THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, June 15, 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; and, in camera, to consider a draft agenda (future business).
Senator Rosa Galvez (Chair) in the chair.
[Translation]
The Chair: My name is Rosa Galvez. I am a senator from Quebec and chair of the committee.
Today, we are conducting a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. I would like to begin with a reminder. Before asking or answering questions, I would ask members and witnesses in the room to please refrain from leaning too close to the microphone or remove your earpiece when doing so. This will prevent any sound feedback that could negatively impact committee staff in the room.
[English]
I will ask my fellow committee members to introduce themselves.
Senator Arnot: David Arnot, Saskatchewan.
[Translation]
Senator Gignac: Good morning. Clément Gignac, Quebec.
Senator Massicotte: Paul Massicotte, Quebec.
Senator Verner: Josée Verner, Quebec.
[English]
Senator Sorensen: Karen Sorensen, Alberta.
[Translation]
Senator Miville-Dechêne: Julie Miville-Dechêne, Quebec.
[English]
The Chair: I wish to welcome all of you and viewers across the country who are watching our proceedings. Today we are continuing our study on the Canadian oil and gas industry.
We welcome, by video conference, Arlene Strom, Chief Sustainability Officer, Suncor Energy Inc.; Susannah Pierce, Country Chair and General Manager, Renewables and Energy Solutions at Shell Canada; and in person, Kevin Krausert, Chief Executive Officer and Co-Founder of Avatar Innovations.
We welcome you and thank you for being with us. Each of you have five minutes to deliver your opening remarks. We will begin with Ms. Strom.
Just before we start with that, I think, because this is our last meeting and before we go into the summer break, I would like to thank the members, each one of you, dear colleagues, for your work over the past month. Also, I would like to thank all the staff and those who contribute directly or indirectly to ensuring that our work goes well. Thank you so very much for your involvement and dedication. Our analysts, thank you so much. I wish you a very nice summer.
With that, we can start our meeting today. We’ll start with Ms. Strom. The floor is yours.
Arlene Strom, Chief Sustainability Officer, Suncor Energy Inc.: Thank you very much. Good morning, honourable senators. I am coming to you today from the traditional territory of the Treaty 7 peoples and Métis Nation, Region 3.
Thank you so much for inviting me to speak to your committee today. I accepted the invitation because I am so proud to work for a company and an industry that is not only an integral part of contributing to our country’s economy and to North American energy security, but we are uniquely positioned to contribute to some of the significant challenges and opportunities in our country. We need to collaborate to find ways to contribute to reducing greenhouse gas, also referred to as GHG, emissions and we need to work with Indigenous communities in a way that continues to contribute to reconciliation.
First, a few quick facts about Suncor. We are a proud Canadian company. We were the first commercial operator in Alberta’s oil sands in 1967, and we continue to develop energy from this resource today.
We also have interests in every offshore project in Newfoundland and Labrador, including the Terra Nova project. We operate three refineries in Canada: in Edmonton, Sarnia and Montreal — as well as Canada’s largest ethanol plant. We also own the Petro-Canada network, providing energy to Canadians from coast to coast to coast.
Although we have divested our renewable business, we were part of the investment that began in the early 2000s to develop and attract capital to the wind business in Canada. We recently divested these assets to allow us to contribute to the energy transition in areas where our capabilities and assets give us a strategic advantage, for example, the low-carbon power business, renewable fuels and hydrogen.
Our purpose, simply put, is to provide trusted energy that enhances people’s lives, while caring for each other and the Earth. Over 16,000 employees contribute to achieving this purpose and last year, we also paid $9.31 billion in royalties and taxes. Our 2022 spend on goods and services in Canada totalled $12.8 billion. Our spend with Indigenous businesses was $3.2 billion last year. This number doesn’t include our equity partnerships earned by Indigenous communities.
We also support Canada’s commitment to the Paris Agreement. One of our long-term strategic objectives is to achieve net-zero emissions from our operations by 2050. In keeping with this, we have set a 2030 target of reducing our annual emissions by 10 megatonnes, right across our value chain.
We acknowledge that our operations are a major source of greenhouse gas emissions, and we believe that in collaboration with industry, government, Indigenous communities and stakeholders, we can achieve net-zero emissions from our operations while continuing to supply the energy that the world needs. In fact, we believe collaboration is an imperative to enable progress on reducing our emissions and ensuring our long-term sustainability.
We are a member of Pathways, an alliance of the largest oil sands producers, because we believe we can go farther at pace by building shared infrastructure to enable carbon capture and reduce emissions significantly across the oil sands by 2030. Our ambition by 2030 includes emissions reductions from carbon capture into one of the best geological pore spaces to enable that capture in the world, and it also includes emissions reductions from other initiatives, including energy efficiency projects and fuel switching, such as that enabled by switching from burning petroleum coke to natural gas-fired cogeneration. This project at Suncor is scheduled to be in operation by the end of 2024.
We’re also looking for ways to reduce emissions from our refineries, for instance, through the exploration of clean hydrogen technologies. With the help of Natural Resources Canada, we’ve built Canada’s Electric Highway of EV fast chargers, providing drivers with cleaner energy choices.
We recognize the world is changing and understand that many energy workers are looking to us and to government for a path forward. There are many opportunities on the horizon in the areas of renewable fuels, electricity and hydrogen. While we plan to grow our business in these sectors, we also believe there will be continued demand for increasingly lower-carbon Canadian oil, well into the future.
To achieve the goal of net-zero emissions from our existing operations, a massive amount of additional skilled labour will be needed. It will include engineers, geophysicists, pipe fitters and other skilled labour jobs. We believe the energy transition will require an “all of the above” labour strategy to decarbonize Canada’s existing energy production while meeting the needs of a growing new energy sector.
We also know greenhouse gas emissions don’t respect international borders, and we see an opportunity for Canada to continue to provide energy while reducing its carbon footprint. In fact, we see an opportunity to demonstrate global leadership in collaboration, to achieve our collective ambition.
We are appreciative of the support that the Canadian government is offering through fiscal incentives such as the carbon capture, utilization, and storage, or CCUS, investment tax credit. At the same time, we need to be aware of the competitive pressures that the Canadian energy industry continues to face, particularly when compared to the level of incentives offered by other countries. The Norwegian government’s investment in the Longship CCUS project is slated to amount to 70% of the total project costs, a figure that roughly matches the U.S. 45Q CCUS supports and exceeds the total support offered by Canada’s CCUS investment tax credit. I am confident that with the plan we have and with continued collaboration among governments, industry and Indigenous communities, we can continue to harness the benefits of Canadian energy while ensuring long-term sustainability.
Thank you for the time. At the appropriate time, I’ll be happy to take questions.
The Chair: Thank you. Ms. Pierce the floor is yours.
Susannah Pierce, Country Chair and General Manager Renewables and Energy Solutions, Shell Canada: Thank you very much and good morning. Thank you, Ms. Strom, for some fantastic opening remarks. Thank you for the opportunity as well to participate in today’s discussion.
I would also like to start by acknowledging that I’m speaking today from Calgary, on the traditional territory of the Blackfoot Confederacy — the Siksika, Peigan-Piikani and Aamskapi Pikuni — the Tsuut’ina and the Stoney Nakoda Nations and Métis Region 3 and all people who make their homes here in the Treaty 7 region.
I’m in good health and spirit and I hope each of you in the Senate room are as well.
Let me begin with a bit of context on Shell and Shell Canada. You may know that Shell Canada is one of the few fully integrated energy companies, which means from production straight through to the many varied customers that you might also be one when you come to a Shell gas station. In 1911, Shell opened a small office in Canada with $50,000 and six employees. Today, Shell Canada has just over 3,200 employees and our businesses do everything from exploration, refining and manufacturing to providing fuels and developing low-carbon energy solutions for our customers. This includes our 40% interest in LNG Canada in British Columbia; in Alberta, our Scotford Shell Energy and Chemicals Park; our Sarnia Manufacturing Centre in Ontario; and, roughly 1,400 Shell‑branded retail stations across the country.
Shell is an international energy company with more than 90,000 employees in more than 70 countries. We’re investing to provide the energy that customers need today and for a long time to come while making sure we transform Shell to win a low‑carbon future. We are focused on performance, discipline and simplification to be our guiding principles as we are allocating capital to enhance our shareholder distributions but also enabling the energy transition.
Our Powering Progress strategy, which we announced a couple of years ago, details how we intend to become a net-zero business by 2050. We will do this focusing on reducing emissions from our own operations and from the fuels and other products we sell to our customers alongside generating shareholder value, which we need in order to make these investments.
Now that I have given an overview of Shell Canada and our global operations, I will focus the remainder of my remarks on the questions the committee has put forth. I would like to start with several themes. First, energy security. Energy security and the role of Canadian energy at home and abroad has become more relevant now than ever as events in Ukraine have led to a significant shift in energy markets. Canada does have a critical role to play in sharing the benefits of our secure, affordable energy with Canadians and our partners around the world. We are lucky to be blessed with abundant natural resources that are developed to some of the highest social and environmental standards anywhere in the world, and are shared with our many partners through the strong and extensive trade relationships we have cultivated.
Traditional forms of energy will continue to have a role to play for some time to come, and we’ve seen recently how macro events on a global scale can impact people’s access to energy and its affordability, a basic human right. Canada can reliably provide energy to a growing world, developed to the highest standard, which includes policies and action from industry that will lead us to net zero by 2050.
The next theme I would like to touch on is sustainability. Sustainability and the environmental benefits that Canada’s lower- and zero-carbon energy products can provide to the world today while preparing for a balanced transition to the future. We know the global energy mix is changing. However, demand for energy services will continue to grow and will have to be met by a combination of different types of energy. There is no one solution.
A recent example includes the investments we are making to help transform our operations at Shell Scotford to be one of the five global energy and chemical parks for Shell. Scotford, which is just north of Edmonton, was selected by Shell to be an energy and chemical park because it made strategic sense. It is one of our most profitable sites and has a high level of integration and access to low-cost feedstocks, and it serves a stable customer base in Western Canada. The transformation of the site will be underpinned by carbon capture sequestration, renewable power sources and alternative feedstocks.
We currently operate the Quest carbon capture sequestration facility at Scotford, which has safely captured more than 7 million tonnes of CO2, as well as a five-megawatt solar farm — behind the fence. We’ve signed a power purchase agreement for 50 megawatts of wind power, and an additional 58-megawatt solar farm is under construction. We plan to make a final investment decision on the proposed first stage of our carbon capture sequestration project, Polaris, later this year.
Sustainability also means protecting the environment, which has been an integral part of the way we do business for many years. The four priority areas we are focused on here include biodiversity, water, circular economy, waste and air quality.
The next theme I’d like to touch on is people. None of this is possible without people. Energy is developed by and for people, which is something that we cannot lose sight of as we navigate the energy transition, as energy touches and contributes in some way to nearly every aspect of the high quality of life Canadians enjoy today.
I would like to highlight the important relationships we have with Indigenous communities and acknowledge that we are enhancing those relationships. Most recently, we signed a good neighbour agreement with both Alexander First Nation and Enoch Cree Nation around our Scotford site. This continues our meaningful steps forward in working more closely with Indigenous communities near or on our operations.
I will close with the most important theme, which Ms. Strom also touched on, and it means a lot to me as a proud Canadian, and that includes collaboration. Collaboration between industry, governments, Indigenous communities and the wider society, sector by sector. It’s vital to establish rapid and realistic ways to achieve our desired economic environmental outcomes in a complex and dynamic environment. Each of our provinces have unique endowments and contributions that create opportunities for the country as it navigates the energy transition, and I encourage a continued focus on breaking down the barriers that will enhance the benefits of the transition and strength of our confederation.
This concludes my opening remarks. I look forward to your questions. Thank you very much.
The Chair: Thank you. Mr. Krausert.
[Translation]
Kevin Krausert, Chief Executive Officer and Co-Founder, Avatar Innovations: Thank you for the invitation today. I am honoured, and I look forward to contributing to the Senate discussion on what is, in my opinion, the greatest opportunity for Canada’s future, namely, abundant and affordable energy supply to a world that should reach net zero emissions by 2050.
[English]
The energy transition is indeed the towering and defining challenge of our generation that will require investment, technology and collaboration on a scale of which our species likely has not seen before. The question Canadians must ask ourselves is: What is the simplest, cheapest and fastest way for us to get there?
Looking across the several hundred thousands of years since our species invented the first energy technology — the discovery of fire — there are several lessons we can learn about how Canada can win.
Oil displaced coal as the planet’s dominant energy source in the 1960s, yet we use three times as much coal today as we did in the 1960s, as it is with every single other energy source. Today, we use more biomass, more solar, more wind, more oil, gas, hydro and nuclear than at any other point in our history except for one — whales.
We nearly hunted whales to extinction to boil down their blubber into whale oil that was used as a lighting fuel for centuries. What replaced it? The invention of kerosene from petroleum. Kerosene only replaced whale oil because of two things: It could be used in existing whale oil lamps that everyone had, and it was a lower-cost and higher-utility energy source.
This sole energy source transition in several hundred thousand years can teach us two things: First, never once have we transitioned to a higher-cost or a lower-utility energy source. Second, every single time the change was driven by the power of technology and innovation. Now we must do so again.
Despite the Herculean challenge in front of us, the good news is that if we define energy transition as a transition off emissions, instead of an energy source transition, we have a much better chance of reaching our net-zero goals. A transition off emissions is not only much more realistic and achievable, but it’s also much less polarizing and can include all of Canada’s regions and industries from coast to coast to coast.
This is the work we are doing at Avatar Innovations, developing, commercializing and investing in new energy transition technologies while building the leaders of tomorrow capable of delivering them. We’re doing this by working inside the industry that is capable of scaling these technologies, the oil and gas sector.
A few facts stun the mind about the power and importance of working inside the oil and gas industry to deliver the energy transition. In less than two and a half years since we’ve incorporated Avatar, we’ve generated 3,500 applications to enrol; nearly 1,000 alumni; 43 breakthrough technologies sponsored by industry; a partnership with XPRIZE on the Elon Musk Foundation’s $100-million carbon removal prize, two of which are finalists; created the country’s only Energy Transition Centre in downtown Calgary; launched Calgary’s first energy transition venture capital fund with Cenovus as our lead investor; and are now operating in five countries on three different continents.
The Avatar model of working inside the oil and gas industry to deliver new emissions reduction technologies to market at record pace now stands as a global model for industrial decarbonization and empowering energy professionals in the transition off emissions.
Yet this proud accomplishment and many brilliant Canadian innovations now stand at risk of being lost to other jurisdictions in pretty short order. The passion of the Inflation Reduction Act in the United States has changed the game on energy transition. Not only did they decide they were going to incentivize the oil and gas industry to decarbonize instead of penalizing it into submission, it created the largest single drain on Canadian energy transition technologies, start-ups, talent and capital I’ve seen in my 25-year career.
Smart policy and collaboration between industry, government and the innovation community can reverse this trend. While Canada can never match the Inflation Reduction Act, also referred to as the IRA, on a dollar-for-dollar basis, we can win at an innovation agenda. The focus is on our strengths: by delivering energy technologies that have defined every energy transition since our species discovered fire, energy technologies that deliver a lower cost and a higher utility. This is our moment. This is our time as a country.
There is a new energy future. Let’s go build it. Thank you. I look forward to your questions.
[Translation]
The Chair: Thank you. We will now proceed to questions.
Senator Miville-Dechêne: Thank you to our guests. I will ask Ms. Strom, from Suncor Energy Inc., a question in French.
In your presentation, you said, if I understood correctly, that you thought you would need more subsidies from the federal government to fund your carbon capture efforts. You argued that countries like Norway and the United States offer more generous conditions.
You know as well as I do that these subsidies are very controversial in Canada, that not everyone agrees with them, and that they slow down efforts to reduce oil production, because they do not incentivize you to produce less oil, only to get more subsidies for carbon capture.
I want to hear your views on this conundrum and ask you whether, in the long term, this would be a better solution than just starting to gradually reduce oil production.
[English]
Ms. Strom: Thank you for your question. A couple of things I could comment on. One of the things you heard from one of my colleagues — and if you don’t mind, I would like to acknowledge that we didn’t know that we were going to be appearing together, but I love that the collaboration that we talked about is occurring among all these parties. We send employees to participate in Avatar, sponsor their work, and we’re working with Shell on things, including a carbon sequestration hub close to Edmonton, where we have refineries.
When we think about energy and the use of fossil fuel, I think we acknowledge there is an imperative that we must reduce our emissions. We must contribute to the Net-Zero Challenge by 2050: that we know is an imperative. But we also know that the energy we produce is needed, not just for combustion, but for other uses as well. We see there being a role for the energy and the oil that we provide as long as we can contribute to reducing emissions from our operations and through the value chain.
One of the things I wanted to highlight on carbon capture is that when you look at scenarios like that provided by the International Energy Agency, they predict that in order to reach net zero by 2050, we need to have 776 gigatonnes of carbon capture. Currently, in the world, 244 megatonnes of carbon is captured per year, representing about 200 projects.
You can see there is a lot of work to do in this area, which is why we think this is an important part of what we need to do in Canada. We operate in a global industry, where we need to be competitive.
I think of it as co-investing. This is not about governments paying for carbon capture. This is about co-investing so that we can continue to contribute to the economy and to solutions on energy and climate and be part of not only providing energy but be part of contributing to Canada meeting its climate goals as well. Thank you for your question.
[Translation]
Senator Miville-Dechêne: You claim you want to achieve net zero emissions from your operations, but those only account for 15% to 20% of total fossil fuel emissions. The vast majority comes from combustion, what is known in the technical lingo as “Scope 3”.
The new international greenhouse gas reduction standards require that Scope 3 emissions also be measured. Would it be correct to say that Suncor Energy Inc. is only committed to reducing its Scope 1 and Scope 2 emissions, in other words, only 15% to 20% of its total emissions?
[English]
Ms. Strom: I want to be clear. The goals that we have established as a collaborative group in the industry through Pathways are Scope 1 and Scope 2 emissions, but we are also working on reducing emissions along the value chain, of course, by providing things like electric charging stations. One other way is we are a large power producer in Alberta. We are currently I believe the fourth-largest power producer in Alberta. When our cogeneration facility comes online at the end of 2024, early 2025, we will bring on another 800 megawatts of lower-carbon intensity power.
As we come off coal in Alberta, which we have come off faster than anticipated, we can provide baseload power as we bring on more renewable power. This is another way that we’re contributing to lowering emissions beyond Scope 1 and Scope 2. We look for other ways that we will be able to do that.
We also see demand for things like gasoline changing between now and 2050. We’ll continue to work with suppliers and with other stakeholders to reduce emissions along the value chain.
Senator Sorensen: I want to thank all of you so much for participating today. As an Albertan, I listened to all of your opening comments with pride. I’m very proud to hear of all the initiatives that are coming out of Alberta.
We hear about the challenges of emissions constantly, and I also want to thank you for the solutions-driven commitment that the industry is presenting, talking about — focusing on solutions.
I’ll try to direct a double question to all three of you, but we have a time limit. Try to give me as much information as you can, but I’ll try to move to everybody.
How do you respond to accusations that the Pathways Alliance and the industry generally are greenwashing their data? I wanted to elaborate a bit on what Ms. Strom was just referring to. Oil and gas companies are transitioning their own operations, and if you can elaborate on other areas that you’re supporting financially or other ways that you’re supporting climate solutions.
I was looking to Suncor’s comment about the first coast-to-coast electric vehicle fast-charging network that they have created. I’ll start with Ms. Pierce and then Ms. Strom. Mr. Krausert, I would ask that you comment just based on your expertise in the industry, if possible, on those two questions.
Ms. Pierce: Senator, if you could remind me of the first part of your question. I remember the second in terms of collaborating across sectors.
Senator Sorensen: How do you respond to accusations that the industry and Pathways are greenwashing?
Ms. Pierce: One of the things that I think as industry we have to do is be increasingly transparent about our plans. Shell, for example, we are putting our powering progress strategy in front of shareholders every year. It comes up for a vote, and you’ll see that in every AGM, we have a vote with respect to our strategy. We’re trying to be as transparent as possible.
With respect to the operations in Canada, that’s also included. When we think about the potential for carbon capture sequestration, we’re working to identify how many emissions can we capture. We’re trying to be quite upfront with the opportunity that each of the technologies that we would be using to decarbonize can provide.
We’re transparent in terms of our plans, which then go to a vote. If anything, we’re trying to say to shareholders and to the public, “These are our plans, and we’ve made a commitment to net zero. You can track how we are doing as we move forward.” We are being very public about that.
On the concept of whether we are saying more than we can possibly achieve, I think we are setting an ambitious plan forward.
To the second part of your question — how we make sure we are addressing other sectors — it really comes to that relationship we have with customers. For example, as the previous senator mentioned, Scope 3 emissions: How do we work to make sure that our customers, which are a large part of the emissions we need to tackle, are also reducing? That requires a very intensive, collaborative ecosystem approach. For example — I use this example quite frequently — if any of you fly into the Vancouver airport and then go down Granville Street, you’ll look to the right, and you will see a Shell gas station. We’ve had a hydrogen pump there for a few years. That hydrogen pump is supposed to service customers when they come up with their hydrogen cars. The challenge has been that we don’t have a lot of people driving hydrogen cars. So while we might be able to produce the low-carbon energy, unless the customers have made the investment to transition their own use of inventions or fuels, then we will be selling things that people aren’t buying, which is not a good choice for a company — particularly when we take people’s money and tell them we will invest it wisely.
With respect to how we tackle the first part of your question of greenwashing, we need to be transparent, we need to be held accountable, and we need to have the ability to have a strategy of doing that every year. When it comes to the second part of your question about how we work with customers, we need to design solutions. We need to be mindful — this is very important — that they, also, have to make investments in the transition. This comes back to the holistic approach that governments can take by identifying the pinch points and asking how they can work with each sector or each part of that ecosystem so they can double the carbon emission reductions as quickly, affordably and reliably as possible.
Ms. Strom: Thank you for the opportunity to address those questions. I appreciate them. Your first question was around responding to accusations of greenwashing. I completely agree with my colleague, Ms. Pierce, that we start with transparency. We have to be talking about what we do. We are also very committed to that. We are about to release our annual climate report as well as our report on sustainability, which has detailed descriptions of not only the current emissions that we contribute to or the emissions related to our operations but what we’re doing to address them.
When I think about us as a company, what do we do as leaders of large companies in Canada? A lot of what we do is set strategy and allocate resources in capital and people. I will give you an example in the Pathways Alliance and what that’s starting to look like. Every Friday morning, the CEOs of the six companies responsible for 95% of the production in the oil sands meet. I have just recently joined this. I’ve been participating directly in Pathways for almost a year. I think the CEOs have missed maybe one or two Fridays. They are allocating time, attention and resources to these meetings and strategy. They are asking if they are making progress and holding themselves accountable to those who are working. There are people throughout our organizations working on it. That is the allocation of people.
Now I’ll talk about the allocation of capital. You may have heard us talk about our goal among the six companies to reduce our emissions by 22 megatonnes by 2030. In order to do that, we need to be allocating capital right away. Part of that is the work we’re doing to switch from burning petroleum coke to cogeneration, as I mentioned in my opening remarks. That’s a $1.4-billion project. In 2022, Suncor spent about $550 million on energy transition or lower carbon-producing technology that will help us to reduce our emissions.
As to a few other examples, Senator Sorensen, we’ve been investing in a company called LanzaTech, which spun out a company called LanzaJet. They have a commercial biofuel facility in Georgia that is producing renewable diesel and sustainable aviation fuel. It’s small, but we’re making steps on being able to lower the costs of producing things like sustainable aviation fuel, which is an important part of contributing to those solutions.
We’ve also invested in a company called —
Senator Sorensen: I think we’ve run out of time, Ms. Strom.
The Chair: Yes. Do you want to comment quickly, Mr. Krausert?
Mr. Krausert: I will try to be brief, but Ms. Pierce and Ms. Strom made some great points.
In terms of the greenwashing accusation, I have the privilege of working with not just the most senior CEOs in the industry but up to a thousand of the emerging professionals working in the industry. I cannot get out of a meeting that is not talking about how we decrease emissions as an industry. The challenge is on the economics as well as the demand. To the previous senator’s question, what will reduce production? Demand.
I can create a scenario whereby we have rapid electrification and rapid adoption of hydrogen, and we spit out a 20 million or 30 million barrel-a-day scenario by 2050. I can also create an equally compelling scenario where we are at 113 million barrels of oil demand by 2050. We built the oil sands predicated on the assumption that it would be a $60 or $70 break-even point, and after over a decade of innovation, we’ve driven the lift costs in some of the pristine facilities like Cenovus’s Christina Lake to single digits. That barrel competes against the Saudis. If we can do the same thing with carbon, the wrong question for Canada to ask is whether we are on a 30 million barrel-a-day scenario by 2050 or a 113 million barrel-a-day scenario. The right question is how can we win in both scenarios? If we can get the carbon emissions under control with these phenomenal lift costs.
The other point is that we export 80% of our oil to the United States. So 80% of those emissions you are talking about are actually American emissions, right? That doesn’t fall under our emissions credit. What market should we seed? How do we win in an innovative economy? About the point of whether we can be doing more: Yes. We can be doing more, but we’re running at it very quickly, and it is the economics and demand side of the question that is really the fundamental question.
In terms of collaboration across sectors, it is an energy system approach that you have to look at. Recently, we were delighted to announce that we have brought Hitachi into Avatar to work alongside the energy professionals, developing its energy transition technologies through Avatar. They’ve matched on an investment dollar, the same dollar number that Suncor and TC Energy have contributed to Avatar. Since they are a non‑pure‑energy company working from Japan, which speaks to the success we’re having on these decarbonization initiatives. Likewise, we have a partnership in place with Boeing’s venture capital funds and AE Industrial Partners HorizonX. We’re working on sustainable aviation fuels.
This is an energy system approach for us to be able to get there, and it is all hands on deck. I think one of the oil and gas industry’s proudest accomplishments is our ability to look at this from a systemic approach as opposed to simply a production approach.
The Chair: I will ask the witnesses to be more concise in their answers, please.
Senator Arnot: I will just set the context by saying I am a Saskatchewan senator, and as a Saskatchewanian, I listen to this discussion with a great deal of trepidation. I hope you can allay my trepidation. The lens I use is this: We all know the oil and gas sector contributes a lot to Canada’s GDP and employment of people, but specifically in Western Canada — in Saskatchewan and Alberta — it is a huge part.
To all the witnesses, you have talked about carbon capture. You talked about the incentives that have been a feature of your investment in carbon capture, I believe. You talked about collaboration, co-investing and cooperation with the provincial and federal governments to work directly to address these issues. We have the Inflation Reduction Act in the United States. It has a huge effect in this country, obviously. We can’t compete at that level.
As corporations and entities, are you talking to the Canadian government about the future incentives you are thinking about? Are you talking in a robust way to deal with these issues with the Canadian and provincial governments? What are the salient features of those discussions as you move forward with a plan that has to be incorporated now for the next 10, 20, 30 and 50 years? I would like to know where this is going.
Mr. Krausert: I will start on the innovation response. I want to explain the Inflation Reduction Act in terms of where I think Canada can win. Overnight, when the Inflation Reduction Act was passed, dozens of multi-billion-dollar projects in the United States — energy transition projects — reached final investment decision. What happened in my world is it created a sucking sound of start-ups and talent moving to the United States, two just in the past month. I can speak of: One, a waste heat power initiative; one a methane emissions start-up. We are creating this drain into the United States because of the Inflation Reduction Act.
But there is a dent in the armour where I think Canada can win. The assumption of the Inflation Reduction Act is that all we have to do on the energy transition is execute, so let’s throw a lot of government money and funding into getting these first-of-kind projects across the line, with the assumption that the technology cost curve will drop and we won’t need the massive amounts of government money in the future. What if it doesn’t?
Look at the cost of solar technology dropping. A lot of that drop was due to interest rate reductions. That’s not a replicable technology innovation that we can do. I promise you that the second and third generation carbon capture technologies, hydrogen, renewable futures, et cetera, will be more efficient. Canada can double down on the innovation agenda on this in a way that we can win.
The tricky part is Canada doesn’t have a great record on innovation but the oil and gas industry has a pretty successful track record on innovation. How can we figure out as a country to unlock record cash flows from the industry to invest in these innovations and then we can export them to the United States, as well as other markets?
That’s the way I’ve been thinking about the Inflation Reduction Act. In terms of the specifics of carbon capture, Ms. Strom and Ms. Pierce are more capable of commenting on that. But a simple way to think about this is, the investment tax credit of 50% doesn’t cover the operating cost, a big portion of the carbon capture. So at best, we are covering 20% of the total cost of a carbon capture facility, whereas the United States is covering up to about 75%. You can think about that in terms of numbers. I will let Ms. Strom, and Ms. Pierce respond to that. But there is an innovation play we can win at.
Ms. Strom: I will respond to the notion of what we are asking for. We are asking for a co-investment from federal and provincial governments of approximately two thirds of capital and operating costs. We’re looking at doing this with urgency. Our goal of 22 megatonnes by 2030 requires that we continue on this path of making progress quickly.
There are three things that we are working with governments on, and, yes, we are having robust discussions. One is the fiscal framework. Two, is we need a regulatory pathway to allow us to get there. And three, we need to work together so we have the labour to allow us to build these important projects that contribute to Canada’s sustainability in our energy industry.
Ms. Pierce: Thank you, senator.
As my final comments, I was born in Regina and I continue to believe I am from Saskatchewan although I spend a lot of time in Calgary and Vancouver.
A lot has already been said about fiscal framework, the regulatory framework. You also heard our opening remarks across the board and in collaboration. I worked on LNG Canada project. We got that project across the finish line on time from a [Technical difficulty] perspective. It will be up and running in a couple of years. We did that because we had a cross-government stakeholder focus on that. That means we need to actively manage projects. What will it take to get to a final investment decision? How do you continue to execute? We don’t yet have a framework between our federal and provincial governments and other stakeholders. If there is one piece we need to focus on, it is that — active management. We, as industry, will be open and collaborative, but if we want to get these projects done. If we want to compete with the United States, we have to be very focused across stakeholders, and in particular federal and provincial governments as well as the Indigenous communities that we work with.
[Translation]
Senator Verner: Thank you for joining us this morning.
I have two questions for you, and I’ll start with the one we have just discussed, namely the understanding that Canadians as a whole might have of what are known as subsidies to the oil industry.
According to what you and another witness explained, there is a distinction to be made here between subsidies for industry operations and those intended for decarbonization, particularly of the oil industry, but also of other industries in the steel or cement sectors. This is all this in a context where the industry has to compete internationally, with other countries.
To put it succinctly, I think that’s what you were talking about this morning. I just wanted to confirm for Canadians who hear the term “oil industry subsidies,” I think there’s some education needed and some nuances to consider for your industry. Is that correct?
[English]
Mr. Krausert: Yes, I can tackle that one first.
It is a fantastic question, because I think there is a lot of confusion on it. If you look at any major energy project anywhere in the world, it has involved heavy government subsidies. If you take that question I was talking about — how we have never transitioned to a lower utility higher-cost energy source — if you factor carbon into the utility part of the equation, somebody has to pay for it. There are, in my opinion, only three sources of money, and generally, they are investors, taxpayers or consumers. Somehow that efficiency has to go. The challenge is, without an incentive mechanism and putting it entirely on the investor, there are other jurisdictions where those energy dollars can be invested. If we want to make these projects economical in Canada, we have to look at how the Americans looked at it and create an economic incentive for the shareholders to say I will invest a dollar because I think I can make more than a dollar and the maximum amount in this jurisdiction.
Right now, that’s not happening in Canada. If you are going to invest a dollar in carbon capture, a climate investment dollar, will you invest it in the United States where you would make $1.20 or in Canada where you would make 90 cents? That’s the context I am thinking about but I will hand it over to Ms. Strom and Ms. Pierce.
Ms. Strom: I will quickly confirm that I loved your summary.
We are looking at incentives and co-investments to make progress on decarbonization. And I agree it’s different. And I agree it needs to be different, not just for oil sands, or for conventional oil and not just for LNG. This is for industries and think we can make an outsized contribution to Canada meeting its goals if we co-invest in some of these ways. Some of this will happen without the incentives. We’re building the cogeneration facility. We will do energy efficiency projects. But in order to accelerate progress and to meet our ambitious goals, we need that co-investment from governments as well as industry. Thank you for the question.
Ms. Pierce: And senator, I think my colleagues said quite a lot. Indeed, if we want to accelerate the transition sector by sector, we need to look at what the constraints are to attracting private capital to make that investment. As a residential homeowner, I put forward a Canada green buildings grant so I can accelerate heat pumps. I wouldn’t do that unless I had access to that capital because it wouldn’t be economical as an individual homeowner. How we work with individuals, and how we work with sector by sector, can help us accelerate those investments where they wouldn’t otherwise be economic on the timeline we need to meet our obligations in terms of our climate targets.
[Translation]
Senator Verner: I have a question pertaining to the study we’re conducting right now. It’s a study on the Canadian oil and gas industry in the context of climate change. One of the objectives is the transition put in place by the industry for its employees, given all the changes that are happening.
In this regard, I would like to hear your thoughts on the fact that, last February and April, the Minister of Labour said that the industry needed more workers. He estimated that around 14,000 more workers were needed to reach our objectives. This represents about 13% of the current number of workers.
Given the situation, and according to the Minister of Labour’s projections, would you say that this is an increase due to the projected demand? Is this due to the introduction of new clean technologies? Are there other factors that have not been mentioned?
[English]
Ms. Strom: Thank you. If I understand the question correctly, I agree completely with the minister in the sense that we will need tens of thousands of new workers to support the projects that we’re building. This is not just over the short-term. If you think about the project itself that we’re talking about throughout Pathways, it’s not only a hub and pipeline, but it is the capture facilities at each of our projects. It requires not only a significant investment of capital, but a significant investment in skilled labour and availability of that labour.
Will some of it come from our existing labour pool? Sure. We hope that we will continue to grow our Indigenous labour workforce and women participating in the workforce, but there will be a significant need there, and we need to work together on training and focusing on getting labour that will be available for that need in the coming years. This is coming at us quickly.
Senator Wells: Thank you, witnesses, for your presentations and answers so far.
I have a question for Ms. Strom. I’m from Newfoundland and Labrador, so I see the importance of the oil and gas industry, or the oil industry in Newfoundland. And, by the way, Newfoundlanders were pleased to see Terra Nova back onstream after their refurbishment. I’ve been up to the Terra Nova, and it is an excellent facility.
With the significantly lower cost of producing oil offshore in Newfoundland than it is in the Prairies, Alberta and Saskatchewan — in Newfoundland, it is $15 per barrel for production, approximately, and in Alberta and Saskatchewan, it is $60 to $70 per barrel. In the Middle East, for comparison, it is $10 a barrel. Would there be a move to go to the offshore, where there is, certainly in Canada, a greater acceptance of oil production than there is in the oil sands?
Ms. Strom: Thank you for the question, senator. We see our offshore productions as playing a significant role in our overall portfolio, and as you point out, there are all kinds of advantages to participating in the offshore oil business. But what I would point out is that one of the key advantages that we have in our oil sands business — although, as you point out, those operating costs are higher — we are more akin to a manufacturing facility in the oil sands than we are in some of these other areas. We don’t have to explore. We don’t have to drill new wells to find the oil. We know where it is. We build the facility, and we can continue to produce.
We use the example of thinking of it more like manufacturing than conventional oil and gas, which I would compare to the offshore facilities, but we definitely see it as an important part of our portfolio over the long term. Thank you for your comments about Terra Nova.
Senator Wells: The other thing that comes into play is the significant emissions from your western operations versus virtually no emissions from the offshore operations. There’s some flaring, but that’s for safety.
Suncor took a lead in part of the green transition some years back, and we’re seeing it as a leader in the oil and gas industry for that because of that greater emphasis. In recent years, they seem to be backing away. With the new leadership at Suncor, is there an emphasis back on green, or, in your mind, has it changed at all?
Ms. Strom: Thank you very much for asking that question. First of all, I want to say one of the reasons I’ve had an amazing 20-year career at Suncor — and I still love getting up in the morning and contributing — is because of our values and our contribution and our commitment to sustainability. You can imagine, with a new boss, this is something that was important to me. I am confident that Rich Kruger, our new CEO, is as committed to contributing to solutions in Canada, to long-term sustainability and to contributing to Canada’s climate goals as our previous leaders have been.
We also want to make sure that our foundational business is strong, but we will continue to be a contributor, and we hope to be a leader in this, for many years to come under Rich Kruger’s leadership. Thank you for asking.
Senator Wells: Thank you.
I also have a question for Ms. Pierce. You mentioned that the traditional forms of energy will continue to be required for years to come. I appreciate that sentiment. What projections does Shell have or what industry projections are you aware of, in general, about when this curve will start to go downward?
Ms. Pierce: Thank you, senator, for the question. It depends on the various scenarios you are looking at and, I would say again, the speed by which we see government actions, customers and other stakeholder actions in terms of making the required investments and commitments for lower-carbon energy, and that’s really the crux of the speed by which we can move.
You have heard of the IEA scenarios quite often. You have heard about the 1.5 scenario, which suggests this is what we need to do in order to get to, basically, the Paris Agreement of mitigating any increase in global temperature over 1.5 degrees Celsius. The challenge is going to be how quickly customers will make the commitments to buy that lower-carbon energy. The speed by which we will see a transition — as has been already discussed today — really depends on how quickly we who produce can make the investment decisions to produce lower-carbon energy that will be underpinned by the commitment of customers to purchase that energy. As long as we are moving in lockstep — the customer demand is meeting the production — we will move more quickly.
As we discussed earlier, it comes down to what are the economics of that decision to me, personally, as a consumer? This is where government policy comes into play. Different countries have different policies. For example, in Canada, we have a regulatory policy — Clean Fuels Regulation — which gives us an incentive to look at decarbonizing the fuel source so that we can then provide it to customers. In some other countries, they don’t have as aggressive climate policies, and so that might actually take more time.
The United States has been spoken about. They have the Inflation Reduction Act, which puts a lot of incentives into producing as well as consuming. That may accelerate the transition.
All of this to say that the speed will depend on the policy that government has in place in their own jurisdictions, the customer decision making — which is to say how economical is this compared to the alternatives, as well as reliable. Am I going to make a commitment on something that I don’t know is going to work when I need it most? And then also the producers, how are we convinced and confident that people will buy our products? Because it is lower carbon, it is affordable and it is reliable.
That’s probably as far as I would go. Again, different scenarios project different outcomes. We continue to see a role for oil and gas for the time to come. Depending on the scenarios, we’ll see a decline more quickly. Even under Paris, we still see the role of fossil fuels and lower-carbon fuels.
Senator Wells: Do you have an idea of when that curve will go down?
Ms. Pierce: We see, for example, natural gas and oil declining within the 2030s or the 2040s, depending on, again, the scenario that you are looking at.
Senator Wells: My last question is to you, Ms. Pierce. You had mentioned the significance of jurisdictional rules. In Canada, we have very stringent rules that put requirements on producers. In other parts of the world, there are less strict rules, especially with respect to the environment, but other things as well like labour and human rights. Recognizing that the petroleum business is a business based on money and markets, how important is it to Shell to have restrictions that are more costly and make doing business more difficult versus going to jurisdictions which are less restrictive but maybe not as good for the environment?
Ms. Pierce: At the end of the day, we make investment decisions considering the economics of those investments. But we are also very clear — and this is another part of our powering lives strategy — about how our investments actually benefit the communities. Canada is a very good example of that.
We made a decision to invest in Canada because we saw an opportunity to produce — in this case, from LNG Canada — affordable and competitive natural gas. But we also made investments in communities and in our relationships with Indigenous groups. We might not have had to make those investments in other jurisdictions, but we believed it was the right thing to do for Canada.
That is a point of pride for our company. The economics truly matter, but so do the relationships with communities and, in particular, how we’re sharing that value with other parts of the community, including Indigenous groups. Economics matter, but so does our footprint and the relationships we have with each community.
The Chair: Before we continue, I want to ask our witnesses: The session was scheduled to last until 10:00, but we still have questions. Could you stay with us for 15 minutes more so that all senators will have an opportunity to ask questions? Fantastic.
Senator Batters: Thank you very much. First of all, I want to acknowledge that Ms. Pierce is from Regina, which is where I’m from too. I’ll have something later for you in the process. We’ll commiserate, I’m sure, about our love of the Roughriders, who have their home opener tomorrow night.
First I want to go to Mr. Krausert. My understanding is that your company, Avatar Innovations, works with oil and gas companies to find solutions but also to facilitate collaboration with academia to unlock business opportunities.
Could you give us an example or two of that kind of collaboration? What would it look like and what business opportunities have been unlocked as a result of that?
Mr. Krausert: Fantastic. I think it also speaks to Senator Verner’s question around the upskilling of energy workers for the transition.
There are three legs to the stool of what Avatar is.
First is an energy transition entrepreneurship technology development curriculum. We just graduated 275 employees from both Shell and Suncor, as well as 42 other energy companies in Canada. The best of those technologies are through our partnerships with the University of Calgary and Southern Alberta Institute of Technology, or SAIT, a polytechnic in Alberta. We do early-stage prototyping, testing and development, and the third leg is a venture capital fund to get these technologies to market.
Because they were born inside the industry, their adoption rates have been faster than anything I’ve seen before. A remote methane sensor technology went from concept to commercial pilot with a major midstream operator in less than 12 months. Not only is that breakneck speed from a tech dev perspective, but it’s also breakneck speed from an industry perspective.
The team that developed that is a consortium of a really smart postdoc from the University of Calgary, a really smart engineer from a major midstream company and another smart engineer from a telecom, Shaw. Through their working and machinations and asking why do you do it this way or that way, they were able to uncover a technology for which they now have opportunities for deployment across North America and will be closing their first $1-million financing rounds within the next couple of months.
Another great example of a technology that has been generated through this collaboration between academia, industry and multi‑sectoral approaches, and one that I’m really excited about, is a pre-combustion natural gas carbon capture technology that can turn methane into zero emissions and formic acid, generating 70% of the heat that would be generated in normal oxidation combustion. Think about the opportunities for that: furnaces, steam-assisted gravity drainage, or SAGD — all these different things.
The point I was trying to get at is that looking at a transition off of emissions will be so much cheaper, easier and faster, and the oil and gas industry has a meaningful and powerful role in that. Avatar is just one of many proud examples of this type of collaboration that’s happening across the industry with other sectors and with academia.
Senator Batters: I have a question for perhaps a couple of you if you wouldn’t mind commenting on this.
When Rhona DelFrari from Cenovus Energy was here last week, I asked her about the public relations battle on this. A couple of you, like Ms. DelFrari, are sustainability officers with oil and gas companies. Clearly, you’re waging that battle, but there’s a great and vocal activist sector of our society that vilifies oil and gas companies and sometimes portrays you as the devil incarnate, and a lot of people buy that. We have a federal government right now that, at the very least, enables that.
Could a couple of you please comment on that and tell me how you turn that around?
Ms. Pierce: Thank you again for that very important question. It’s something that I take very personally because I get vilified, indeed. I have two children, and I want my children to be proud of their mother.
How we do that is to continue to be transparent about the decisions we’re making and how we make these decisions. But it’s also ensuring that it’s not just me talking about it, but it’s the communities and the Indigenous groups that we work with that talk about it.
One of my proudest achievements is working with the Indigenous communities around LNG Canada. We made sure, working with my good friend Chief Crystal Smith, to have a share in it to say: How do we make sure this is something that you accept in your community, that it’s done to the standard that you think is responsible with respect to Mother Earth, and that you benefit from this in terms of having the ability to say what you want to do with your future on the basis of a relationship that gives you an income that doesn’t depend on the government?
We need to do a better job of talking about what the transition will involve. That includes, as I mentioned earlier, working with customers — the people who drive their cars, who use the energy, who make the steel that we depend on for our buildings — but also the communities that are working with us. That has to change.
Appearing today in front of you is also to make sure people know that we’re human and we are committed. We have children too. If I could accelerate the transition to remove emissions from the atmosphere, I would, but that’s what I get to do every day within my company, which has private capital to spend. I want them to spend it here, and I want them to spend it on decarbonization. That’s what we need to do more of. I appreciate each of you also giving us the opportunity to be heard, but being heard as well.
Senator Massicotte: Thank you very much for being with us this morning.
When I think of your industries, I’m always trying to grasp: What’s the business model? I’m a big believer that, at the end of the day, you’re going to do what is right for your company. It’s called profits. That’s how our economy functions. It’s supply and demand. I’m always trying to understand where you’re coming from. Obviously, I think that profits will dictate your decisions.
I wouldn’t mind talking to Ms. Pierce about Shell. We all realized, I think — two days ago or the day before yesterday, in the annual international meeting of Shell — that you basically decided to slow down the renewables and the effort you’re making there and to place more importance on the oil and gas sector and, obviously, the level of CO2.
That’s a disappointment to me. Shell has been exemplary internationally in terms of how it manages its GHGs. But obviously that’s the case, because that’s where the shareholders want you to go.
Having said that, if you want to try to convince me, talk to me about the economy, about supply and demand and how you get there. Nice words will not get us there. We need to have concrete results. The world is looking to you — especially Shell, being international — to see what you will do and how you’re going to get there. We’re trusting you to make reasonable profits but also to bring down GHGs and carbon completely.
Ms. Pierce, could you comment on that? How do we get there using today’s business model of supply and demand?
Ms. Pierce: Yes. Thank you for the question. Indeed, as an individual who works for Shell, I also need to believe in the company that I work for. I’ve been paying close attention to the decisions that are being made.
We did not remove our commitment to achieving net zero. We have decided that we need to focus on how we use our shareholders’ money to make sure it’s making a return so that we can continue to invest in the energy transition.
What you saw us do is pull back from the amount of money we’re throwing at everything. We’ll be focused on how we can continue to generate cash today so that we can continue to generate value into the future.
When it comes to the speed of the transition, as has been discussed thus far, we need to make sure that customers are willing to pay and invest in the various technologies that consume lower-carbon energies. That’s part of the way we look at lower-carbon energies and lower-carbon fuels. For example, renewable diesel you can put in the truck that you drive. But we have to make sure that those customers are working with us as quickly as possible so that we pivot the transition of those investments.
Having said that, we have decided that we will keep oil production flat, simply because we’ve already met our commitment to reduce 1.2% per year by 2030, we continue to invest in lower-carbon fuels.
For example, between 2023 and 2025, we’ll invest between $10 to $15 billion in lower-carbon fuels, which includes e‑mobility; EV chargers; low-carbon fuels such as renewable diesel; Nature Energy, which we have an investment in Quebec, which will be renewable natural gas, as well as hydrogen.
We’re not pulling back our commitment to net zero. What we’re doing is focusing on using our shareholders’ dollars wisely so that we can more effectively invest in the energy transition, working with our customers. I have to wake up this morning, sit in front of you and say that I believe in this and I believe it’s the right thing to do.
We’re not taking our pedal off the transition. We still have our commitment, but we have to use our dollars effectively. The last thing I will say — and this is also where I spend a lot of my time — in order to make all of this work. We really need to work together between governments, customers, on how quickly we can transition because I cannot produce lower carbon fuels — just as I used my hydrogen example in Granville in Vancouver — unless someone is willing to buy them. We have to work together to make that happen.
Senator Massicotte: If I could add one more, when you say “co-investment” all the time — those are nice words which suggest that you’re basically a partner together with the federal government — and with all Canadians, in fact. You give me that sentiment, but is that the case? You say we need co-investment by two thirds. Obviously, that means you want the federal government to fund two thirds of the costs of CCS, carbon capture sequestration, or future use. Does that also mean the federal government will have two thirds of the profits, or are you only looking for a partner to fund the costs?
Ms. Pierce: Part of what we’re looking at in the circumstance to which I think you’re referring is carbon capture sequestration. Part of that is to make sure that when we look at the Clean Fuels Regulations, which is part of the underpinning of this, that we see, okay, this is how we can make sure that we’re producing lower carbon fuels, by investing in carbon capture sequestration. But the actual economics of that decision will depend upon how that investment is actually giving us the assurance that we will actually make some return on it and manage the risks of actually securing those emissions in the ground.
It’s a risk-reward relationship. That’s what we have to look at with respect to asking if we make that investment here in Alberta or somewhere else. If the risk-reward relationship looks better somewhere else — and has been mentioned, the United States — we’ll go there. It’s a balancing of the economic decision, and it’s really about how to remove carbon emissions as quickly as possible and produce lower carbon fuels. That’s what it’s about at the end of the day.
Senator Massicotte: If the government will co-fund two thirds of the CCS, will they get two thirds of the profits?
Ms. Pierce: We would get a return on the investment in terms of the tax and the royalties that we would pay directly back to the governments.
Senator Massicotte: Here I am, a typical Canadian consumer. What is in it for me? We’re going to get what percentage of taxation? Am I going to get the money back?
Ms. Pierce: We reinvest. We employ people who then generate incomes that get taxed. We make sure that when we reduce lower carbon fuels; also, the whole point is that they’re actually more affordable to you. That’s the relationship that we need to have with government as well. We can’t produce lower carbon fuels if they’re more expensive; nobody will buy them. Again, it’s a relationship that we have to make an investment decision here, which gives the opportunity for investment dollars, for employment, which then provides taxation to governments and royalties.
Senator Massicotte: Thank you.
[Translation]
Senator Gignac: Welcome to our witnesses.
I’m a senator from Quebec, but I would like to recognize the importance of Canada’s oil and gas industry in creating wealth and providing benefits for all Canadians over the last few decades through the equalization program. All Canadians, including Quebecers, have seen improvements in their standard of living. We are, however, facing very significant challenges.
As a former Quebec minister responsible for economic development, innovation and export trade, I’m a great believer in innovation as a determinant of success for our energy transition. I would like to give a nod to my colleague Senator Verner, who clearly explained the difference between subsidies, specifically, subsidies for operations versus incentives to ensure a successful energy transition
I worked in capital and financial markets for decades. Mark Carney has told us that we need different approaches to investors in Canada. I’m talking about pension funds here. Some are divesting themselves of their oil and gas assets, decreasing investment in this sector to reduce their carbon footprint. In contrast, others are working with the industry to invest and improve their processes.
My question is for Mr. Krausert. You alluded to this — we may not be able to compete with the Inflation Reduction Act in the United States — but we have public pension funds that now exceed 100% of gross domestic product. What do you think of that? Do you think our pension funds are active partners in ensuring a successful energy transition in Canada? Should there be a little more intervention or more pressure on our public pension funds? I’m not talking about our private pension funds, I’m talking about our public sector pension funds, about investing more to make our energy transition a success.
Mr. Krausert: Thank you for the question.
[English]
I started my career in oil and gas as a roughneck on the rigs of Northern Alberta, while I was pursuing a research neuroscience degree at McGill University. Through that experience, I had a chance to work with many, many Quebecers, as well as to purchase my first home in Montréal. I was a Quebec taxpayer for about six years, and I’ve really seen the Canadian oil and gas industry as being a broad, inclusive community that brings the country together and creates a lot of wealth.
In terms of Mr. Carney’s views through the Glasgow Financial Alliance for Net Zero around investments in oil and gas, most of the Canadian institutional pension funds have taken a very responsible view of working with the sector to decrease emissions. The Canada Pension Plan Investment Board, or CPPIB, is one. These are major investors inside companies such as Suncor as well as many of the other larger entities that are out there.
An investor has that sort of responsibility. Pension funds come from our parents, our grandparents, who are investing inside the future. The funds are very responsible in terms of generating a return, and they should go where capital will generate the best return. The institutional equities have taken a very responsible view around balancing that act. Even under the Paris Agreement, we still need continued investment in fossil fuels.
Where Canada lags is on the availability of risk capital and investment. Not only are you seeing these carbon-capture projects becoming sub-economic in Canada compared to the United States — I think it’s why we’re a little bit slower out of the gate — there’s also a tremendous amount of risk capital availability in the United States versus Canada. Canada has one of the largest government R&D spends in the developed world, but we have one of the lowest corporate R&D spends. That’s not just energy; that’s all.
Smart strategy is increasing the availability of risk capital to stop this drain of amazing technologies going to the United States. One initiative that has worked very well in the tech sector has been a VCCI fund, Venture Capital Catalyst Initiative fund. That is where government takes a first-in-last-out investment approach, thereby guaranteeing a certain hurdle rate for investments in some of these early-stage technologies. If we applied that to energy, I can imagine that we could unlock a lot of strategic capital.
There’s one major phenomenal venture capital fund called Evok Innovations in which Suncor and Cenovus are investors. Shell has a low-carbon ventures investment fund; Chevron and Aramco even have these. We can attract this capital in Canada if we have a smart innovation agenda. We can use one of the largest industrial sectors of our country and our largest export commodity to drive this innovation agenda.
Does that answer? I think the institutional equities are being quite responsible.
Senator Gignac: Thank you. I know we’re running out of time. I’m glad to see in the last budget, the Canada Growth Fund, which basically will accelerate the transition. Thank you.
The Chair: I will allow myself to ask a last question because I remember comments from Senator Verner that we have to think about for our report.
I agree Mr. Krausert, that “emissions” should be the word and it should be the indicator and this is the way that we should all think about bringing down emissions. My question is to Ms. Pierce and Ms. Strom. Your sector, oil and gas, is the first sector that realized the impact of combustion, fossil fuels creating planet warming and the havoc that climate change is bringing. Your sector knew since the 1980s about this situation. When it comes to emissions, can you please tell me, since you became aware of the situation, how many tonnes of carbon you have reduced? What is the rate of greenhouse gas reduction per year that you are doing now in order to take you to net zero by 2050?
This needs to go into our report. Thank you so much.
Ms. Pierce: One of the things Shell has done, probably since around 2010 to 2011, is to include a carbon price in how we look at projects. Essentially, we have always said how many emissions and this was even before there was a carbon price put in by government. We’ve assessed projects on the basis of, if there were a carbon price, what would that be? We base our economics on that. With respect to our latest strategy, we’ve announced publicly including recently we’ve already reduced our Scopes 1 and 2 emissions by approximately 30%. So we are very focused. That’s in our energy transition report and there will be a lot more information, specifically which I would refer the committee to, with respect to that. That’s reducing Scopes 1 and 2.
Scope 3 are the emissions. A large part of the emissions we’ve committed to under net zero is working with customers. We are working on a net carbon intensity with that to achieve zero carbon intensity by 2050. We’ve already made about a 50%, almost close to 30% reduction on our 50% goal by 2030 in Scopes 1 and 2. We’ll be getting to Scope 3 by 2050 on a net carbon intensity working with customers.
Ms. Strom: Thank you for the question.
I have been at Suncor for 20 years, and we have had long-term goals around climate. We had a climate plan where we began investing in wind, as I mentioned, in 2002. We have always had these long-term goals. We’ve grown our business, so we have increased our aggregate emissions but lowered our emissions intensity.
Now, your question about how we’re going to meet our goals of reducing absolute emissions, that’s why we have a goal of reducing 10 megatonnes of absolute emissions. We used to have an emissions intensity goal over the last 10 years our industry has reduced our emissions intensity by about 23%. Our new Fort Hills mine is on par with average North American emissions intensity barrels. We’ll work on that 10 megatonnes by doing things like carbon capture, couple megatonnes through energy efficiency, fuel switching and contributing to the power grid and lowering the emission intensity of the power grid. Those are ways we will reduce our absolute emissions by 10; our goal is to do it by 10 megatonnes by 2030. Thank you very much for the question.
The Chair: With that, we conclude our committee meeting. We will move in camera to discuss the report.
Thank you so much to our witnesses. It is appreciated.
(The committee continued in camera.)