THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, March 30, 2023
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 Rosa Galvez (Chair) in the chair.
[Translation]
The Chair: My name is Rosa Galvez. I’m a senator from Quebec and I chair this committee.
Today, we’re conducting a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
[English]
I would like to begin with a reminder. Before asking and answering questions, I would like to ask members and witnesses in the room to please refrain from leaning in too close to the microphone or remove your earpiece when doing so. This will avoid any sound feedback that could negatively impact the committee and staff in the room.
I ask the members of the committee to introduce themselves.
[Translation]
Senator Verner: Josée Verner from Quebec.
Senator Audette: Michèle Audette from Quebec.
Senator Miville-Dechêne: Julie Miville-Dechêne from Quebec.
[English]
Senator Sorensen: Karen Sorensen, Alberta.
Senator Anderson: Dawn Anderson, Northwest Territories.
Senator McCallum: Mary Jane McCallum, Manitoba.
Senator Arnot: David Arnot, Saskatchewan.
The Chair: Thank you so much.
I wish to welcome all of you and the viewers across the country who are watching our proceedings. Today we are continuing our study on the Canadian oil and gas industry.
For our first panel, we welcome by video conference the Honourable Gary G. Mar, President and Chief Executive Officer of the Canada West Foundation; and Geoff Dembicki, Investigative Climate Journalist.
Welcome and thank you for being with us. Each of you have five minutes to deliver your opening remarks. We will begin with Mr. Mar, followed by Mr. Dembicki. The floor is yours, Mr. Mar.
Hon. Gary G. Mar, President and Chief Executive Officer, Canada West Foundation: Thank you very much, Madam Chair. It is nice to see you again, senator. It is a pleasure for me to be before your committee again.
I want to thank you for inviting me to provide testimony today to your committee. I am the president and chief executive officer of the Canada West Foundation. We are a nonpartisan and evidence-based public policy think tank. We work on issues that help build a strong West within a strong Canada. Your former colleague, Doug Black, who is the chair of the Canada West Foundation, asked me to convey his best wishes to all of his former colleagues.
In everything that we do here at the Canada West Foundation, we look how to help Canada be both economically competitive and environmentally responsible. We don’t think there has to be a trade-off; we can do both.
You’ve asked me here today to talk about the Canadian oil and gas industry, and I’m going to cut straight to the heart of what is probably the biggest question you have: When it comes to greenhouse gas, or GHG emissions, is Canada’s oil and gas industry the problem or the solution? My answer is: yes and yes. It is an undisputable fact that the oil and gas sector has the highest greenhouse gas, or GHG, emissions of all the industrial sectors in this country. These emissions are indeed a large problem. They contribute to climate change and stand in the way of Canada reaching its net-zero targets under the Paris Agreement and under federal legislation. The sector’s emissions need to be reduced substantially and permanently. That’s my first yes. When it comes to GHG emissions, Canada’s oil and gas sector is a problem.
I also gave you a second yes. When it comes to GHG emissions, Canada’s oil and gas sector is also part of the solution, and I wish to give examples. The first example has to do with methane emissions. As I’m sure members of the committee are aware, methane is a particularly concerning greenhouse gas. It has somewhere between 25 and 34 times the global warming potential of CO2 and it’s for this reason both the federal government and the governments of British Columbia, Alberta and Saskatchewan have all put in place legislation and regulations to extensively reduce methane emissions from the upstream oil and gas sector. They set a target of reducing these emissions by 45% by the year 2025.
Well, here is some good news: As of 2022, methane emissions from the upstream oil and gas sector in Western Canada have decreased by about 44%, compared to the target of 45%. So, ahead of schedule and with further decreases projected by 2025. The problem of methane is not over, but it is a substantial achievement from a sector that needs to be recognized. It is also not the global norm. Canada is a high performer in this area. In contrast to our 44% reduction, the United States has reduced its methane emissions over the same period of time by 6%.
A second example I want to talk about is Liquefied Natural Gas, also known as LNG, production. We don’t have many LNG facilities planned for construction in Canada, but as of earlier this month, we have one more, the Cedar LNG project owned by the Xa’is’la First Nation, a First Nation-led partnership. There are two aspects to these facilities that are relevant to reducing emissions. The first is emissions from the LNG production facilities themselves. As planned, the Canadian LNG facilities will have, by far, the lowest emissions of any LNG production on the planet. This means that when Japan or Korea come to buy LNG from Canada — which they most definitely have stated they want to do — it will be lower emissions than their other alternatives. Then there is the question of how the LNG will be used and the answer is this: Mostly to displace the use of coal.
A recent study by researchers from British Columbia and Alberta did a full life-cycle analysis of Canadian LNG. They found that if Canadian LNG were used in China for the textile industry, home heating or for the chemical industry, that GHG emissions would be reduced between 32 and 60% depending on the application. That’s a lot and that is a reduction squarely the result of the use of Canadian LNG.
As we think about new and additional LNG facilities, we should also take note of the energy action framework that was just put in place earlier this month by the province of British Columbia. The framework will require all new LNG facilities to create a credible plan to be net zero for emissions by 2030.
The third and final example I want to talk about is the oil sands. I know this committee heard from Mark Cameron from Pathways Alliance back in December, and I am glad you did because what that group is trying to do is unprecedented and something we as a country can be proud of and should stand behind. Carbon capture and sequestration, also known as CCS, is real, proven and something that can be done on a massive scale. Shell’s Quest CCS project opened in 2015 and since has permanently sequestered 6 million tonnes of CO2. What Quest did was to provide some early learnings that are open source and that are helping drive down the cost of new CCS projects. CCS is not inexpensive, not by a long shot, and to do something like this will take time to build, like any infrastructure project. We’re not going to see results tomorrow. But what the Pathways Alliance is planning in terms of CCS is enormously ambitious. Their goal is to sequester 22 million tonnes of CO2 by 2030. While challenging, it does appear to be achievable.
Is this going to completely eliminate emissions from the oil sands? It is not. One reason is that production continues to rise and it is rising because the world needs and demands the oil that we produce. Even as emission intensity declines, overall emissions have at least to this point continued to rise. The answer here is not easy, but attention is being brought to it. What we see in the Pathways Alliance is a lot of resources, money and the attention of top levels of companies and the coordination across stakeholder groups working toward how to effectively move the needle.
In conclusion, with respect to greenhouse gas emissions, is Canada’s oil and gas industry the problem or the solution? Yes and yes. And yes, the sector has the highest GHG emissions of all industries in the country and yes, Canadian oil and gas has solutions. They’re not only coming from the energy industry. They are coming from our universities, a large number of not-for-profit organizations and small entrepreneurs all developing innovative ways to reduce emissions.
As I said at the beginning, we need Canada to be both economically competitive and environmentally responsible. The path to achieving these twin objectives runs straight through Canada’s oil and gas sector. Thank you, Madam Chair.
The Chair: Thank you. Mr. Dembicki, the floor is yours.
Geoff Dembicki, Investigative climate journalist, as an individual: My name is Geoff Dembicki, and I’m an investigative climate change journalist. I’m the author of the book The Petroleum Papers, which was named a top 10 book of 2022 by The Washington Post. I’ve written extensively about the Canadian oil and gas industry for media outlets like The Tyee and DeSmog, as well as The New York Times, Rolling Stone and The Guardian.
I grew up in Edmonton, Alberta, and as a child my family would often visit a playground next to Imperial Oil’s Strathcona refinery. It wasn’t until I became a journalist many years later that I learned what that refinery was doing to the global climate.
Yet Imperial Oil, which is owned by Exxon, has known about the catastrophic climate impacts of its business model longer than I’ve been alive. While researching my book, I read through hundreds of pages of internal documents from the company, which revealed that Imperial Oil was studying the link between fossil fuels and global warming as early as the 1970s.
That was more than a decade before NASA scientist James Hansen first brought climate change to the general public’s attention. Imperial Oil was so advanced in its understanding that in the early 1990s, it privately studied how to fix climate change and concluded that a national carbon price could stabilize Canada’s emissions.
It also learned that this might result in lost revenues of $940 million. So Imperial decided to sabotage climate solutions. It wrote a list of talking points that executives should use when speaking with journalists and policy-makers. They were instructed to stress the “many uncertainties” associated with efforts to stop global warming.
A former employee at Exxon told me that if Imperial Oil had, instead, used its political weight to push for a carbon price in the early 1990s, “It would have been so much easier to address the crisis if we’d started then.” Yet by 1996, Imperial Oil was publicly denying climate change is even real. Its annual report claimed there is “widespread uncertainty” about whether humans are causing it.
In 2002, Imperial Oil helped set up a press conference in Ottawa, not far from the Senate, where several dozen of the world’s leading climate change deniers urged Canadian policy makers not to ratify the Kyoto Protocol. One of the speakers was Patrick Michaels, who had earlier claimed that “. . . the climate change issue is an overblown bunch of hooey . . . .”
Two decades later, Imperial Oil is still trying to mislead the Canadian public. It is part of an organization called the Pathways Alliance, along with other oil sands producers, that is spending huge on advertisements saying the industry is committed to fighting climate change. They advertised on the front page of the Toronto Star, and even during the Super Bowl.
Yet in its own submissions to the federal government, the Pathways Alliance reveals that the goal of its “net-zero plan” is to increase our dependence on oil. Experts forecast oil sands production could rise 500,000 barrels per day within the next decade. Because of this disconnect, Greenpeace just filed a complaint about Pathways Alliance to the Competition Bureau Canada, accusing it of false and misleading advertising.
Meanwhile, after their most profitable year ever, oil producers are asking the federal government to give them billions of dollars in taxpayer money to pay for carbon capture and storage technology. Why? Because the industry isn’t even confident it will work. Imperial Oil told its own shareholders in 2021 that the technology is “. . . economically challenged.”
The oil and gas industry is not and has never been a climate leader.
The Standing Senate Committee on Energy, the Environment and Natural Resources should learn the full extent of the industry’s history when it comes to climate change: what companies here privately studied, and how they misrepresented the science and solutions to Canadians.
In the U.S., Congress just spent a year investigating the oil and gas industry’s disinformation campaigns. The Senate should pick up the investigation so that Canadians can finally learn how many missed opportunities we’ve had to get the emergency under control. Thank you.
The Chair: Thank you. We will start with the period of questions.
[Translation]
Senator Miville-Dechêne: Mr. Mar, I’d like to talk to you about carbon capture, since you mentioned it yourself.
In the budget, a reference was made to renewing and continuing the federal government’s $516-million investment in or subsidy to the oil industry for carbon capture. You talked about the industry’s contribution to reducing climate change.
However, those particular carbon capture methods are very inefficient. We’re looking at a 3% to 15% reduction or thereabouts in greenhouse gases using that method.
Wouldn’t it make sense for industry players to pay for these technological innovations in carbon capture themselves, given the profits they make and the increase in their oil sales?
[English]
Mr. Mar: Thank you, senator. I appreciate that question. At the core of CCS is the rationale that oil or gas is not the issue. The issue is emissions. If we are going to deal with emissions, that’s why you need CCS, and this has largely been recognized by the International Energy Agency as one of the ways that will have to deal with the oil and gas industry, because by their estimates — the International Energy Agency and the U.S. Energy Information Administration — we will be using fossil fuels for decades to come.
By the year 2050, perhaps we go from 100 million barrels of oil a day to about 60 million barrels of oil a day but still significant. This is why CCS is required. Is industry contributing to the technology and the research in this area? Yes. Are taxpayers doing the same thing? The answer is also, yes.
A good example would be the Boundary Dam Power Station facility where the province of Saskatchewan and its taxpayers contributed nearly $1 billion to that project, which has demonstrated that CCS is a real solution.
It is possible to move forward, in partnership with the oil and gas industry and with government funding, to be able to better improve these technologies to make sure that carbon is permanently sequestered in storage facilities.
[Translation]
Senator Miville-Dechêne: Who should pay for these technological improvements? The oil industry is making a profit. Why shouldn’t it be up to them and them alone to finance technology that produces fewer emissions? After all, these emissions are produced by oil. In that sense, I don’t really understand why taxpayers should be asked to contribute.
[English]
Mr. Mar: Because if you left it entirely to the responsibility of the oil and gas industry, there are other places where oil and gas companies can go to find their sources of oil and gas in order to meet world demand, which is roughly at 100 million barrels of oil a day.
If you place that responsibility entirely upon Canadian oil and gas companies to deal with the costs associated with CCS, what you will see is not better outcomes. In fact, you will see worse outcomes as oil development moves to places that do not have the same kind of attention to environmental standards as Canada.
Of the six largest proven reserves in the world, Canada is number three. Number one is Venezuela, number two Saudi Arabia, and following Canada is Iran, Iraq and the Russian Federation. If you look at the bigger picture of not only environmental standards but the S and G of ESG, being social and governance, you would have to agree that Canada looks like the paragon of democracy compared to petro-dictators that come from these other countries.
Senator Sorensen: Good morning to our witnesses. Mr. Mar, it’s nice to see you. My first question is, Mr. Mar, what would you say to those who state that industry, including the Pathways Alliance, is greenwashing their data and their messaging?
Mr. Mar: I think that Pathways has a legitimate desire to move the needle on lowering emissions of GHGs. The reason is because of demands from financing. You see financiers and insurers that finance and insure the oil and gas industry demanding this from producers, and you see the producers demanding it from their supply chains as well. I think their efforts are real and legitimate. Of course, there should be oversight to make sure that they are, in fact, doing that, but I believe that their motives are true to the objective of reducing GHG emissions through the use of CCS.
Senator Sorensen: As an Albertan, I am aware that we must look to the future, which includes a transition away from oil and gas. However I remain concerned about the transition for our industry workers. What are your thoughts on how the federal government can better support oil and gas workers in Alberta as they transition away into new industry?
Mr. Mar: Senator Sorensen, this is an excellent question. It’s not just Alberta. There are about 450,000 people who work in the upstream oil and gas sector throughout the country. They come from places like northeastern British Columbia, Newfoundland and Labrador, across the prairies. This is an important sector of our economy, particularly in the province of Alberta where the energy sector creates roughly 20% of the GDP of the province and 25%, roughly, of the province’s provincial revenues.
Senator Sorensen, it is interesting that you, I and Geoff Dembicki all come from Alberta. We have perspectives, some of which overlap.
One of the things that I noted in the federal budget of the day before yesterday was that there really wasn’t the kind of money put toward this transition. If you are an oil and gas worker, you have a certain skill set and a set of competencies. Do you need to go back to school in order to be able to apply that to new technologies of new energy? The answer is no, but what we do need to do is to fill the gap between what people who might be working in the oil and gas sector know and what their competencies are and the competencies they need in order to work in new energy sources.
In Alberta, you would be aware, Senator Sorensen, about the fact that wind energy and solar energy are among the highest per capita anywhere in the country, but there are shortages of people who have the ability to work in these areas. Having support, both federally and provincially, to fill those gaps in so that those people can make a transition to good jobs in new forms of energy is really important.
The Chair: Mr. Dembicki, do you want to react to that?
Mr. Dembicki: I’m sorry, that was addressed to me?
The Chair: Yes. I will give you an opportunity to react because your name was mentioned.
Mr. Dembicki: In regard to carbon capture and storage, industry is asking for the majority of it to be funded by taxpayers, and this is coming off the oil and gas industry’s most profitable year ever. They made an absolute killing last year. They have so much revenue.
The reason that they want the federal government to provide so much support for this technology is that it’s still largely unproven. Imperial Oil voted against a shareholder resolution as far back as 2021, where shareholders were demanding the company have a net-zero transition. Imperial Oil said at that time that carbon capture and storage technology had many economic uncertainties when looking at the global picture.
The other thing to keep in mind is that the industry is viewing carbon capture as a way to expand its production. I’ve listened in on industry conferences where people discuss carbon capture as a way to make the industry appear greener, from a marketing perspective, so that Canadian oil can be marketed around the world as a sustainable alternative to other oil sources.
It’s good if production emissions are being reduced here in Canada, but I want to point out that, potentially, as much as 80% or 90% of the emissions associated with a barrel of oil come from burning it in something like a car engine. Even if we’re reducing production emissions here at home, all that oil we’re selling overseas is still having a massive impact on global emissions and climate change.
I would urge the Senate and the Canadian government to take all of that into consideration when thinking about this technology.
Senator Arnot: Thank you, witnesses. My question is for Mr. Mar primarily. I have three short, concise questions.
Mr. Mar, you mentioned the Cedar Liquefied Natural Gas project headed by the Xa’is’la First Nation. We have heard witnesses from other First Nations at the committee previously that First Nations would like to be able to make an investment in cash in some of these partnerships, and they see that as a way to actualize reconciliation in a modern context. What they need is large investment, obviously, but it needs to be backstopped or guaranteed by the Government of Canada.
Do you believe that the Cedar model is one that should be used by the Government of Canada in that kind of a model?
We heard that from people from the Fort St. John vicinity in Alberta.
Second, you’ve mentioned carbon sequestration, and carbon capture and storage. I am impressed by that. I want to give you a chance to amplify that, because Saskatchewan people, through the government, have made a significant investment in the infrastructure and technology, and they want to be able to capitalize on that. We have been told that Saskatchewan is leading on that. Is that a real possibility? How do you see that work?
Third, in Western Canada, we heard from communities, particularly in small towns, that they face dire consequences if jobs move away from their communities, and there’s already infrastructure there. This is, particularly, a focus on jobs we’ve seen in the green transition and not so much communities. I believe communities have an agency or place to play here.
I’m wondering what your comment would be. In particular in Saskatchewan, and certainly in Western Canada, we see this as a real problem because jobs will move to where the jobs are and leave the communities behind in dire economic consequences. We’ve already made huge infrastructure investment in these small communities.
Those are my questions. Of course, I’m particularly interested in how you think this has an impact in Western Canada. What research has Canada West done from that perspective, the purview of communities, not just jobs?
Mr. Mar: Thank you, senator. Those are excellent points. I’ll try and address them in order, if I have them correct.
First of all, with respect to the Xa’is’la First Nations model, I think this is the direction that we should be moving, particularly with LNG. Let me say that one of the most successful countries in the world at reducing its GHG emissions has been the United States, and it’s largely because they’ve switched over from coal to natural gas to generate their electricity. Canada already has an exceptional record in that about 82% of our electricity in the country is already generated from non-emitting sources of GHG. It’s largely hydro and nuclear, and to some degree, things like wind and solar are also contributing to the large amount of non-emitting GHG electricity in Canada.
The point of moving LNG to places like China is that if you can displace the use of coal, you can reduce the GHG emissions in the global atmosphere. There’s no such thing as a provincial atmosphere. There’s no such thing as a Canadian atmosphere. There’s one global atmosphere. This is the reason why Mike Rose of Tourmaline wrote an op-ed piece about three weeks ago where he talked about a hat trick. The hat trick is that by developing LNG, you’re creating economic opportunity for Canada, growing our economy. Number two, you’re bringing genuine economic reconciliation with our First Nations. Three, you in fact are making tangible reductions of GHGs in the global atmosphere. Mr. Rose refers to that as a hat trick of outcomes that we would want. That’s point one.
Secondly, in Saskatchewan, when I was located in the Canadian embassy in Washington — and Mr. Dembicki covered me while I was there, so he would know about this — one of the things that we did was we had something called CODELs, or congressional member delegations, that would want to come up and see the oil sands. One of the places we always took them to was Boundary Dam. I think people were very impressed with the work being done at the Petroleum Technology Research Centre at the University of Regina. They were impressed with what they saw at Boundary Dam. They were impressed with what they saw at the oil sands, and they recognized that these types of CCS facilities are, in fact, getting better and better.
Most recently — I think it was last year — Senator Joe Manchin, a Democratic senator from West Virginia, came to Alberta. I believe it was part of the inspiration for him to go back and look at the U.S. federal government putting money into CCS facilities, including one in his home state of West Virginia.
I would disagree with those who say this is not a proven technology. It is an expensive one, but it is proven.
With respect to employment in smaller communities in particular, senator, you would be well aware that throughout Alberta and Saskatchewan, a lot of employment comes from the oil and gas sector. I think the key point to make is that if you look at creating a job in Mississauga but it displaces a job in Weyburn, Saskatchewan, that doesn’t really help Saskatchewan.
I think it is important to recognize that in this transition, we need to make sure that there are ways of maintaining the sustainability of smaller communities, particularly in Alberta and Saskatchewan, to ensure that there are good jobs that can replace, as I talked about, the 450,000 jobs across Canada that are in the upstream oil and gas sector. Real attention has to be paid to this matter to ensure that it’s fair.
I would say this: In Canada, we often talk about the strength of our diversity of people. I think this is a great thing. It’s one of the great reasons that we should be proud of our country. One thing that we don’t talk about is our diversity of natural resources. In Saskatchewan, critical minerals are important. Uranium is a particularly important natural resource that should be developed through the use of SMRs, or small modular reactors. There is an opportunity to recognize the different natural resources in different parts of Canada. If you are in Nova Scotia and almost all of your electricity comes from coal, we need to figure out ways of making that coal better because they just don’t have access to other kinds of natural resources. You won’t be able to put in enough wind and solar, and its intermittent nature makes it difficult to replace the base load that coal provides in a place like Nova Scotia.
We should be looking at it from the perspective of recognizing the different natural resources. What clean technology means in the province of Quebec will be very different from what clean technology looks like in the province of Saskatchewan. In Saskatchewan, it really means decarbonization of the use of fossil fuels. I can tell you that great strides are being made in this area.
Senator Batters: What a great way to lead into my questions. I’m from Saskatchewan also.
First of all, you endeared yourself to me when I saw in your video background a Snowbird jet. That’s wonderful to see. Then when you talk about Boundary Dam, the world-class carbon capture and storage facility in my late husband’s hometown of Estevan, Saskatchewan, I love to hear that. It’s an incredible facility that I’ve had the opportunity to tour.
Mr. Mar, in an article that you co-authored in the Calgary Herald in November, you discussed Canadian support for climate action initiatives largely based on the region. Not surprisingly, you note that residents of oil-and-gas-producing provinces were much less supportive of a rapid transition than others. You note that the government’s modelling for economic impacts focused on a non-existent average Canadian, yet when modelling using realistic assumptions was applied to my home province of Saskatchewan, the projected impacts were actually staggering. For example, decreasing oil production by 85% would reduce our whole provincial GDP by 12%, which is a decline that would be similar to that experienced in the Great Depression of the 1930s.
Why do you believe the federal government is failing to be transparent about the real economic impact of its energy transition on specific regions?
Mr. Mar: Senator, your comment is worthy because the economic modelling used by Environment and Climate Change Canada, or ECCC, suggests that a job lost in Weyburn is made up for by creating that job in Brampton, Ontario. We know that that’s not, in fact, the case.
What Canada West Foundation did is we took the ECCC modelling and we applied it region by region. What we found was that when you used that model, there’s no appreciable difference because it’s not broken down by region; it’s all national. That needs to change.
I’m not going to besmirch the motives of the federal government in doing so — I’ll leave that to politicians to take care of — but I will say that the modelling is not particularly transparent. It’s not entirely clear what their assumptions are, but we know when we plug in numbers, it yields very little difference to the overall employment picture in Canada. It doesn’t take into account the regional impacts that a dramatic reduction in the oil and gas industry would have in a place like Saskatchewan or Alberta.
Senator Batters: Absolutely. That’s a really important point to make, and it is an especially important task for your Canada West Foundation, to make sure that those types of realities are actually known.
Mr. Mar, what do you think the impact will be of the federal government moving ahead with a rapid Just Transition policy that would actually create winners and losers?
Mr. Mar: Let me say that I’m not opposed to the idea of trying to reduce our greenhouse gas emissions and moving toward net zero by 2050, which is the stated ambition. It won’t be easy.
It won’t be easy to do, and the International Energy Agency produced a report back in 2021 saying that for the world to get to net zero by 2050, there are three things — and really four things — that have to happen: Number 1, you have to stop investing in new fossil fuel developments immediately starting in 2021; number 2, starting in 2035 all vehicles have to be electric vehicles; number 3, all electricity produced has to come from non-emitting sources by the year 2040; and number 4, all the countries of the world have to do this, not just the wealthy ones.
If you look at what is needed to make this happen, it’s really three things: It’s technology, policy and financing. The technology part is actually pretty good. There’s a lot of great technology out there. The policy will be difficult, because, first of all, I don’t think it’s likely that expensive technologies for reducing GHGs through the adoption of wind, solar, geothermal and such sources are going to be applied in the two largest emitters in the world, China and India. And the reason is because the United States, through the Inflation Reduction Act, is plowing very large sums of money into this, but the GDP per capita of China and India are, perhaps, a fifth or a quarter of that of the United States. I think it’s unlikely that we’ll be getting them to adopt these technologies.
They’re going to continue using coal. In 2022, China approved about 160 new coal plants, so that’s a new coal plant every two or three days. I assure you that they do not use the same kind of mitigation technologies that we have.
The third area is the financing, and this is something that Geoff Dembicki mentioned: Who should pay for this? Here in the city of Calgary, if you’re going to sign on to your electricity bill, it’s about 13 cents a kilowatt hour. Let’s ask Canadians: Are you prepared to go to electricity prices that are 40 or 50 or 60 cents a kilowatt hour, as they are currently experiencing in some parts of Europe?
It is challenging, but it is not impossible. That doesn’t mean that we shouldn’t try and move toward net zero by 2050 as a country, but I would point out that the federal government’s ambition is to do that across the economy. If you look at the commitment that the United States has made to net zero by 2050, it is only in respect of government operations. That’s not the whole economy; it’s just government operations, and the U.S. military, which is the largest consumer of fossil fuels in the United States, is exempt from government operations for this purpose.
We need to be very cautious that we not only watch what happens in the United States but that we do not disadvantage ourselves vis-à-vis our largest trade partner and largest trade competitor, which is the U.S.
Senator Batters: Thank you. Very good point.
[Translation]
Senator Audette: I would like to address the Honourable Gary G. Mar.
Canada is big, there are many schools of thought and, of course, there are the First Peoples, Indigenous communities. You mentioned the critical minerals strategy, which includes a component on issues or topics that affect Indigenous peoples.
This government, with this strategy, concerns me because they seem to want to move quickly.
In the context of your work, I would like to know your position or approaches regarding open, prior and informed consent when it comes to working or at least engaging with First Nations.
Looking at Canada, where there are natural resources, there are always First Nations. How do you find a balance and coexist? I don’t know how you do it, so perhaps you can share your knowledge.
It should also be said that the balance of power may not be equal, so it’s hard for a First Nation to challenge or participate when it doesn’t have the same means as multinationals, big foundations or governments.
Maybe there are some things you could share about this.
[English]
Mr. Mar: This was actually the subject matter of one of my previous appearances before this committee.
Senator Galvez, as chair, you may recall that in a previous life I was the President and CEO of the Petroleum Services Association of Canada, and at the time I did cite the fact that the largest employer of First Nations employees in the country is the natural resources sector.
I think this is an important question that you’ve asked, senator, today about how we ensure that we are able to move forward in a way that recognizes the rights of First Nations communities. By my count, I understand there are over 640 First Nations in Canada. Some of them are very small, and as you say, senator, they do not have the sophistication or the resources or the ability to evaluate projects that may be crossing their lands.
One group that I think is helping a great deal in this area is a group that is led by Mark Podlasly. Mark Podlasly is an adjunct professor at the University of British Columbia. He is a graduate of Harvard University. He is a First Nations individual who has started something called the First Nation Major Projects Coalition.
He has assembled about 80 people from across the country — all of them First Nations — and they are lawyers, bankers, scientists and geotechnicians. They have a wide range of professional backgrounds, and they work with First Nations that do not have the size or the sophistication to be able to examine what kinds of questions they should be asking at an environmental impact assessment. They don’t have the ability to review those assessments and understand what it may mean to their water, land and air.
Mark Podlasly and the First Nations Major Projects Coalition are serving a very important role to give First Nations — whether they be large or small — the opportunity to be able to ask good questions and to be able to understand the answers while going through an environmental review, or to be able to review, perhaps, a benefits agreement that a pipeline company or an energy project might put before them.
The Chair: There was a second question, if you can quickly answer, Mr. Mar, concerning the prior consent.
Mr. Mar: On that subject, I confess that I am not an expert, but my understanding is that such consent is as important a process to go through but does not yield a veto to a First Nation to veto a project. But I do think it is very important, as we move forward on these projects as they affect First Nations, that we treat First Nations like real partners and not just as mere stakeholders.
When the federal government, for example, sort of assumed responsibility, bought Kinder Morgan’s stake in the Trans Mountain expansion project and even they had difficulty working with First Nations along the way. The result was great delays and enormous cost overruns in getting this project to move forward.
My understanding is the project should be complete. It’s completely completed in the province of Alberta. Parts of the Lower Mainland are 80% complete, but it should be in place by the first quarter of 2024. That’s good news, but the costs have gone from $6 billion, to $12 billion, to $20 billion, now to maybe $30 or $31 billion. That’s in part because of the delays in developing it. The delays came as a result of, for example, not treating First Nations like partners and instead treating them as mere stakeholders. That is an important distinction to make.
Senator McCallum: Thank you for your presentations. I want to go back to your statement about the global atmosphere versus the local one.
People are worried about China when Canada can’t bring their own GHG emissions down. Greenhouse gases rose by 21% between 1990 and 2019. These emissions are occurring around Indigenous land and affecting the people.
In the submission from Mikisew Cree First Nation to the House of Commons on March 23, 2022, they stated that the use of oil sands products, that is their combustion, adds significantly more emissions than their production, and that the oil sands are proposing CCUS to address these production emissions. They believe that it will actually exacerbate climate change.
You talked about CCS, in your statement, which won’t deal with combustion. Carbon capture and storage, or CCS, and carbon capture, utilization, and storage, or CCUS, are both based on carbon capture, but the difference lies in what is done after the capture step. Is carbon capture, utilization and storage, or CCUS, contributing to the problem because the carbon that’s captured is actually used for injection to create more oil and gas? Other gases are produced and they’re not being reported.
Mr. Mar: Senator, your understanding of the facts are correct. CCS applies to the production phase, and the majority of emissions come from the actual combustion phase of the use of that oil or gas. As you’ve correctly stated, when you burn it in your automobile, that’s where 80% of the GHGs emanate from the tailpipe of an internal combustion engine.
The reality is that the world is still using internal combustion engines. One of your later witnesses, Mr. Cosbey, is probably going to talk about the drive toward cleaner types of transportation modes and the fact that the costs of oil and gas will eventually drive the policy toward the use of other types of energy for modes of transportation such as hydrogen and electricity.
What is not noted, though, is what the costs will be. As long as the world continues to demand oil and continues to use internal combustion engines, I think Canada’s oil should be the last barrel that is taken out of the market place of choices, not the first one. Also, the development of our natural gas is an important way that we can contribute to a green initiative in other parts of the world. This is contemplated in Article 6 of the Paris agreement, something called ITMOs, or internationally transferred mitigation outcomes, where Canada can get credit from a place like Japan. If Japan uses Canadian natural gas and reduce their use of coal that credit should come to Canada for its emission targets, its nationally determined commitments.
This is an important tool that the Government of Canada needs to contemplate. It is fine and well for the Canadian government to say, “Well, we’ll provide you with hydrogen,” but we don’t have any facilities for the production of hydrogen yet. It strikes me that in order to be a trusted supplier of future energy, like hydrogen, you should try and be a trusted supplier of current energies, like natural gas. Again, if that natural gas displaces coal, it measurably reduces the GHG that goes into the atmosphere in the globe.
Senator McCallum: Can you respond about the CCUS? Is it exacerbating the problem?
Mr. Mar: I can do that. For a long time, we have used CO2. It’s been a while since I was the head of the Petroleum Services Association of Canada, but essentially you inject CO2 into existing reservoirs. Reservoirs of oil have a certain depletion rate. The primary pressure in those wells diminishes over time as you recover the oil from it. By injecting CO2, you are having a tertiary recovery method that repressurizes the well allowing you to recover more conventional oil. This is something that is happening in places like Saskatchewan and Alberta, where you’re actually producing conventional oil — not oil sands — which has less impact than oil sands. You are extending the life of an existing well by being able to recover the oil by repressurizing it so that it can rise to the surface and be captured.
Senator Galvez: Thank you.
Mr. Mar: Is it increasing GHGs? It’s increasing production of oil, but it is a less intensive form of oil than oil sands would be.
Senator Galvez: Mr. Mar, thank you.
Senator Massicotte: Mr. Mar, my question is addressed to you. I accept the fact that the world will need hydrocarbons for several decades. I also buy into the idea that if it’s going to be consumed and produced by somebody, why not us? Therefore, I appreciate the importance of investment and the effect on GDP. My rebuttal to that, though, is that still suggests that your industry has an immense responsibility to minimize the CO2 in spite of the fact we’ll be using it. It’s got to be one of the cleanest there is in the world.
Could you comment on where we are in that respect? How clean are we? Is this the best we can do?
Mr. Mar: Senator Massicotte, if you look at not only the environment, but at the “S” and the “G” of ESG, you will find that Canada’s oil and gas industry are among the very best in the world. That’s not me saying that. That would be looking at, for example, environmental, social and governance, or ESG metrics that are used by Morgan Stanley.
Morgan Stanley does benchmarking on ESG, and the Bank of Montreal sets up ETFs to invest in the energy sector. They use the benchmarks from MSCI, the branch of Morgan Stanley that evaluates that Canadian energy is very well done compared to other producers in the world. That’s particularly true since, when looking at the top six proven reserves in the world, Canada is the only place that is a Western liberal democracy.
I appreciate the fact that people can raise concerns about oil and gas here in Canada in a way that they cannot raise concerns in Nigeria, Venezuela, Saudi Arabia or the Russian Federation. That’s the reason, in my opinion, Canadian oil and gas are clean because they are transparent and subject to the legitimate concerns that people might raise within the Canadian context, which does not have the same pressure that is brought to bear on Iran, Iraq or Venezuela.
Senator Massicotte: The answer might be complicated, but how clean are we compared to the rest of the world relative to the major producers? On the environmental side.
Mr. Mar: I would have to make an undertaking to provide you with the data. I don’t have the data off the top of my head, senator, but I would certainly undertake to provide that to you in terms of the metrics. It’s an important question. I just don’t have the answer.
The Chair: Thank you to our witnesses. This concludes our first panel.
In our second panel, we welcome Aaron Cosbey, Senior Associate, International Institute for Sustainable Development and two representatives from the Carbon Tracker Initiative, Mark Campanale, Founder and Executive Chair; and Mike Coffin, Head of Oil, Gas and Mining.
Welcome, and thank you for being with us. Each of you have five minutes to deliver your opening remarks. We will begin with Mr. Cosbey and Mr. Campanale.
The floor is yours.
Aaron Cosbey, Senior Associate, International Institute for Sustainable Development: Thank you for inviting me to speak to you today. I’m an economist by training, with over 30 years of work on the policy and law of sustainable development. I’m going to speak today mostly about the oil sector, based on a series of research papers I’ve published in the last few years, although the dynamics in the gas sector are similar in many ways.
I have three points to make: First, global demand for oil will peak and decline by 2030; second, this is bad news for Canadian producers and all Canadians that post-peak producers will generate very little in the way of jobs, investments or royalties; and third, there is therefore no economic case for subsidizing this sunset sector.
My first point is that oil demand will globally peak by 2030 and decline. That decline will be driven primarily, but not only, by the electrification of road transport, which consumes 43% of total oil demand. That is not just my opinion; it’s the forecast of every credible energy analyst, including Rystad Energy, IEA, BP, DNV, McKinsey, Shell and others. The only question is how steep the decline will be post-peak. Our own analysis forecasts a decline of 13 million barrels a day by 2030 and 45 million barrels a day by 2050.
For reference, the drop in global demand that devastated oil markets and sent prices negative in 2020 was less than 7 million barrels per day.
My second point is that this is bad news for Canadian producers and all Canadians. Canadian oil sands producers talk about thriving in a market of 25 million barrels per day, or a quarter of today’s demand. They talk about selling the proverbial last proverbial barrel of oil.
Is that realistic?
The post-2030 decline scenario is not pretty. It involves low demand, low prices and high price volatility. The world’s oil-producing nations and firms will all be competing to sell off reserves, which they know they will be worth less in the future.
But yes, some Canadian producers will survive in that scenario. Oil sands mining operations with their capital paid off have very low marginal costs of production.
But not all will survive. Oil sands mining operations account less than a third of Canadian oil producers, and not all of them have paid off their capital. Also, profits will be low since prices will be low.
There will also be almost no new exploration and production. We will mostly be talking production from existing facilities or incremental expansions of existing facilities.
Most important, though, is this: The appropriate question from a public policy perspective is not whether a few producers will manage to turn a profit in that scenario. The appropriate question is, will oil and gas be the powerful driver of regional and national prosperity that it has been in the past? The answer is no.
Rystad Energy compared scenarios where the world achieved a temperature increase of 1.6 degrees versus one where we achieved 2.2 degrees. In the more ambitious scenario, Canada’s oil patch drops in terms of government revenues remitted by more than 70% and drops capital expenditure by more than 60%.
On jobs, if there is minimal new activity, the service sector — drilling, construction, surveying — more than a third of oil and gas sector jobs tanks, as do exploration jobs. That’s on top of the massive job losses already ongoing since 2014. We’ve lost over 20% since then, and EY predicts that automation and efficiency will mean we lose more than half of the remainder by 2040.
The third point, we should not subsidize this sector. Why do we spend $11 billion per year in subsidies and other support to the oil and gas sectors? It’s not because oil and gas extraction are inherently good; it’s because that investment pays off in terms of jobs, investment, government revenues and prosperity for Canadians.
If the sectors’ numbers on all those scores go into terminal decline post-2030, then where’s the rationale for spending scarce taxpayer dollars to prop them up?
This is a topic of conversation from previous testimony. You might ask, what about subsidizing oil and gas producers to decarbonize, for example by subsidizing CCUS? If there is no reason to prop up the fossil fuel sector for the sake of jobs, investment, government revenues, then the only reason to subsidize decarbonization would be to mitigate climate change. In that case, the decision on whether the public should support CCUS or should support other mitigation options, including outside the oil and gas sector, should depend entirely on which are cheaper on a dollar per tonne basis. CCUS does not measure up well on that metric.
Where should we spend that money? Spend it on climate change mitigation and other sectors. Spend it on the clean sectors of the future, where there are prospects for more, not fewer jobs, investment and government revenues. And spend it managing the energy transition so that oil and gas-dependent workers, communities, regions, do not suffer the unplanned and painful disruption in the coming energy transition.
Thank you, and I look forward to our conversations.
The Chair: Thank you. Mr. Campanale.
Mark Campanale, Founder and Executive Chair, Carbon Tracker Initiative: We’re a non-profit financial think tank. Most of our audience is the financial community, so institutional investors. The particular piece of work that Carbon Tracker does is we analyze future coal, oil and gas production and we very much focus on the investment plans of the world’s largest coal, oil and gas companies.
First, we look at the limitations set down by the science around carbon budgets. So the world emits around 41 gigatonnes of CO2 annually and to stick to or keep to the goals of 1.5 degrees with a high probability —
The Chair: Mr. Campanale, excuse me, I need to have the okay from the translators to continue.
Unfortunately, they need your — is it possible to send by email your remarks to Mr. Coffin, and then we can start questions while you do that?
[Translation]
Senator Miville-Dechêne: My question is for Mr. Cosbey. I thank you for your presentation, which was quite dramatic.
Things are tense right now because, on one hand, we have the government’s efforts to control and limit climate change and, on the other hand, we have an industry that continues to make a profit, which is part of its reason for being.
What do you say to people who think that oil investments should align with Canada’s goal of slowing climate change? Should they align? Should pension funds continue to invest in oil, given the situation?
You mentioned that there will be no investments in new projects, that’s a start, but what about the status quo and current investments? The oil industry is still getting subsidies.
[English]
Mr. Cosbey: Thank you for that excellent question. Of course, the thrust of my remarks was more toward where public investment should be flowing rather than private investment. I’m not here to counsel any private investors as to where they should put their money. I have my opinions based on my analysis, but if the private sector wants to invest in the oil sector or in CCUS, fill your boots.
I personally think those investments drive in the wrong direction. They risk creating more assets at risk of stranding and they make the ultimate transition away from that sector — which is driven, to be clear, not by Canadian policy, but by global demand, forces and policies on climate change — more difficult. But it is not my place to advise private investors where to put their money.
But it is very much my place as a citizen and a taxpayer to ask my government not to put my money into a sunset sector where the payoffs in future are nowhere near as good as they would be if we were investing in the green sectors of the future.
[Translation]
Senator Miville-Dechêne: According to your rather harsh analysis of the situation, there is no future for the oil industry. What do we do with all these people? There are people, provinces involved in the oil sector. The federal government doesn’t seem to acknowledge the fact that there are provinces in particular that will suffer. What are some solutions?
[English]
Mr. Cosbey: Yes, that is the question, and I am glad you got to it. There are two things to note; one, if we proceed without understanding that is the question, we risk a hard stop and a painful transition. Think in Canada’s terms of the collapse of the cod fishery on the East Coast, or we can point to the Powder River Basin in the United States, the collapse there and Appalachia of the coal sector. These are socially and economically painful transitions because they were not planned for.
If, on the other hand, we do plan for that transition, if we start now to help the workers and communities that are oil-and-gas dependent get off oil-and-gas dependency and move into other sectors, we stand to have a record much like what Germany achieved in terms of its coal transition.
Note two things: Germany’s coal transition was a decades-long effort that had buy-in from the public, unions, businesses and government. It was not an easy task.
Let me go on to say there are many opportunities to employ those same workers now involved in oil and gas in other productive sectors. I look at the work of Alberta Innovates to look at ways we can produce valuable commodities from bitumen without burning it. The estimated market for carbon fibre as a replacement for steel dwarfs our current export markets in oil.
If we can start working on those efforts at diversification, using our existing resources — for example, those people trained in fracking also know how to do geothermal — we can use the existing excellent resources, such as project management, finance resources, training capacity, in places like Alberta, Saskatchewan and Newfoundland and put them to work in other sectors that have a future. We have to do so immediately.
Senator Massicotte: Mr. Cosbey, I am also a member of the Banking and Commerce Committee here, and that committee is doing a lot of work on how we get the rest of our economy working well. As you acknowledged, the oil-and-gas sector is an extremely important factor in our GDP and economy.
If you look at the dollars, it represents something like 80% of all the investments. We are having a lot of problems as a country to get us going in a more productive way, a more investment-oriented way. We’re consuming a lot of our excess funding.
The scenario that everyone is painting is negative. A lot of people like you say that we have to get it done and focused properly. You’re right, but we have said that for the last 10 or 15 years, and we’re not getting there. Can you comment further?
Mr. Cosbey: We’re getting to the important questions. The budget that was just passed is a good step in the right direction. We see other countries like the United States and jurisdictions like the European Union also moving in this direction. The U.S., with its Inflation Reduction Act, the European Union with its Net-Zero Industry Act. The idea is to create the fertile ground for investment in the sectors of the future.
If we look at the most recent announcement of the St. Thomas Volkswagen EV battery factory, the first battery factory by Volkswagen outside of Europe, and Stellantis’s $5 billion investment in battery factories, those folks came here because Canada has a good environment in which to make those investments. We have a clean energy grid and good value chain possibilities in terms of critical minerals, and the recent budget makes the investments in investment credits, tax credits, funding for clean energy and clean manufacturing that brings these kinds of investment to Canada. These are worthwhile investments.
That’s one of the ways you diversify our economic dependency away from oil and gas and toward those sectors of the future.
Senator Massicotte: You listed some of the reasons why Volkswagen decided to come to Ontario. They are getting $8 billion in subsidies to get them to locate in our beautiful country. Your general attitude is a bit negative. I think all of us are largely negative on subsidies unless proven necessary, and that’s always a debate. Could you comment on Volkswagen? Why must we subsidize them to such a high degree, given their impact on our economy?
Mr. Cosbey: I can’t comment with any kind of intelligence on the specifics of the cost and benefits of that subsidy, and, in general, as an economist, I don’t like subsidies.
But we are, let’s be frank, in a subsidy war to win the investment in the clean economy with economies like the United States, the European Union, and, to some extent, China.
These are countries that are showering those producers with massive investments. The Canadian approach is a prudent one. We have not tried to match dollar for dollar the largesse offered south of the border, but we have tried to make those incentives strategic. We know we have not only those subsidies but also a carbon price that gives us, in my view as an economist, a leg up on the other jurisdictions that rely solely on subsidies.
Yes, in the subsidies race, we are going to spend some money needlessly. We’re going to engage in some smokestack chasing just bringing a factory here that could have been done somewhere else with the same global benefit. I’m afraid that is an unavoidable cost of being in the subsidy race, which we did not start, but realistically we are in.
The Chair: Thank you so much.
Mike Coffin, Head of Oil, Gas and Mining, Carbon Tracker Initiative: By way of introduction, Carbon Tracker Initiative is a not-for-profit think tank based in London. We look at the global energy transition, particularly related to the impact on climate change.
I head up the oil, gas and mining team, and I worked in the oil-and-gas industry myself for 10 years. I am a chartered geologist by background, and I worked for BP before joining Carbon Tracker about four years ago.
We work primarily for an investment audience, highlighting the risks of continuing to invest in the oil-and-gas industry as the world rapidly shifts away from fossil fuel-based energy systems toward a cleaner, renewable base energy system that is cleaner, cheaper and more secure.
In these opening comments, I will echo a number of the comments that Mr. Cosbey made, with a global perspective as well.
My first comment will be around the climate problem and ultimately to limit global warming to 1.5 degrees, or well below 2 degrees. The goals of the Paris Agreement requires a rapid reduction of greenhouse gas emissions.
You need the same reduction we saw during 2020, the year of COVID, every year for the next two decades to reach net zero and on a path consistent with limiting global warming to 1.5 degrees, without excessive temperature overshoot.
The carbon budget right now is 300 gigatonnes. That means for 1.5 degrees, if we release an additional 300 gigatonnes of CO2 into the atmosphere, or an equivalent, including methane, that will take the world to 1.5 degrees.
Currently, we produce 42 gigatonnes globally of carbon dioxide emissions annually. That means we have seven years left at current rates of emissions before that 1.5 degree carbon budget is bust. The more we bust that budget, the greater the temperature rise, and the greater the temperature rise, and the greater degree of temperature overshoot, that is temperature rise in excess of 1.5 degrees C, the higher the risk that this temperature overshoot cannot be reversed.
In attempting to reverse it, which may or may not be possible for non-linearities in the global climate dynamics, and all sorts of climate tipping points, global society would need to use net negative emissions at massive scale in the latter part of this century to attempt to reduce temperature overshoot, but it may not be reversible.
I should stress that net-zero emissions by 2050 is a necessary goal, but not the only goal. What is critical is you have a credible pathway to emissions reductions between now and that point that net zero is reached.
Continually existing emissions globally and under the national level out to 2049 and then suddenly stopping and then reaching net zero is not a credible way of achieving 1.5 degrees. The temperature rise as a result will be well in excess of that. That’s the climate problem, the first key point.
The second point — and this echoes many of the previous witnesses’ comments— is a demand substitution problem. The demand substitution of the fossil fuel demand through the new energy system — be that renewables, grids, electric vehicles, new fuels, sustainable fuels or, for example, green hydrogen — will substitute for fossil fuel demand, and those companies and countries that are reliant on export or revenues from the sale of those fossil fuel products will see those revenues fall.
There are two effects. There is a volume effect, but the price effect is even bigger. Declining demand will see long-term prices fall and will see revenues fall even more sharply. This is about the cash flows that will fail to materialize as expected if companies are continuing to invest in oil and gas projects. Any expectation of future revenues that fails to materialize as the world shifts away from using fossil fuels will ultimately erode a significant amount of value. Whether that is from a national budget or from individual investors, the effects are the same. Crucially, whether that shift away from fossil fuel demand is driven by policy action at a global scale or throughout competition by renewables and, ultimately, by a new energy system that is cheaper and cleaner, the effects are the same.
This pulls into question not only the viability of new investments into fossil fuels but also the future cash flows expected from your existing fossil fuels. This brings a number of other issues too, for example, decommissioning liabilities. If demand for your product is going to weaken and prices fall, the commercial viability of projects may be shortened in duration. Future liabilities for the decommissioning of assets may accelerate; that is, come closer in time and, therefore, grow in magnitude. They’re no longer discounted away into the future.
In terms of the industry plans, can an oil and gas company be viewed as being part of the solution or being net-zero aligned? For us, a focus on operation emissions totally fails to recognize the demand substitution challenge of the new system. From a climate perspective, decarbonizing oil and gas is basically a myth, as we have heard previously. In fact, 85% to 90% of emissions result from end-use combustion. Focusing on just 10% to 15% of operation emissions totally misses the climate impact. Decarbonizing oil and gas is basically a myth. Demethanizing oil is potentially one thing. Clearly, action on methane is critical given the short-term impacts on the climate.
For an oil and gas company to be viewed as climate aligned, we need to see a company planning on production declines, and any assets it sells to others must be done in a responsible fashion. As the International Energy Agency, or the IEA, made clear, there’s little room, if any, for investment in new oil and gas projects under a 1.5-degrees scenario, and company climate targets must be framed appropriately. We’ve outlined a series of hallmarks of the Paris compliance. There must be credible approaches to achieving those targets.
Finally, it’s all about appropriate governance. At a company level, are executives incentivized appropriately to shift the organization away from fossil fuels for the climate, for the health of the company and to protect shareholder value through the transition?
My final point was around carbon capture and storage. For us, the term CCUS, encompass a huge range of technologies. It varies from carbon capture and storage, which may be applied to hard-to-abate sectors, for example, cement or steel manufacturing to help decarbonize those sectors; to, at the other end, carbon capture, utilization and storage used for enhanced oil recovery. This is where you’re putting CO2 into a reservoir to increase the number of hydrocarbons that can result. Ultimately, that is net detrimental to the climate. More CO2 could potentially come as a result of the combustion of the fluids as opposed to the inputs. Oil and gas companies will speak to CCUS as though it’s a climate positive, but the reality is it’s attempting to justify continued production.
The second part is decarbonizing hard-to-abate sectors. We’ll potentially need some degree of net negative emissions to help reverse temperature overshoot later this century, but we must not confuse that need with company plans for CCUS to justify continued production right here, right now. It’s critical that we separate those three different use cases for carbon capture utilization and/or storage technologies in their application.
I’ll end my statement there.
The Chair: Thank you so much. I’ve been informed that our third witness, Chief Allan Adam, is now online. Happy to see you. Good morning, chief. Please go ahead.
Allan Adam, Chief, Athabasca Chipewyan First Nation: We’re a sovereign nation. Our territories are located in northeastern Alberta. I’m appearing from Fort Chipewyan, our primary community. We are signatories to Treaty 8.
You may have seen Athabasca Chipewyan First Nation, also known as ACFN, in the news recently. Imperial Oil is leaking toxic water from the tailings pond of their oil sands mine into our territory, affecting our people’s ability to hunt, fish and trap. The lands are affected by the spill. This has poisoned it and it has entered the waterways that flow downstream toward Fort Chipewyan.
The leak started in May 2022 and a second spill, the largest in Alberta’s history, occurred in February of 2023. Imperial Oil and the Alberta energy regulator have known about this since mid-2022 but only told ACFN in February of 2023. I mention this because it is an example of how ACFN and the Indigenous people are treated in the oil sands as an afterthought of environmental racism. It colours our view, our everyday life and we need to end this now.
ACFN understands the science of climate change. We’ve been voicing our concerns for decades. We’re eyewitness to its impacts: Low water in the Athabasca River, forest fires, changes to caribou migration and disruption of our winter road. Our lives, still today, are rooted around the land. We are the first to see the changes that are happening to our lands, water and animals.
We understand that the climate crisis is now forcing our country, and international communities, in general, to consider the role of fossil fuels in our economies. Humanity can’t continue to emit greenhouse gases into the atmosphere and expect to have a healthy planet and a stable human society.
Transition to a low-carbon economy is already happening. International climate scientists, as well as oil giants like BP, have indicated that oil production and use will fall over the coming decades. Transition from oil and gas raises serious questions for the Canadian oil and gas industry. As one of the largest sources of greenhouse gas emissions in Canada, how does this industry fit into the low-carbon world? It doesn’t even have a credible plan to reduce emissions, not to mention the emissions from the products that they sell, which are five times larger.
Will global pressure force the oil sands to go out of business? The market of oil is shrinking, and we cannot ignore this very real possibility. What happens to tailings ponds and the mine sites on our lands if companies go out of business before they can clean them up? There’s been no reclamation to date and we need approximately $130 billion to clean up the tailings ponds. Alberta only collected $1.5 billion.
Finally, what happens to all the workers and the communities that depend on the industry? What clean, good paying local jobs will they turn to? ACFN wants a leadership role in the low-carbon transition. No one asked ACFN whether we wanted the oil sands in our territory or listened to us when we asked them to slow down development so we could manage the impasse.
The environmental assessment process of rubber-stamping by the federal and provincial governments has failed to address the cumulative effects of this industry.
The planning and the management of the oil sands, and the interests of ACFN, and other Indigenous communities, have been treated as an afterthought. The benefits that were obtained are ones that we have negotiated with the oil sands companies ourselves.
To answer the difficult questions about how the oil sands can participate in the transition to a low-carbon economy, the first thing we need is a forum of discussions and decision makers. We must ensure that the people in the community who will be the most affected by the low-carbon transition, especially fossil fuel workers, have a key role in deciding what comes next, and we get the financial support of their governments and industry to make it happen.
Indigenous peoples must lead this planning, not to be an afterthought. We must lead the transition because we are directly affected by it. We benefit from the oil sands, but we also bear the brunt of its environmental, climate and health impacts. More important, we must lead the transition in our own territory because we are a sovereign nation with constitutionally protected rights, and reconciliation demands we have to lead the role in determining our own future.
We want opportunities to develop and establish economic activities that do not make climate change worse or leak toxic chemicals into our waters. We reject fossil climate solutions and want to repair our lands, prioritize our rights and ensure that no one is left behind.
I respect that many other Indigenous communities living in extraction zones across Canada are eager to reclaim their sovereignty and seize opportunities like this.
Yesterday the Intergovernmental Panel on Climate Change released a report that confirmed that the world is on the brink of a climate catastrophe. Immediate action is required. ACFN is ready to do its part. We’re already a leader on sustainability. We have invested in clean energy, developed a community energy plan, and will be developing a just transition plan; however, we need the federal government to step up and create opportunities, starting with its sustainable jobs legislation. The regional energy and resource tables that Canada has established are not significant.
The legislation itself needs to create spaces for government, industry, workers and unions to come together, guided by key principles to decide what they want in a net-zero economy and how to get there.
Strong federal legislation is the first step to ensure that Indigenous communities, like ACFN, as well as Alberta and Canada, continue to prosper into the future, even if the world leaves oil behind.
The Chair: Thank you so much, Chief Adam.
Senator McCallum: I wanted to thank all the presenters for their presentations and a special thank you to Chief Adam.
I have been on the Energy Committee for quite a while, and I had seen the high rate of cancers that is unique, and many different types of cancers that affected the people in Fort Chipewyan, and I agree with what you have said.
You came up with a lot of recommendations. I wanted to go back to your statement where you have invested in clean energy. Can you speak a bit about that? That was my question to the other presenters as well.
Should we spend subsidies to manage the energy transition, and what does this energy look like, and what are the green sectors that people are talking about?
Mr. Adam: When you asked the question about what we invested for green energy, we invested in a community of solar farms that has reduced the carbon footprint for the generator that produces the power, and it uses diesel.
One of the things that we recognized in that area is how could we reduce the consumption of diesel? The two First Nations and the Métis came together in Fort Chipewyan, and we put up a solar farm to offset the carbon footprint in Fort Chipewyan alone. Not only that, the Athabasca First Nation itself has invested in the largest solar farm in Western Canada that is located in Vulcan down in Southern Alberta. This solar farm is probably one of the largest solar farms owned by a First Nation in Canada. We’ve partnered with Concord, and we’re into solar farms; so we’re leading by example.
We talked about greenhouse gas emissions in the past, and that if we wanted to reduce our footprint, we had to develop a green economy. That’s what we’ve been doing, and we’re still planning on developing and investing in more green economy for the future.
Mr. Cosbey: I want to echo Chief Adam’s points first, and point to the fact that the First Nations renewable energy sector is the fastest-growing component of that energy sector in Canada, and that’s appropriate.
Getting those off-grid communities off their diesel generators and on to renewable energy is an important part of not only the energy transition but reconciliation in Canada.
As to where else we could spend that money, we’re going to need a lot more electricity in the future in Canada, so electrification of the economy is going to demand that we double, at least, the amount of electricity currently produced. So subsidies to renewable electricity generation and, as much as we can, facilitating the construction of interties that can bring clean energy from Manitoba to Saskatchewan, clean energy from B.C. to Alberta, to provide a balancing load to allow those provinces to invest in renewable energy to a greater degree is all money well spent.
We need to decarbonize our industrial sector. We need to be spending money, as the recent budget does, in trying to help hard-to-decarbonize sectors like steel, aluminum, cement, decarbonize their operations, and those are not cheap investments.
Dealing on a sectoral basis with sectors like transport, which is one of our biggest sources of emissions in Canada, so any money spent on the infrastructure for electrical vehicles, given what we know about the growth in that sector, is also going to be well spent. These are all wise investments if we’re thinking about the green economy of the future.
The Chair: Did you want to add anything, Mr. Coffin?
Mr. Coffin: From my perspective here, obviously it’s critical that we separate the discussion about decarbonizing the domestic energy system and ensuring, as Mr. Cosbey said, electrification and ensuring that electricity supply comes from renewable sources and low or zero-carbon sources. That will require significant investment in grids and storage, whether that’s green hydrogen or battery storage as well, ultimately to make that grid. It’s very important that arguments such as intermittency aren’t used to block that transition. Intermittency may be an issue for the last part of decarbonizing, but right now there is still a huge amount of the energy systems that can be decarbonized with existing technologies. Those technologies are already rolling now.
In terms of subsidies, the role of subsidies can help initiate the industry and those new technologies bring down those initial costs. They become commercially viable in their own right. We’ve absolutely seen that with electric vehicles. Particularly we see that uptake of electric vehicles in Europe rolling out incredibly fast over the last few years. Subsidies and policy action have initiated that to the point where they’re now becoming commercially viable in their own right.
Very important that we separate the issue of decarbonizing domestic energy supply in the system, versus the loss of export revenue from a loss of demand for oil and gas products that are exported overseas. It’s absolutely critical to keep those two separate.
Senator McCallum: Not a question. I want to say that hydro is not green and it is not environmentally friendly. There is a lot of environmental racism that is involved in electrification in Canada, and we need to make certain we’re not moving one to the other, when I believe we will be in the same situation. Thank you.
Senator Arnot: Thank you to all the witnesses. I want to direct my comments firstly to Chief Allan Adam; and secondly to Mr. Cosbey in particular.
Chief Adam, you’ve made a compelling statement here, one that is unassailable and is backed up by the facts in the Athabasca River system. We’ve seen the poison of the water and the poisoning of the air. To me, your statements are absolutely impacting. What you’re describing has happened is adding to Canada’s national shame. I’m making a note here to the analysts because I think this is going to be a key recommendation eventually on this report that we will make and will show up in it, so I want this to be noted.
Certainly, what the chief has said is that there’s a clear failure to recognize section 35 of the Canadian Constitution by the Government of Canada and by the Government of Alberta in particular. It’s definitely a breach of the treaty rights under Treaty 8, of which Chief Adam is a descendant of the original signers; a breach of the treaty relationship; a breach of the high standard of the honour of the Crown; and a breach of fiduciary duty, which is a high standard by governments in relation to working with First Nations people.
It seems to me that the community needs to be recognized, the community needs to be given agency. In this particular case, it’s the community of the Athabasca Chipewyan First Nation, which should have an equal and important place at any table created to deal with these issues that he’s highlighted.
I want Chief Adam to have an opportunity to expand on what he would like to see. I know he’s been quite articulate and clear on what he wants.
With respect to Mr. Cosbey, you said that we need to see public sector spending, and I want you to be able to build on the community aspect and on what you heard from Chief Adam. The year 2030 is very close to us; it’s seven years away. We need to see spending on the fairness in this transition. One of the examples that hasn’t been mentioned is the Uranium City example in northern Saskatchewan. In 1982 the population was 2,500 people; today it’s 73. The whole community was shut down, hospitals, infrastructure, et cetera. It’s a stark example of what will or could happen. In other words, I’m saying we need to engage communities on this matter.
What I’m saying here is going to take more than five minutes to respond to, but we’ve got all these technical difficulties. What I would ask is that if the witnesses feel they don’t have enough time, please follow up with written submissions to amplify these issues. These are so important and have to be analyzed carefully. I do feel this is an important statement that we’ve heard here this morning and we need to make clear note of it, and it should show up as a strong recommendation in the report. Thank you.
The Chair: I’m going to allow Senator Audette to pose her question. If there is not enough time for the answers, please, Chief Adams and the other witnesses, you can always send written answers to the clerk of the committee secretariat.
Senator Audette: A comment and, of course, a question to Chief Adam. Tshinashkumitin Utshimau. Thank you. If it’s possible for you and your nation or your community to send us what you would like to see in our report, recommendations, et cetera, because it does have a direct impact on the relationship we have with Mother Earth and the transmission of our culture, language, and, of course, the environment. I know you proposed many times on the importance of sharing when a project like this is happening on our nitassinan [Innu Aimun spoken]. Please, if you have any recommendations to propose to us, I will read it with my heart and my spirit.
The Chair: If you want to take a couple of minutes to react and send in written form whatever else you have as information that was requested. Thank you.
Mr. Adam: I think that one of the recommendations that we are recommending to the committee is that we are in the midst of a crisis here in northeastern Alberta. There is no oversight in regard to the development and further development of the oil sands. If we’re going to continue to develop the oil sands until we make a low-carbon transition, we need both the Alberta and federal governments to legislate the oil sands and regulate it wherein the First Nations are part of the panel to make decisions on giving licences to operators. It is not in the best interests of the First Nations to participate and argue our points to defend ourselves on our own traditional territories where extraction occurs.
I asked this question myself many times: Why are we not sitting on the panel side as co-regulators? Why can’t we make the decisions if we’re going to give the operating licence a go, a nay or either way? I don’t think it’s right that the First Nations have to participate and defend ourselves like we are criminals in a court of law of environmental racism. We should be sitting behind the panel, collecting the data and the information given to us, and then we should be analyzing all of the witnesses that come forward from any kind of a panel or any kind of industry out there. We should have the decision-making powers as a sovereign nation to say: “No, we cannot give you these licences based on these circumstances, unless you fill the gaps. Only then will we talk and you can come back to us. Until then, there is no licence to be handed out by the First Nations.” That’s what we should look at and to look at this from the sector because throughout time and history, First Nations from our region have never had this opportunity. It’s also been explored from northern B.C. in regard to how they turned into a low-carbon transition. The First Nations now sit on the panel board that gives out the licence to the operators, and they have the right to veto that licence if any environmental disaster occurs on their site.
That’s the kind of authority we need to have, and we need to be sitting on these panels instead of defending our rights and our positions of First Nations people.
The Chair: Thank you so much to all of our witnesses. Thank you, senators, for your patience. We had some technical problems, but we managed. With that, I declare this meeting adjourned.
(The committee adjourned.)