THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, November 28, 2024
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 Paul J. Massicotte (Chair) in the chair.
The Chair: Good morning, honourable senators. My name is Paul Massicotte, and I am a senator from Quebec and the chair of this committee.
This is a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. I will now ask my fellow senators to introduce themselves, starting with the senator to my right.
Senator Verner: I am Josée Verner from Quebec.
Senator Youance: I am Suze Youance from Quebec.
Senator Miville-Dechêne: I am Julie Miville-Dechêne from Quebec. We have a strong and proud Quebec contingent.
Senator D. M. Wells: David Wells, Newfoundland and Labrador.
Senator Robinson: Good morning. Mary Robinson, Prince Edward Island.
Senator McCallum: Welcome. Mary Jane McCallum from Manitoba.
[Translation]
The Chair: Thank you. Congratulations, Senator Youance, who is joining us as a permanent member.
Before we get started, we have to adopt a motion dealing with the chairmanship of the committee. As you may recall, there was an agreement at the beginning of the parliamentary session that the position of chair would alternate every year between Senator Galvez and myself. Since we are approaching the last meeting of the year, I would like to propose the following motion.
I move:
That the Honourable Senator Galvez be chair of the Standing Senate Committee on Energy, the Environment and Natural Resources, effective January 1, 2025.
Honourable senators, is there agreement to adopt the motion?
Hon. Senators: Agreed.
The Chair: The motion is carried. Thank you very much.
The committee has invited witnesses to appear today as part of its special study on climate change in the Canadian oil and gas industry.
With us from Environment and Climate Change Canada are Paola Mellow, Director General, Carbon Markets Bureau; Magda Little, Director, Oil, Gas and Alternative Energy; Lindsay Pratt, Director, Pollutant Inventories and Reporting; and Matthew Watkinson, Director, Regulatory Analysis and Valuation.
From Natural Resources Canada, we have Erin O’Brien, Assistant Deputy Minister, Fuels Sector; Drew Leyburne, Assistant Deputy Minister, Energy Efficiency and Technology Sector; and Scott Clausen, Director, Analysis and Operations Branch.
Lastly, from Statistics Canada, we welcome Jennifer Withington, Assistant Chief Statistician, Economic Statistics; Augustine Akuoko-Asibey, Director General, Agriculture, Energy and Environment Statistics Branch; Heidi Ertl, Director, Centre for Energy and Transportation Statistics; and Ziad Ghanem, Acting Director General, Macroeconomic Accounts.
Welcome to all of you and thank you for accepting our invitation. Each group will have five minutes for opening remarks. You may go ahead, Ms. Withington.
[English]
Jennifer Withington, Acting Assistant Chief Statistician, Economic Statistics, Statistics Canada: Thank you, honourable committee chair and members, for the invitation to speak to you today.
It is a pleasure to appear before this committee as part of the study on climate change and the Canadian oil and gas industry. I would like to start by acknowledging that we are gathered on the traditional unceded territory of the Algonquin Anishinaabe people.
My name is Jennifer Withington, Acting Assistant Chief Statistician for Economic Statistics at Statistics Canada. I am joined by Directors General Augustine Akuoko-Asibey and Ziad Ghanem, and Heidi Ertl, Director of the Centre for Energy and Transportation Statistics.
Statistics Canada’s mandate is to provide reliable information on every aspect of our country and its communities, including its population, economy, society and environment. We do this by working closely with our federal, provincial and territorial counterparts and with the cooperation of Canadian individuals, businesses and institutions.
I have been asked to appear before the esteemed Standing Senate Committee on Energy, the Environment and Natural Resources because Statistics Canada collects and publishes a rich set of data and insights on the oil and gas industry. From its contribution to gross domestic product and employment to trade and its alignment with Canada’s climate goals, the oil and gas industry is a key driver of Canada’s economy and our place in the world. With a sustainable future in mind, I would like to highlight a few key areas where Statistics Canada can help inform policies and decisions impacting the oil and gas industry.
First, Statistics Canada — in partnership with Natural Resources Canada, Environment and Climate Change Canada and the Canada Energy Regulator — houses the Canadian Centre for Energy Information. This virtual centre makes finding energy information easier and provides Canadians with access to the most accurate and up-to-date energy data, tools and resources. Here you can find data to support Canada’s ranking as the world’s fourth-largest oil producer and fourth-largest oil exporter. Atlantic Canada possesses vast offshore deposits of natural gas, making Canada the fifth-largest gas producer globally.
In terms of economic importance, the petroleum sector accounted for 7.7% of the gross domestic product, or GDP, in 2023, or $209 billion. The sector directly and indirectly employed about 446,000 people in 2023, including approximately 10,800 Indigenous people.
Production of crude oil continues to increase each year, and natural gas volumes are currently at record-high levels of production, consumption and storage. Canadian exports of oil and gas totalled $177 billion in 2023, of which 97% was to the United States. The sector received slightly over $1 billion in federal subsidies in 2021; it’s the latest year for which we have this detail. Over 91% of the subsidy amount was from the Canada Emergency Wage Subsidy program. Provincial subsidies totalled $554 million, primarily driven by the Accelerated Site Closure Program.
Data from Statistics Canada and the Canadian Centre for Energy Information are key inputs into the Energy Fact Book, published by Natural Resources Canada, as well as Canada’s Energy Future reports, published by the Canada Energy Regulator.
Second, the agency works closely with Environment and Climate Change Canada to report and monitor progress toward climate goals, including the national inventory report which contains greenhouse gas, or GHG, emissions estimates for different countries. Statistics Canada’s Report on Energy Supply and Demand in Canada: Explanatory Information represents an important source of data for this work, which estimates that Canada’s oil and gas sector accounts for about 31% of the country’s GHG emissions.
Third, Canada has an opportunity to transition toward a more sustainable energy mix, including renewables like solar, wind and hydro. Technological innovation, clean technologies and carbon capture will also be key to Canada’s progress toward climate goals. In 2022, Canadian businesses spent $2.8 billion on energy-related research and development, or R&D, including $1.9 billion on R&D to further develop clean technologies. Government funding to businesses for energy-related R&D increased 13% in 2022, reaching $211 million.
Finally, Statistics Canada publishes insights into important questions facing Canada, such as the displacement of workers as we transition to a low-carbon economy. A 2020 study showed that from 1995 to 2016, 81.2% of workers displaced from oil and gas extraction found a new job outside the oil and gas industry in the year following the job loss. Moreover, half of workers from 2009 to 2011 saw their real annual earnings decline by at least 30% in the short term.
At Statistics Canada, we are committed to delivering accurate and timely information on the issues that matter most to Canadians. As Canada navigates the shift toward a net-zero future, robust data will be instrumental in supporting modelling, policy development and decision making to address the complexities of balancing environmental concerns with economic interests.
Thank you again for the opportunity to discuss Statistics Canada’s data holdings on the oil and gas industry. My colleagues and I would be glad to take any questions. Thank you.
The Chair: Is there anybody else who wants to add to the presentation? If that’s the case, let’s proceed to the questions. Senator Verner, the deputy chair of our committee, will start.
[Translation]
Senator Verner: I imagine that my question is for you, Ms. Withington. You listed a slew of figures, so you may have to repeat some of them. Since the start of our study, a number of witnesses have brought up the very broad issue of federal subsidies for the oil and gas industry and the fact that there is no clear definition of what constitutes a subsidy. In July 2023, Minister Guilbeault announced an assessment framework to phase out so-called inefficient fossil fuel subsidies by 2025.
Can you give us the definitions of an inefficient subsidy and an efficient subsidy?
[English]
Ms. Withington: At Statistics Canada, we do not categorize by inefficient or efficient subsidies. In government financial statistics, we define “subsidies” as current unrequited transfers that government units make to enterprises on the basis of the levels of their production activities or the quantities or values of the goods and services that they produce, sell, export or import.
More succinctly put, we do not take into consideration indirect subsidies. It’s just subsidies for the production or selling of goods.
[Translation]
Senator Verner: Can any of the other witnesses in today’s panel give me a definition of an inefficient subsidy? Canada is supposed to phase out those subsidies within the next few months.
[English]
Erin O’Brien, Assistant Deputy Minister, Fuels Sector, Natural Resources Canada: Thank you very much for the question, senator. And you’re right; the government has actually done a fair bit of work in this area over the past couple of years. You made reference to the inefficient fossil fuel subsidies initiative. The government released an approach to deal with inefficient fossil fuel subsidies about a year ago.
There is a framework in place, and the government has done an assessment of government policies across the federal government and put it through this framework to determine which subsidies might be determined to be inefficient.
Under the framework, a measure is deemed inefficient if it disproportionately benefits the fossil fuel sector, solely supports fossil fuel activities or supports fossil fuel consumption and is considered a subsidy at the outset of the framework. All measures are identified as fossil fuel subsidies and are deemed inefficient unless they meet certain criteria.
There are a handful of criteria that are outlined in the framework that would then say the subsidy is not inefficient: for instance, if it enables significant GHG emissions reductions; supports clean energy or clean technology; provides an essential energy service, particularly to a rural community, for instance; or supports Indigenous economic participation in an energy project, for instance. There is a list. We’d be happy to share information with you, including a link to this policy on the government’s website.
[Translation]
Senator Verner: Are you able to put an overall number on how much all the subsidies represent? I’m talking about both efficient and inefficient subsidies. Also, are you able to tell me the percentage the inefficient subsidies account for? In other words, how much money goes towards inefficient subsidies, and how much goes to efficient subsidies?
[English]
Ms. O’Brien: I’m not in a position to provide those details to you currently. The government has done some of that analysis. To my knowledge, very few programs have been identified as inefficient fossil fuel subsidies. But we can certainly undertake to get you those details on the margins of this meeting.
[Translation]
Senator Verner: What is the total amount allocated to subsidies, if you don’t break it down? One of you must know how much the government gives to the oil and gas industry.
[English]
Ms. Withington: As I mentioned, in oil and gas in 2021, it was $1 billion in federal subsidies and $554 million in provincial subsidies. The provincial ones were mostly driven by the Accelerated Site Closure Program.
[Translation]
Senator Verner: Thank you.
[English]
The Chair: Are they all inefficient?
Ms. Withington: As I mentioned previously, we don’t use the same categorization process. We just look at the subsidies in total.
The Chair: But for the total number of subsidies, the money transfer was $1 billion? Do I understand you correctly?
Ms. Withington: For federal, yes. That was in 2021. That is the most recent data we have for the oil and gas industry.
The Chair: But we can’t generalize to say that 50% is inefficient? That’s the total amount for inefficient or efficient subsidies — it’s $1 billion for the total amount?
Ms. Withington: Correct. The vast majority of the $1 billion was for the Canada Emergency Wage Subsidy.
The Chair: What is that?
Ms. Withington: During the pandemic, that was a subsidy measure to support wages.
The Chair: And it is complete?
Ms. Withington: Yes.
The Chair: I presume the $1 billion will go down significantly because the program must be complete.
Ms. Withington: Yes. We don’t have the data for just the oil and gas, but we do know that in 2023, subsidies for all industries was $43.6 billion by comparison, compared to $119.4 billion in 2020 and $67.5 billion in 2021.
The Chair: I’m left with the impression that because the pandemic is complete, the total amount of subsidies will go down significantly. Is that correct?
Ms. Withington: Yes.
The Chair: It’s probably not in the billions. It’s $1 billion if you consume all of it, so it’s a fraction of $1 billion. Am I correct in saying that?
Ms. Withington: So 9% was not from the wage subsidy. Of the $1 billion in 2021, 91% was from the Canada Emergency Wage Subsidy. About 9% was not, as it was from other subsidies.
The Chair: Given the program is complete because of the pandemic, it is going to go down significantly?
Ms. Withington: Yes, that is a safe assumption.
The Chair: A year from now, we will say, “Why did we have all this debate when the amount is insignificant?”
Senator Miville-Dechêne: I’m sorry, but they are old figures. It was three years ago.
The Chair: The pandemic is complete. It’s finished. So I presume it’s going to go down.
Ms. Withington: I would say that’s a safe assumption that the same patterns would hold in 2023.
Senator D. M. Wells: Thanks, panel. We’re down to $90 million. That’s 9% of the billion.
When we had the Canadian Association of Petroleum Producers at one of our hearings a couple of weeks ago, they said they received no subsidy. I want to get to the discussion related to Senator Verner’s questions. What is considered a subsidy?
Ms. O’Brien, you mentioned three things. One was consumption, one was solely directed to the oil companies, and there was a third one that I missed. If you could tell me that, then I could ask some questions.
Ms. O’Brien: What I was referring to, senator, was not necessarily a broad definition of what is a subsidy, but what would be determined an inefficient fossil fuel subsidy.
To repeat what I had said, an inefficient fossil fuel subsidy is disproportionately beneficial to the fossil fuel sector, solely supports fossil fuel activities or supports fossil fuel consumption.
Senator D. M. Wells: Thanks for that. For my question, I’m not sure who is best positioned to answer it, so I’d open it up. Would a barrel of diesel sent to a remote community in the North so that they can heat their homes be considered a subsidy to the oil and gas sector?
Ms. O’Brien: Senator, to the best of my knowledge, while it might be considered a subsidy, it would not be considered an inefficient fossil fuel subsidy because it would be supporting — in fact, I think it would meet two conditions: It supports the energy needs in rural communities, and also it supports Indigenous communities.
Senator D. M. Wells: Okay, that’s good. Would a Scientific Research and Experimental Development, or SR&ED, refund be considered a subsidy from Natural Resources Canada, or NRCan?
Ms. O’Brien: Like support for innovation in R&D?
Senator D. M. Wells: Yes.
Drew Leyburne, Assistant Deputy Minister, Energy Efficiency and Technology Sector, Natural Resources Canada: If it is a clean technology — carbon management, or carbon capture, utilization and storage, or CCUS, et cetera — it would not be considered inefficient.
Senator D. M. Wells: What if it were none of those? What if it were for oil and gas?
Mr. Leyburne: If it were R&D whose express purpose was expanding production without abating emissions, then it would be considered inefficient.
Senator D. M. Wells: Would it be considered a subsidy?
Mr. Leyburne: Yes.
Senator D. M. Wells: Okay. Maybe this question is for Ms. Withington or maybe not: How much in direct payment to the oil and gas companies would be considered a direct subsidy to the oil and gas companies versus a subsidy to the sector — that is, heating a community in the North with diesel?
Ms. Withington: By our definition of “subsidies,” it’s for the production, export or selling of the goods or services. I think that would be considered more of an indirect subsidy, which wouldn’t be captured.
Senator D. M. Wells: Right. This is my final question in this round: As Canada is the fourth-largest producer and fourth-largest exporter in the world, is there any analysis done on Canada’s place in the world and our GDP? We spoke about that being 7% of Canada’s GDP. Is there any analysis done on what effect that would have on Canada’s GDP?
Ms. Withington: I would say that potentially the GDP could go down, unless it were displaced by other types of energy production or another type of economic activity.
Senator D. M. Wells: Would anyone else who might be knowledgeable have a comment on that? Okay, thank you.
[Translation]
Senator Miville-Dechêne: I’m going to stay on the hot topic of subsidies. I find it a bit concerning that the last reference year we have for total subsidies is 2021.
We have officials from a number of departments here, so does anyone have a more up-to-date figure for the subsidies to the oil and gas sector? If so, I will follow up on my fellow senator’s question about the percentage of inefficient versus efficient subsidies, specifically in terms of the updated figure.
I would also like to know whether you subsidized carbon capture research or pilot projects in the oil and gas sector. I’m curious about the ways in which the subsidies reduce emissions. Those are my three questions.
We’d like to know the numbers. Ever since we started looking into the issue, the information we’ve had has never been specific. We are always dealing with unknowns.
Ms. Withington: I’d like to clarify something. Our data are based on the subsidies granted in 2023. Those data are more general.
Senator Miville-Dechêne: You said the data were for the whole industry, did you not?
Ms. Withington: Yes, because it takes a lot of time to disaggregate the data by industry.
Senator Miville-Dechêne: The work you do reflects a time lag, but we have department officials here who, under normal circumstances, want an idea of what’s being spent that year.
The Chair: What do the 2023 figures reveal?
[English]
Ms. Withington: In general, the Government of Canada had $43.6 billion in subsidies in 2023, of which $5.3 billion was with the federal government.
The Chair: The balance is with the provincial governments?
[Translation]
Is that for the gas industry?
Ms. Withington: That is overall, not just for the gas industry.
[English]
The Chair: It’s $43 billion?
Ms. Withington: Yes, it’s $43.6 billion, and $5.3 billion was from the federal government for the whole economy.
The Chair: If it’s not from the federal government, then it must be from the provincial governments, right?
Ms. Withington: Correct. The $38.3 billion was from the provincial governments.
The Chair: What portion of that are subsidies?
Ms. Withington: Those are the subsidies.
The Chair: They’re inefficient subsidies?
Ms. Withington: They’re not classified in that way.
The Chair: Okay. I’m not sure I got it.
[Translation]
Senator Miville-Dechêne: It’s for the whole industry.
Ms. Withington: Yes, for all the industries. That is just to give you an idea.
The Chair: The figure is lower, either because the program no longer exists or because the pandemic is over.
Ms. Withington: Yes.
The Chair: Nevertheless, the $43 billion is for the whole industry, so it’s still general. Has Senator Miville-Dechêne already left us?
Senator Miville-Dechêne: No, I’d like to know the answer. I still have questions.
The Chair: Go ahead.
[English]
Ms. O’Brien: I think I had indicated that the government has done a review of efficient, I suppose, versus inefficient fossil fuel subsidies, and very few government programs have been identified as being inefficient.
Senator Miville-Dechêne: That’s not my question. My question is about the total. What are the grants to oil and gas? What is a recent figure?
Ms. O’Brien: I can speak to funding and investments that NRCan has given to the sector. From 2006 to 2024, NRCan has provided approximately $1 billion to the oil and gas sector. A lot of those investments are to support investments in, say, decarbonization technologies or sort of broader objectives, and they are not directly related to the production of oil and gas.
For instance, on my list, certain oil and gas companies received funding under NRCan’s 2 Billion Trees program to plant trees as well as the Energy Innovation Program that my colleague Mr. Leyburne can speak to. Many of these go toward supporting decarbonization and clean technology investments. Those are the purpose. For NRCan, the number is $1 billion from 2006 to 2024, but I am not aware of what the aggregate is.
The Chair: It’s $1 billion over 18 years. Is that accurate?
Senator Miville-Dechêne: We were told by quite a few witnesses that the oil and gas sector had not started to do carbon capture at all despite the subsidies on research because it was just too expensive at that point. Is that true?
Mr. Leyburne: There are a number of projects in Canada that have been initiated by the oil and gas sector in the carbon management space, or CCUS. The Shell Quest project is an active project that has been in operation for almost a decade. A number of other projects have received final investment decisions and intend to move forward.
As part of implementing the recent CCUS investment tax credit, we know that we have already received over 20 applications, many of which come from the oil and gas sector. I think it is important to note that for carbon management, or CCUS, while oil and gas is one of the industrial clients that will be using that technology, it is applied in multiple heavy industrial sectors.
Senator Miville-Dechêne: I’m always interested in oil and gas because of our study. You are saying it is happening?
Mr. Leyburne: Yes, the Shell Quest project has been happening.
Senator Miville-Dechêne: Do you think you can write who’s buying the technology?
Mr. Leyburne: Yes, we could give you a list of all the projects.
Senator Miville-Dechêne: Because we’ve had contradictory information on that, or I have, in any case.
Mr. Leyburne: Sure. We can give you the full list. There are eight active projects in Canada right now, and I can tell you that over the last three or four years of running research, development and demonstration, or RD&D, projects, we’ve received hundreds of applications from credible CCUS projects that intend to establish in Canada.
[Translation]
Senator Miville-Dechêne: Thank you.
[English]
Senator Arnot: Thank you, witnesses. I think this question is mainly for Mr. Leyburne, but I’ll ask it and take answers from anybody.
Sir, are current investments in clean energy technologies sufficient to meet Canada’s 2030 and 2050 climate targets, given the oil and gas industry’s substantial share of emissions? If not, in your view, where are investments likely to make the biggest impact?
I would like you to share more in depth, if you will, any success stories about the initiatives or programs that you oversee which demonstrate significant improvements in energy efficiency in oil and gas operations.
Mr. Leyburne: Yes, I would be happy to jump in on that point.
I think the International Energy Agency has said that globally about a third to 40% of the technologies that are needed for the planet to reach net zero are not yet ready. That means they are not yet invented, or they exist but are not cheap enough. That number probably applies across the board in Canada as well.
We know that in the net-zero scenario, that number goes up even higher. The Canadian Climate Institute similarly estimates that for Canada, currently commercial technologies will play the majority of the role, but there is still a lot of heavy lifting to do.
I would say that in the RD&D space, Canada shows relatively well on the government spending side for energy R&D when we compare to our OECD peers. We lag a little bit on the industrial investment side — the business energy R&D side — compared to some peers. Having said that, the oil and gas industry, as I’m sure you have heard, is the single largest consumer of clean technologies by a significant margin and continues to invest through a number of mechanisms. I’ll just list a few of them that you may have encountered, but it’s just for completeness.
There is the Clean Resource Innovation Network, or CRIN. It was established through support from the federal government and others but with funding from industry as well to support innovation across the oil and gas sector. There’s COSIA, which used to be Canada’s Oil Sands Innovation Alliance. It has now been subsumed under Pathways Alliance. There’s the Natural Gas Innovation Fund, which was spun out of the Canadian Gas Association. And there’s Petroleum Technology Alliance Canada, or PTAC, which is another organization that is looking specifically at methane and issues related to methane. It is a very busy space.
Over the last decade in particular, NRCan has made significant investments in the decarbonization of the petroleum oil and gas sector. I think we have some great success stories. Certainly, if you look back further, lots of examples of NRCan investments have resulted in significant reductions in emissions.
The Shell Quest project is one that we funded, so when we give the list of CCUS projects, we could certainly indicate the GHG emissions reductions and efficiency gains. It is not just CCUS. I have a lab in Edmonton, Alberta, that is almost exclusively focused on decarbonizing the oil and gas sector for 30-plus years now, working closely with partners in Alberta Innovates and InnoTech Alberta. In the list of projects, we could certainly provide some of the specific results that we have seen from those investments.
Senator Arnot: In your opinion, are we going to meet these targets utilizing those investments? Are they getting us to those targets in 2030 and 2050?
Mr. Leyburne: I think in the 2030 frame — and you would have seen this from the industrial players — with the vast majority of solutions that will be in place by 2030, R&D is not going to help much in that space.
In the higher technology readiness areas, technology demonstration projects may have an impact by 2030, but the reality is for most of the work that I am doing in the RD&D space, we are looking beyond 2030 to 2050. As hard as the work is this decade to reach the 2030 targets, the heaviest lifting will come in the 2030s and 2040s. That’s when you’re going to see the R&D really kick in.
Most of our investments are structured toward drastically reducing the cost of technology, so in carbon capture, for example, it’s about reducing the cost of the capture itself. The storage and the transportation are relatively well established, but if we can get the cost curve to follow patterns that we see in solar photovoltaic, or PV, technology or other technologies over the last few decades, then CCUS is going to become a much more viable technology, and it needs to be a much more viable technology. The International Energy Agency assumes that 9% to 10% of all global emissions to reach net zero are going to come from carbon management technologies.
The Chair: Ms. O’Brien, did you have something to add?
Ms. O’Brien: Mr. Leyburne was speaking about a slightly longer time horizon. I just wanted to make the point that there are a number of technologies that oil and gas companies are applying today to drive down their emissions profile. In addition to carbon capture and storage technologies, they’re looking at using solvents, cogeneration of heat and energy, and gas conservation and methane reductions. They are actively applying these techniques and processes to lower their emissions between now and 2030.
Senator McCallum: Welcome. When we did the study on oil and gas, witnesses described the tension between the economic benefits that the industry brings to the country — jobs, GDP and exports — with the environmental damage caused by ever-increasing GHG emissions. Now we know that oil and gas were ramping up their production, and you have said that this morning.
The committee heard that Indigenous peoples often bear the brunt of the environmental damage caused by the industry while also being excluded from meaningful participation. One of the major concerns now is the pollution of the waters because we’re looking at a water bill for First Nations, and that has not been addressed in that bill. Even when you look at the point source, it is very difficult to understand when effluent comes out of tailings ponds that they are increasing. When you say, “If it disproportionately benefits oil,” as a First Nations person, that’s how I feel. Even with the explanations we received this morning, I’m still in the dark about these subsidies and these benefits. You say there is reliable data, but it is from three years ago. And what’s your definition of “clean energy” when there is still environmental damage occurring? Your definition of “clean energy” would be appreciated, plus how will the environmental damage that’s occurring now be alleviated?
Ms. Withington: I can answer regarding the benefits in terms of employment. I believe it was 10,800 —
Senator McCallum: You say there are benefits, but I am looking at the environmental damage.
Ms. Withington: There were 10,800 Indigenous people employed in the oil and gas industry. My apologies. I understand that wasn’t the thrust of your question.
In terms of the benefits versus the costs, we have studies that show that the GDP of the oil and gas industry has risen faster than the GHG emissions, but the GHG emissions, nonetheless, in the oil and gas industry are the highest. I’ll let the officials speak to the GHGs.
More specifically, in terms of the environmental damage to the lakes, we don’t have anything specific on that.
Senator McCallum: And what’s your definition of “clean energy”? Because you had raised that point in your speech that you were —
Ms. Withington: I’ll let my co-worker here speak to the definition of “clean energy.”
Heidi Ertl, Director, Centre for Energy and Transportation Statistics, Statistics Canada: Thank you for the question. I can speak to renewable fuels. In terms of our definition, it includes fuel ethanol, biodiesel and renewable diesel. We have the Monthly Renewable Fuel and Hydrogen Survey, which began collection in 2020. We have expanded that survey just this past January to further collect information on feedstocks; hydroprocessed fermented sugars; water; natural gas; liquid such as biocrude, alternative aviation fuel and other liquid renewables; and gas in terms of landfill biogas, renewable natural gas and hydrogen, and there is a long list of the different hydrogen products. In terms of solids, it includes wood pellets and renewable fuel plant co-products.
We do not have any data at this moment because the collection has just begun, but we’ll be looking to publish that, and that should give a better indication of some of the cleaner technologies that are being used by the sector.
Senator McCallum: If you have no data, then how can you classify it as clean energy? When I look at clean energy, it is the balance between the damage it causes — like for hydro, everyone says it is clean, but it is not. It is causing a lot of damage up in the North. How can you define it as clean if you have no data?
Paola Mellow, Director General, Carbon Markets Bureau, Environment and Climate Change Canada: I don’t think I’ll answer all of your questions with this, but one thing perhaps to consider is there is a suite of environmental regulations in place, as you know, in the oil and gas sector — I can speak, for example, to the most recent draft regulations that were published on November 9. The objective of that is enabling the sector to grow in line with the Canada Energy Regulator’s Canada net-zero projection, while ensuring there is a cap or a limit on all emissions from upstream oil and gas and liquefied natural gas. That’s just one example.
I also have my colleague here who can speak to other examples of environmental regulations. But I guess I am trying to make the point that there is a suite of environmental regulations in place that are working together with a suite of regulations to move the industry in the direction of a decarbonized, globally competitive oil and gas industry.
In terms of cleaner energy, I guess the one thing I would say in the context of regulations is generally there is a definition of “clean energy” insofar as it is targeted by our regulations. For example, my colleague from Statistics Canada was talking about clean fuels. We have the Clean Fuel Regulations which are imposed on refineries. They are required to reduce the life-cycle emissions of all the gasoline and diesel that is used in Canada.
For example, in that regulation, we have a definition of what are the clean energies that work toward this goal and help these regulated refineries deliver this cleaner energy. Within that regulation, for example, we have a fossil fuel baseline, and it says, “This is the baseline of fossil fuel emissions intensity in Canada. In order to come into compliance with this regulation, you have to be moving into this space of cleaner fuels, which is more clean than that fossil fuel baseline.”
It is a very broad answer to your question, but I just wanted to introduce into the conversation the concept of the suite of regulations that are in place that are — together with the subsidies — moving the sector toward the decarbonization pathway and cleaner energy pathway.
The Chair: If I can comment, I think the problem we’re having is it’s a lot of information, and your answer is very technical, but I’m not sure what it tells us. But I can appreciate my colleague who is asking how we develop an opinion when we don’t have the data or the facts. I appreciate your personal opinions, but it doesn’t give us much comfort relative to the certainty of the information that we are getting and what it means to us.
Senator McCallum: One of the concerns I have is that regulations are not being applied. When we look at the Alberta Energy Regulator, it could have fined Imperial Oil at least 26 times with the oil sands, but they didn’t; they were fined $51,000. And then you look at Kearl Lake and the tailings. I know that Environment and Climate Change Canada is opening an investigation as to whether Imperial Oil broke federal laws with two releases of tailings — that is ongoing now — and they broke the Fisheries Act. That is recent.
The other one is that recent leaks of toxic tailings from the oil sands have revealed serious flaws in how Canada and Alberta look after the environment. In the reading I have done, with law, they are not being applied, and that is the major problem for pollution getting into the water.
I don’t know how to ask the question.
The Chair: Does anybody want to comment on that issue?
Ms. Mellow: I’m going to defer to my colleague Ms. Little.
Magda Little, Director, Oil, Gas and Alternative Energy, Environment and Climate Change Canada: Yes, I want to build upon the comments of my colleague Ms. Mellow.
My department has put in place a number of regulations that restrict GHGs and also restrict environmental pollution.
One regulation I would like to touch upon is our current regulations for the oil and gas industry on methane releases. Those regulations were finalized in 2018 and took effect in 2020. They were designed to help Canada achieve its target to reduce methane emissions by 40% to 45% below 2012 levels by 2025 from the production of oil and gas. Those regulations currently set facility-level restrictions on the amount of methane that can be vented as well as fugitive releases.
We proposed amendments to these regulations almost a year ago, in December 2023, to increase the stringency so that we could contribute to Canada’s 2030 targets. Our proposed regulations would see a reduction in methane emissions from the sector by at least 75% below 2012 levels by 2030. These reductions would again be made by restricting deliberate releases of methane by the sector as well as reducing fugitive emissions.
Methane is a greenhouse gas, but it is 25 times as potent as CO2, so making reductions in this particular greenhouse gas is tantamount to achieving our 2030 targets and contributing to 2050 goals. Not only is methane a greenhouse gas, but it is also an air pollutant. It contributes to the formation of smog in the atmosphere and impacts human health here in Canada and around the world.
When the sector emits methane, it also emits other air pollutants — some of them being toxic air pollutants, such as benzine. The methane regulations will achieve reductions in toxic air pollutants emitted from the sector. These reductions in toxic air pollutants are estimated to have significant health benefits across Canada that are regionally different and will impact the health of the elderly, children and others with health concerns.
In addition —
The Chair: I have to stop you there. We will run out of time eventually. All of this is good. You proposed it a year ago. Where is it at?
Ms. Little: Currently, we have undertaken several discussions with industry, non-governmental organizations and academics. We’re fine-tuning our regulations and expecting to publish those final regulations in the coming months.
The Chair: When will it be effective?
Ms. Little: These regulations were designed to reduce emissions — some of them being toxic emissions. To give the industry the time to make the investment in this area, we are imposing the new regulations upon new facilities. The proposal is to give them a lead time, which is until 2027, and all existing facilities would become subject by 2030.
Of course —
The Chair: It is still a long way off for something that is so obvious, which we have talked about lots in the last 10 years. It is a “gimme” type of decision, but we delay and delay, probably because industry doesn’t want to apply it.
I congratulate you for the idea, but we have to focus on getting it done.
[Translation]
Senator Youance: Thank you to the witnesses for sharing their experience and data with us. I’d like to dig a bit deeper to find out what level of information Statistics Canada collects and how the data are used to guide Canada’s oil and gas sector and develop policies.
Ms. Little talked about methane, and Canada launches new satellites to measure changes in methane emissions. How do those data influence policy? Lastly, are the data publicly available?
I’m coming back to the subsidies for my second question. Canada and various provinces give out subsidies to Canadians to purchase electric vehicles. I have to point to the irony in that rationale from a production standpoint. The industry benefits from technological advances to increase vehicle production. There’s a lack of consistency in terms of gridlock and suburban sprawl.
As we know, electric vehicles are cleaner, and that has a broader impact. However, to what extent does Statistics Canada measure the complementary impact of electric vehicle subsidies in the data it collects?
I’ll leave it there.
The Chair: Do you know the answer?
[English]
Ms. Withington: Okay, thank you. That is a long question. There are a lot of parts to it. I will try to answer, but if anything is left out, please ask.
We get our data through a variety of administrative data and surveys on a number of issues. You were talking about electric vehicles. We have vehicle registrations, so we know that approximately 20% of the vehicles that were recently purchased are electric vehicles. As I mentioned earlier, we gather information on all aspects of society, the environment and the economy.
As to how this data can be used by policy-makers, the goal is that they look at the rich set of data and come to conclusions on their own, using all the various sources of data. It is our job to provide the information and the guidance on which information can be used in which situations.
We do not provide policy advice, such as “Something is good” or “You should do something,” but we do make the data available. We also listen to our stakeholders to find data gaps. We have raised a few data gaps here or areas where we could have more timely data, and then we try to address those issues.
I hope that answered your question. We do have information on all elements of the economy, labour and the environment.
Senator Anderson: My apologies for being late. I ran into three construction sites on the way here.
My question is this: How is Natural Resources Canada — or any of the representatives on the panel — planning for the impact of climate change and its impact on the use of fuel and rising costs? I’ll give you a couple of examples.
In Yellowknife, which was providing electricity via hydro, we have had low water levels for months. They had to switch back to the use of heavy fuel to provide that electricity.
Currently, in Norman Wells, they had a barge cancelled. Now due to the low water in the Mackenzie River — which was foreseeable and which was predicted — the community saw costs rise to $4.65 per litre of gasoline and $5.19 per litre of stove oil.
Is this something that any of you follow? Is it something that anybody prepares for? Because what this has done in terms of specifically both Yellowknife and Norman Wells — that is 2 communities out of 33, and there are others — is it creates situations where there must be a reliance on heavy fuel, and these communities that are dealing with these high costs of living now have to have their fuel flown in by plane, which now increases your GHG emissions. Is this something that is planned for, and is there a strategy to deal with it going forward?
Ms. O’Brien: Senator, thank you so much for raising that issue.
In fact, Natural Resources Canada, or NRCan, has been working diligently and directly with the Government of Northwest Territories and the major fuel-supplying company Imperial Oil to ensure that those communities continue to have reliable access to fuel supply. We’re very conscious about the impacts that you have raised in terms of affordability as well.
This is now the second year in a row where fuel supply has been at risk for those communities for the reasons that you’ve outlined. As we head into this year while trying to think forward to the next, we’re hopefully not in this repetitive cycle, looking at what we can do to actually bring in even more fuel to build enough of a stockpile or a bridge so that when the winter comes, we can bring in more, or more reliable sources of fuel can be trucked in through the roads.
You’re right; this is starting to look like more of a systemic issue. To deal with the reliance in terms of diesel in northern communities, we do have a programmatic approach to that.
I’ll turn to my colleague Mr. Leyburne for his expertise.
Mr. Leyburne: Thank you.
In working with other federal departments and agencies, NRCan does have a pretty extensive suite of grants and contribution programs to address the diesel dependency in remote and northern communities. Within my portfolio, I’ve had one for a few years now called the Indigenous Off-Diesel Initiative, working very closely with communities to create Indigenous energy champions in communities.
Much of that work morphed over the years into a program that was called CERRC — and I apologize that I cannot remember what the acronym stands for — but more recently, it has been converted into, I think, a very important organization called Wah-ila-toos. It’s a multi-departmental initiative to help Indigenous communities look at their energy futures, both the reduction of diesel and also integrating renewable energies into the community.
Just this week, the Indigenous advisory council for that initiative released a very important report on the recommendations to government. I’m happy to share that with this committee, if there is an interest.
Again, we’re working very closely with our partners in the Department of Indigenous Services Canada and the Department of Crown-Indigenous Relations and Northern Affairs Canada, or CIRNAC. Wah-ila-toos is a single-door, no-wrong-door approach to working with Indigenous communities to help with the very issues you raised.
I’ll just mention in closing that beyond deploying technologies, we also have a pretty extensive suite of energy efficiency and retrofit programs that are pan-Canadian in nature, but north of 60, we have very tailored programs to work with communities, with Inuit Tapiriit Kanatami, or ITK, and with Indigenous communities north of 60 to improve the energy efficiency of their buildings so that they are not as reliant on the fuels or electricity as they might be otherwise.
Senator Anderson: Thank you for that information. I appreciate it.
I want to point out a couple of things. You talked about it being a systemic issue. For the ice road that you’re talking about, if it opens and how long it will be open is debatable. They count on it being available for maybe five to six weeks. But over the years, that time has decreased, so this problem for Norman Wells is not expected to go away.
The issue also fell on the municipality of Norman Wells to address this. What is happening is that the municipal governments — the mayors and the councils — are now the ones at the forefront of these massive changes, as well as these huge costs, the unaffordability for people in the communities and the threat of people leaving the communities.
What Norman Wells had to do was they actually had a petition that called for a state of emergency to address the humanitarian crisis that they saw in their community. They had asked for $1.84 million in rebates to offset the exorbitant diesel shipping costs and for collaboration with the federal government to provide immediate financial or logistical relief until the winter road opens, and that is just until the winter road opens, which is in the new year in February or March.
This is an ongoing issue for them. It is a huge issue for a small community, and there seems to be a very reactive approach at all levels of government instead of a proactive approach. There needs to be more effort put into dealing with the communities directly, because it’s the communities that are struggling with some of these issues.
When you talk about reducing the cost of fuel, in the community of Aklavik, which is operating at a deficit, their fuel costs for their buildings have gone up three times the amount, so much so that they cannot afford to run their municipality.
These issues are very real issues, and I don’t see that they’re being addressed at the federal level. I don’t see the engagement. The communities that I visit don’t see that.
I want to put that out there, and thank you for your information.
The Chair: Ms. Little, did you have something to add?
Ms. Little: From our regulatory perspective, it’s more of a systemic recognition of these specialized issues.
For our regulations for the generation of energy from stationary diesel engines, we have specialized requirements for that north of 60 area to reduce the barriers and access to that equipment, as compared to the South.
The Chair: If I can interject, maybe my question will be addressed to Mr. Leyburne. As my colleague Senator Miville-Dechêne noted, we’ve had information and witnesses come to us and say that it’s really not working with the industry.
In fact, in the newspapers, Suncor is making it very clear that their interest at this point in time is to forget the government. “We just want to drill, drill, drill” is a public statement, yet we have witnesses also saying that the companies will make more money if they don’t drill at all and leave the wells empty or non-productive, given that the whole system is not properly attuned and doesn’t motivate the companies to do significantly well.
The bells we heard are ringing very loudly that it’s not working. Yes, you can refer to dates that they are — eventually, they get there — but it’s so easy to explain the future, yet it’s always wrong after the fact.
The further away you go, the easier it is to get away with it, because reality never hits the road.
Could you comment, Mr. Leyburne? You’re saying, “No, everything is rosy; everything is well. The intensity is good, and the programs are working well.”
Is that the case, and why are we hearing differently?
Mr. Leyburne: I think you’ll hear agreement from all of us. There is still a lot of work to do in the oil and gas sector to meet 2030 targets, and net zero is an extremely difficult challenge for all heavy-emitting industries.
For CCUS specifically — because that is one of the technologies being discussed mostly at committee here — we have to remember that it is following a technology cost curve that is similar to most clean technologies. The last time I was here, I think I said that solar panels were first sold in 1959, but it has only been in the last five years that solar panels have leapfrogged over other technology solutions in terms of their cost.
Through the work we’re doing in our own R&D in our government labs and through the funding we provide to others doing R&D, we expect to substantially reduce the cost of not only CCUS but also other technologies over the next decade right into the 2030s and 2040s.
CCUS needs to be judged in the same way that other technologies are judged. There are a number of projects in Canada and abroad that are meeting all the targets they set for themselves from a technology perspective. There are early players. Boundary Dam, as I’m sure people are aware, is a coal-fired plant using CCUS. It was a world-leading project, and it met many of its targets, but it didn’t meet all of them because they were the first of their kind. We need to give CCUS that same time.
I know patience is hard to come by when talking about climate change, but these technologies do need to be proven. Canada is at the vanguard of proving to the world that they are viable technologies. We have about a quarter to a fifth of the world’s active projects right now, and we have the geology and expertise that will make Canada a leader if we just continue to push.
The Chair: Where is Shell at, and what percentage of the emissions are captured in Shell’s project?
Mr. Leyburne: For Shell, it varies. It’s actually not Shell anymore; we call it “Shell Quest,” but it is actually not Shell that is operating it. I would have to get back to you on the exact performance numbers because they vary over the years. They are improving year over year.
I can tell you about a number of other active projects that I haven’t mentioned yet. The Sturgeon Refinery captures 99% of the CO2 generated from their hydrogen gasification unit, and Entropy and their Glacier CCUS project have so far captured 90% to 95% of the CO2 generated from natural gas combustion.
The Chair: What about the Shell project approximately?
Mr. Leyburne: It’s in the eighties, but it is measured in a way that is a bit difficult. I don’t know if my colleagues from the environment side who are tracking the performance know the numbers.
Ms. Little: Yes. The Shell project is along the lines of what Mr. Leyburne indicated: It captures a fairly pure stream of CO2, so it allows the capture rates to remain high.
The Chair: What about the cap? They’re all happy with it? Everybody’s joyful?
Mr. Leyburne: You’re talking about the oil and gas emissions cap? Industry has been clear on its stance. I don’t know if anyone wants to jump in.
Ms. Mellow: I can speak to the oil and gas emissions cap.
As you know, we published the proposed regulations earlier in November, and those were based on previous conversations with the industry. Now we’re going into this sort of formal consultation period that we do on the basis of draft regulations.
One thing I would say about our engagement to date with the industry that has been perhaps a highlight has been building up the emissions cap. It’s based on an assessment of technically achievable technology. Specifically, that includes methane abatement technology, hydrogen, CCUS and a few other ones — solvents, I guess, are another large one that was considered. Basically, we had input from industry as well as other parties to build up this picture of technically achievable technologies to deploy into the oil and gas sector for the 2030 to 2032 period, which is the first compliance period. The regulation is effectively built around that uptake of technology.
The Chair: But this was prepared in conjunction with industry, so there is a little bit of complaining, but everyone is onside. You think everyone will adapt in the next few years. Is that what you’re saying?
Ms. O’Brien: If you would permit me to take a step back and tie in the comments that Mr. Leyburne and Ms. Mellow have made regarding the details of the cap, and I will certainly get to the cap.
The government’s approach is — and everybody understands — we need to decarbonize the economy. The oil and gas sector is the largest contributor to GHG emissions. They have made significant progress in terms of those emissions over the last number of years in both absolute emissions and on an intensity basis. It is important to recognize what they have done.
But there is a long way to go, and production is certainly increasing.
In order to be able to decarbonize at the rate required, that will require significant investment. As the federal government, we are trying to employ all the levers that we have, including regulatory tools that are in the domain of my colleagues here at Environment and Climate Change Canada. Within NRCan, we have a number of funding programs that, together, will hopefully create incentives for industry and government to make the necessary and very expensive investments to get us to where we need to be.
The Chair: We’re not there yet?
Ms. O’Brien: We’re not there yet, but there are commitments from across a number of sectors in the economy. I can certainly speak to the oil and gas sector, where the largest companies have net-zero commitments or carbon-neutral commitments for 2050. Our objective in terms of the tools we have is to drive that further, faster. In terms of the emissions cap, for instance, the government made a decision that this was a sector in which it would like to see more activity in terms of driving toward net zero.
As Ms. Mellow had mentioned, we had done a lot of analysis involving StatCan data as we were developing this tool. We have set targets that we think are reasonable for this sector to achieve.
That being said, this is based on models and static data. The draft regulations are out for consultation. I think the government has indicated that it is looking forward to a meaningful consultation in terms of the regulations and whether we have the balance right.
Senator, to your point, we are hearing a very clear and consistent message from the industry that they don’t believe we have the balance right. This is the purpose and the nature of the consultation that’s available. The regulations were released in early November. The consultation period is open for 60 days. We would strongly encourage not only industry but also people with any interest in terms of this to actively participate in the consultation process to ensure the regulation is appropriately calibrated.
We understand it is important that we have the right conditions in place to incentivize investment in decarbonization in order to hit the overall objectives.
I hope that frames what we’re trying to do with our various —
[Translation]
Senator Verner: My questions are about the topic of our study, the oil and gas industry.
With respect to the phase-out of public financing of the fossil fuel sector, it says in a briefing note that the phase-out will be publicly announced by the fall of 2024. Fall 2024 is almost over. When do you plan to announce the measure? When you refer to phasing out public financing, do you still mean all types of subsidies to the industry, efficient and otherwise?
[English]
Ms. O’Brien: In terms of the inefficient fossil fuel subsidies framework, that has been released. We will check in terms of when the government will be able to release the results of the analysis against that framework. We will certainly follow up with you at that time. I believe the framework was released about a year ago.
The inefficient fossil fuel subsidies framework is also supplemented by another commitment that’s called the Glasgow Statement. That came out a year prior in December 2022. That commitment addresses investment in international fossil fuel projects, so combined it’s trying to address the issue of fossil fuel subsidies more broadly.
Currently, the government is looking to bring forward a commitment on the public financing of fossil fuels, and that’s currently under development. The government is hoping to bring that forward in the coming months.
[Translation]
Senator Verner: I’m not sure we’re talking about the same thing.
As I understand it, the July 2023 announcement refers to an assessment framework for inefficient subsidies. You explained that a subsidy has to satisfy a certain number of criteria to determine whether it is inefficient or efficient. According to the briefing note, the news release indicates that a plan to phase out subsidies in the fossil fuel sector is coming. It was supposed to be released by the fall of 2024. The winter of 2025 is around the corner. When do you plan to provide more information on the measure you intend to put in place? Will it cover all types of assistance to the industry? If I understood what you said earlier correctly, it will be necessary to make significant investments in order to reach certain targets. That seems contradictory to me.
[English]
Ms. O’Brien: Thank you for the clarification. I apologize if my remarks weren’t clear.
To frame the context, there are three commitments that the government has made to address fossil fuel subsidies in the fossil fuel sector. Two of the commitments have been publicly released. The first one that came out was this Glasgow commitment that addressed subsidies in terms of investment in international fossil fuel projects. For instance, support provided by Export Development Canada to the possible development of a natural gas plant in a developing country would be captured by this Glasgow commitment.
The second pillar of the subsidy work is the inefficient fossil fuel subsidies strategy, and that came out last year. That framework looks at government support of all natures, such as tax support and program expenditures, and it determines which ones are inefficient. The government is going through the work right now to determine what the outcome of that is. So far, that analysis will indicate that there are very few inefficient fossil fuel subsidy programs in Canada.
The third element of the subsidy policy approach is to address, basically, all that remains. That’s called the public financing of the fossil fuel sector. The government is currently finalizing its approach in terms of how to address this — I think I’d just call them residual support mechanisms for the sector — and anticipates coming forward with those commitments very soon in the coming weeks or months. I think you had indicated there was a political commitment to have this framework available before the end of the calendar year.
[Translation]
Senator Verner: Thank you.
[English]
Senator D. M. Wells: I’d like to go to two places. One is global efforts on emissions control. I recognize that Statistics Canada doesn’t collect stats on other jurisdictions, but perhaps from the full suite of people whom we have here, I can ask this: How does Canada compare to the world when it comes to carbon reduction efficiency, methane reduction and that sort of thing when we look at the largest producers of petroleum, which are the U.S., Russia and Saudi Arabia, with Canada being fourth, as well as the countries with the largest reserves, such as Venezuela and Saudi Arabia, with Canada being third? It can be anecdotal.
Mr. Leyburne, we’ve known each other for a long time. I know you’re well experienced in this sector. We knew each other when we both had brown hair, actually.
How does Canada compare? What are these countries that I mentioned doing specifically to control their emissions?
Ms. O’Brien: I’m happy to start and look forward to support from others. Thank you for the question. I think it’s a very important one.
In order to be able to answer the question with a certain degree of rigour, it would depend on what product we’re looking at. In Canada, we’re extremely fortunate in that we have an abundance of fossil fuel oil and gas products. Looking at oil sands, for instance, that’s a very heavy oil. It tends to have a higher emissions profile than lighter products like lighter crude or gas.
I discussed earlier that Canada’s oil sands have made some significant improvements in terms of its emissions profile. Certainly, it is not amongst the dirtiest in the class of heavy oil. There are countries, to my understanding — Venezuela and others, for instance — whose products have higher emissions profiles.
As we look at other product classes — for instance, natural gas — when you compare Canada’s natural gas to international competitors, it fares very well. That’s for a number of reasons. One is we’re just sort of blessed by the nature of the basins that we have. Basically, what comes out of the ground tends to be cleaner than other basins, notably the Permian Basin in the United States. But also, Canada has a strong regulatory approach, with strong methane regulations that the companies have to abide by.
If we look at lighter crude products in Canada’s offshore, again, those fare amongst the cleanest in the world when looking at their emissions profile; it’s kind of by the nature of the resource that is being exploited but also the regulatory framework that is in place.
Ms. Little: Building on those comments, the International Energy Agency, or IEA, has done analyses that intercompare different countries’ emissions intensities using sort of a rigorous method that is consistent, to the extent possible, amongst countries.
As my colleague pointed out, Canada has a heavy oil that is very emissions-intensive to produce, certainly. On the methane side, Canada does fare very well, and largely that’s because of the regulations that have been in place since 2018 and the requirements for industry to control those emissions.
But I would say that we’re not sort of in a safe space here. We need to continuously improve, and that’s because, in part, the European Union is looking very closely at methane emissions from its oil and gas suppliers. They will require all of their suppliers to put in place methane measurement and monitoring systems. By 2030, they intend to put in place certain intensities for those products as well.
Globally, companies are recognizing this. Some 50 companies, including some of the largest like Saudi Aramco, have made commitments to reducing methane to near zero by 2030. It’s really important that we continuously improve our resource and decarbonize to remain competitive in that international space.
The Chair: Ms. Little, can we ask you to send us a copy of that IEA report, if you could?
Ms. Little: Absolutely.
The Chair: Send it to my colleague, please. Thank you. We have heard that many times, and I have asked many times, but it would be neat to see it more scientifically presented, as you referred to.
Senator D. M. Wells: Thanks, Ms. O’Brien, for mentioning the Newfoundland and Labrador offshore as a world leader in low emissions. There are no pipelines, no leakage of pipelines and no tailings ponds that can dissipate methane, and it goes straight to market. So thanks for mentioning that, because I would have.
The petroleum sector particularly in Canada, but really globally, gets a bad rap for being a high emitter, but I think it is important to note — I’m looking for a comment on this — that the use of petroleum, natural gas and oil goes toward electricity production, transportation, food production and agriculture, construction, and commercial and residential heating and cooling.
Are there suitable replacements on a commercial and industrial scale that can look after those needs in place of oil and gas?
Mr. Leyburne: I’m going to start with the long term, but you are probably looking in the short term. Over the long term, hydrocarbons will be used in the global economy forever — certainly for the things that there is no replacement for, such as chemicals, feedstocks, lubricants, et cetera.
I think the question about how replaceable fuels are in any given setting really varies at this point in Canada. There are more alternatives than there were 10 years ago or during the Organization of the Petroleum Exporting Countries, or OPEC, crises in the 1970s and 1980s. That means where the market and where physics are pushing the technologies, replacements are coming into play.
In terms of internal combustion engines, the thing about electric vehicles is they don’t waste the 70% or 80% of energy on heat that a gasoline engine would. I think physics will prevail over time as the technologies improve. But right now, I think we all acknowledge that oil and gas is an absolutely crucial part. It’s woven into the Canadian economy and every Canadian community right now. If we pretend like we could shut off the taps and have cost-effective alternatives ready, it’s impossible. There’s no place in the world where that would be true right now.
Ms. Mellow: If I could add about the Clean Fuel Regulations, again, from a regulatory perspective, we do have very substantial regulations that are in place for the providers of gasoline and diesel that are used in Canada. It basically requires them to reduce the life-cycle emissions intensity of the gasoline and diesel used in Canada.
There are many pathways to compliance. One is cleaner fossil fuels, but the other one is substitution. For example, the regulation is going to support the uptake of low-carbon intensity fuels like biofuels, hydrogen and renewable diesel — things that are sourced from waste material. It is also going to support the uptake of electric vehicles, hydrogen vehicles and natural gas vehicles.
There is a suite of cleaner fuels, and this regulation supports their uptake basically because what it does is require an improvement in the life-cycle emissions intensity of gasoline and diesel used in Canada, but it doesn’t say how. It basically puts forth a number of pathways that you could use as evergreen, working with industry as new types of fuel technologies come up. It is this ongoing incentive to help — from a regulatory perspective — sort of have that cleaner fuel and technology space, and it’s coupled with the program supports.
The Chair: Thank you very much.
[Translation]
Senator Miville-Dechêne: I’m very concerned about the future of the planet.
Canada is a major oil and gas producer, so I can’t help but see the paradox of the situation. I understand that we have a market economy, but you’re saying that we are deploying a great deal of effort to reduce the industry’s emissions, even though Canada’s oil sands are more harmful than the oil fields off the coast of Newfoundland.
As I see it, the paradox is massive. It’s the elephant in the room. We are selling more and more oil without knowing our own needs. You’re talking about our oil needs, but we are selling it everywhere.
The emissions cap is coming. You said you’ve done calculations and projections; you’ve prepared charts. Are you able to say whether the cap you’re going to impose will reduce oil production, and if so, by how much?
I find the information in your materials quite complicated. You’ve allocated units to each industry, but they are going to use their offset credits, so they won’t end up doing much. As I understand it, the industries are going to purchase or replace offset credits.
The situation is full of paradoxes. I realize that significant efforts are being made, but reducing our emissions is going to be pretty hard as long as we keep producing oil and selling it all over the place.
[English]
Ms. O’Brien: I’m happy to set some context. Thank you. There is a lot in your commentary and questions.
No, no, this is it —
Senator Miville-Dechêne: — a way out, and it seems pretty difficult.
Ms. O’Brien: Your passion is obvious, and you spoke very eloquently to the problems we’re trying to solve.
Regarding your comments around the pace of the transition, as Mr. Leyburne noted, nobody on the panel is going to argue that we don’t have to go further and faster to hit the climate targets. However, there are a number of complexities in terms of how far and how fast we can reasonably go. Through regulations and programs, we’re focused on the supply of fossil fuels, and a number of these initiatives target that side of the equation.
But you are right to point out that there is an important element in terms of demand. These producers are meeting market demands. Senator Wells had indicated a number of persistent and ongoing uses for fossil fuels.
It is a challenge to find that equilibrium within the time frame and the challenges that climate change is presenting. We’re focused on that.
Part of the challenge, though, is also ensuring that not only are we meeting important climate targets but we are also mindful of important considerations around ensuring that energy sources remain affordable for citizens. We see what happens when prices at the pump increase as a result of different pressures. Affordability remains a key concern, as does reliability.
We need to ensure we have energy solutions in place that will meet the needs of Canadians as well as global citizens.
As we think about our regulatory tools and programs, we consciously think about how we’re ensuring the balance of the trifecta of those considerations. Maybe that is the context or backdrop. Then Ms. Mellow can speak more to the emissions cap.
The Chair: We need to be quick because we’re running out of time.
Ms. Mellow: Absolutely.
To be clear, the emissions cap is just that: It is a cap on emissions, not production. We look at technically achievable abatement technologies, but we crosswalk it to a production forecast that’s sourced from the Canada Energy Regulator’s Canada Net-zero Scenario. Basically, in this scenario, Canada and other parties to the Paris Agreement achieve their interim and net-zero emissions targets. In this scenario, Canada’s oil and gas sector grows production out to 2030.
I just want to also emphasize that there is space between growing production and growing emissions. We have seen improvements in energy intensity in the sector over time. I’m not taking away from where we have seen emissions growth, but part of the broader context that my colleague laid out very well is this separation of emissions reductions and production. We have seen significant improvements in energy efficiency.
Senator McCallum: According to scenarios from the Intergovernmental Panel on Climate Change, if the global temperature rises by 3 to 4 degrees Celsius, the world could face severe environmental, social and economic consequences. Fossil fuel consumption, including oil, is a key driver of this warming.
While most of Canada’s oil production is exported, particularly to the United States, the downstream emissions from that consumption contribute significantly to global greenhouse gas levels, but they are accounted for outside of Canada’s climate reporting. How significant is Canada’s oil industry in driving global greenhouse gas emissions, and how should we think about the impacts of exported oil when the emissions are accounted for by other countries? We are still responsible for those emissions. Are there policy tools or industry initiatives that could mitigate the downstream emissions impact of exported oil?
I also wanted to go back to Senator Wells’s comment about offshore oil.
But my question is this: When that oil is shipped by tankers, how much emissions come from the tankers?
Matthew Watkinson, Director, Regulatory Analysis and Valuation, Environment and Climate Change Canada: In terms of emissions reporting and the policy frameworks for that, under the Paris Agreement, there are rules for reporting through the United Nations Framework Convention on Climate Change, or UNFCCC. Those take into consideration how countries should report their own emissions. I’m not an expert in that area, but I have colleagues who are, so we could follow up with information on that reporting framework.
The Chair: Please address it to our clerk, and we will circulate it among our members.
Senator McCallum: How do you account for emissions? Because we are still responsible for them.
The Chair: It’s the 20% that cares about the burning or the combustion; that’s your question, right?
Senator McCallum: Yes, it’s the downstream effects: the refining and distribution.
Mr. Watkinson: In very general terms, because all countries that are party to the treaty are reporting on emissions, they have an accounting structure that is meant to take into consideration the totality and then divide up everybody’s share. It’s a very specific set of rules used for the accounting. I don’t know exactly what they are, but I can follow up with the info.
Senator McCallum: Thank you. And for the question about the tankers as well, please send the information.
[Translation]
Senator Youance: I’d like to follow up on Senator Miville-Dechêne’s question. There’s a big debate when it comes to the uncertainty around the change in demand. There are two scenarios, one where Canada continues to increase production and one where the focus is on technology. Obviously, with the whole price on carbon, the cost of those products is going to become a major issue. That’s the scenario where oil and gas production increases.
This can be seen as an opportunity, but how will Canada deal with the pressure of global demand while working to achieve its sustainable development goals?
Here’s where the other paradox comes in: the situation where production is gradually decreased. How is Canada going to support sectors that will lose the benefits of oil production? Those are two major paradoxes.
[English]
Ms. O’Brien: Thank you. You are right: There is a paradox here that we’re all thinking our way through. To go back to a question raised by Senator Wells in terms of the emissions profile of Canadian products, for a number of products, such as natural gas, there is an argument that exporting Canadian natural gas to our allies to help them decarbonize their energy systems is contributing to improved environmental and climate outcomes globally, even though the increased production is going to result in increased emissions domestically.
We’re certainly thinking through those issues and how a policy framework could address them. For instance, a global internationally transferred mitigation outcome, or ITMO, is under consideration. That could present a path forward, although it is certainly not without its challenges in terms of implementation.
But you are right: This is a significant question that we’re dealing with. Canada is on a trajectory and path in terms of the decarbonization of our economy, but other countries are on different paths and are at different stages of readiness. There are a number of opportunities for Canadian oil and gas producers to pursue those opportunities. This is a part of the balance that we’re trying to achieve.
The Chair: I will just ask one question for my part. I’m thinking about all the difficulties we’re facing with the American positioning on oil and gas, the tariffs and so on. Am I correct in saying that the Americans are self-sufficient in oil and gas, but they often include our exports to basically come up to zero? Are my numbers right? When you include our product, they are self-sufficient, but if you exclude our product, they’ll be short by our product? Am I correct in saying that?
Ms. O’Brien: There is a lot that we could plumb in that question. Certainly, Canada and the United States have a very privileged and integrated energy market. The importance of that trade cannot be understated. We have over 70 pipelines for oil and gas where product is moving from Canada to the south and from the south back into Canada.
Canada is the largest source of oil imports into the United States. Currently, we’re exporting about 4 million barrels a day. The 99% of gas imports into the U.S. are from Canada. As I mentioned, this relationship is integrated and certainly reciprocal. Much of the western United States actually receives their natural gas from Alberta and B.C. specifically.
The Chair: Therefore, economically, if it doesn’t have any merits for us to export our oil and gas to satisfy American demands, they will need to go worldwide — Europe and so on — to satisfy their needs. Is that accurate?
Ms. O’Brien: When you look at the increased exports, for instance, in terms of U.S. liquefied natural gas, which has just kind of skyrocketed these last few years, much of that is literally fuelled by Canadian natural gas exports to the United States. The markets are highly integrated.
The Chair: If they cut us off or if we decide, for economic reasons, it is not profitable to export it, they’ll be short?
Ms. O’Brien: We see negative implications on both sides of the border.
Senator McCallum: On this one, I would like to get a written response.
I received a letter from a retired research biochemist about carbon capture, and this is what it states:
Carbon capture has become a delay tactic. Despite decades of development and billions in investment, it remains largely ineffective and unproven as a solution for emissions reductions. It will not provide the emissions reductions for oil extraction that Pathways Alliance implies, and it has not been successfully deployed anywhere, including for blue hydrogen production. Furthermore, carbon capture deployment in hard-to-abate sectors like steel and concrete is also unlikely. Unlike carbon capture, those industries are rapidly and successfully innovating and will not need carbon capture.
The Chair: Mr. Leyburne, do you agree with that?
Mr. Leyburne: I am happy to jump in on the CCUS-specific question.
I work with energy researchers and engineers every day. They all have their favourite technologies. I have the luxury of working on all energy technologies, so I try to judge CCUS by the same standard that I judge others.
It is simply not correct that there are not active CCUS projects meeting all of the technological targets that have been set. It is absolutely incorrect that the cement and steel industries won’t rely on CCUS. The oil and gas industry is the same.
As I said, it is a technology that is still working its way through the technology readiness levels that every energy technology does. We can’t afford to give up on it because there are going to be emissions where no matter how good the batteries or alternative fuels become, there won’t be an alternative. Cement is a great example. There are process emissions from cement that you can’t get rid of unless it is through carbon capture.
That’s before we talk about the carbon removal technologies that derive a lot of their inspiration from carbon capture. Those can actually remove negative emissions over time which, with every passing year, becomes more and more necessary.
We acknowledge, as does the Intergovernmental Panel on Climate Change, the United Nations Framework Convention on Climate Change and the International Energy Agency — every credible energy organization in the world — that this is an absolutely necessary technology to meet net-zero targets.
Senator Miville-Dechêne: In the document that you will send us, can you try to put a percentage on oil and gas? How many companies in terms of production are using carbon capture? That may give us a sense. People are saying it’s none. You are saying it exists. Maybe with some figures, we would know how widespread it is.
Mr. Leyburne: I can give you a list of the domestic projects and international —
Senator Miville-Dechêne: And the percentage in Canada, like how many companies —
Mr. Leyburne: Yes. Off the top, it is the larger producers that are primarily looking at that. The smaller the project, the less likely.
The Chair: Put all that in writing so that we can have it.
Thank you very much. We had a good discussion. You have made us a bit smarter. Thank you to my colleagues.
(The committee adjourned.)