are designed to expedite decarbonization over time. Given that the carbon tax, for example, is set to ratchet up to $170 per tonne of CO2 equivalent in the coming years, through our response to that discussion paper on oil and gas sector emissions, we encouraged the government to give such mechanisms time to facilitate private sector decarbonization.
The key takeaway here is that the chamber is concerned that continuously altering and creating a siloed regulatory and policy landscape might dissuade investments in Canadian operations, whether it’s clean energy development or otherwise. That’s our main takeaway from the proposed path forward from Environment and Climate Change Canada.
Senator Batters: That’s very helpful.
Senator Klyne: My question is for Mr. Cameron, but if there is some connection for Mr. Billedeau, you can certainly chime in.
I want to ask about the Petroleum Technology Research Centre located in Innovation Place at the University of Regina. Initially, I was going to ask about carbon capture and storage and Aquistore, but did you mention HORNET in your opening remarks? HORNET is a sustainable development demonstration project, so I thought you might have been working with them. It’s aimed at heavy oil research, looking at the efficiency and reduction of emissions from heavy oil extraction.
Mr. Cameron: I’d be happy to look into that, but it’s not something I’m aware of.
Senator Klyne: Mr. Billedeau, do your members have any interaction with the Petroleum Technology Research Centre?
Mr. Billedeau: Similarly, I will have to get back to you after engaging with our members to provide a more fulsome response.
Senator Klyne: They would probably welcome the call. Thank you.
Senator McCallum: I wanted to go back to mitigation. This time it’s for the tailings ponds. Despite the Canadian Environmental Protection Act, 1999, they increased 300%. When we look at the tailings ponds and the mitigation of those ponds, is there technology to remove the toxins? If not, what is preventing that technology from emerging?
They have talked about releasing the water into the Athabasca River, which would then flow into the Arctic Ocean.
Do you see ponds increasing in size?
Mr. Cameron: That’s a great question. There are many technologies being developed actively to reduce the toxins from tailings ponds.
The question we’re struggling with is this: What are the conditions to allow for water release? The minister, back in the summer, said that he would want the water to be drinking-water quality, but river water is not drinking-water quality. Fish don’t swim in drinking water. You have to find the right balance of minerals and sediment that are acceptable, environmentally, and that are reflective of what natural water would be.
We’re working with governments to come up with appropriate policies to make sure we’ve reduced any chemicals, metals or heavy minerals from the water, and that it is sufficiently high quality that it can be released back into the river.
That’s really what we’re working on. We have spent tens or hundreds of millions of dollars on all forms of different technologies to reduce minerals and chemicals from the water.
Senator McCallum: Do you think they will keep increasing?
Mr. Cameron: If we come up with a water release policy, we can start reducing the size of those ponds. Right now, we don’t have the ability to release water. Many other industries in the mining sector are allowed to release water, but we’re not. We have to come up with an agreement to allow that to happen.
Senator McCallum: We will have to look at the other tailings from the mines as to why they’re allowed to release and you’re not. Are you concerned about that?
Mr. Cameron: Definitely, but it’s something we’re actively working on.
[Translation]
The Deputy Chair: I’d like to thank all the witnesses and my senator colleagues who were here this morning. I declare this meeting adjourned.
(The committee adjourned.)