THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, February 9, 2023
The Standing Senate Committee on Energy, the Environment and Natural Resources met with videoconference this day at 9:02 a.m. [ET] to study emerging issues related to the committee’s mandate.
Senator Paul J. Massicotte (Chair) in the chair.
[Translation]
The Chair: Good morning, honourable senators. My name is Paul Massicotte. I am a senator from Quebec and the chair of this committee.
Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
I would like to begin with a reminder. Before asking and answering questions, members and witnesses in the room are asked to please refrain from leaning in too close to the microphone or removing their earpiece when doing so. This will avoid any sound feedback that could negatively impact the committee staff in the room.
Now, I would like to introduce the members of the committee who are participating in this meeting: Senator Margaret Dawn Anderson from the Northwest Territories, Senator David Arnot from Saskatchewan, Senator Denise Batters from Saskatchewan, Senator Andrew Cardozo from Ontario, Senator Rosa Galvez from Quebec, Senator Julie Miville-Dechêne from Quebec, Senator Kim Pate from Ontario, Senator Judith Seidman from Quebec, Senator Karen Sorensen from Alberta, and Senator Josée Verner from Quebec.
I wish to welcome all of you, and the viewers across the country who may be watching.
Today, we are meeting to continue our study on climate change, specifically the Canadian oil and gas industry.
We have two panels joining us today. In the first panel, we have Patrick Rondeau, Union Adviser Responsible for the Environment and Transition File, and Hans Marotte, Political Adviser, both from the Fédération des travailleurs et travailleuses du Québec.
Welcome and thank you for agreeing to meet with the committee today.
We will start with your opening statement. You have five minutes. Over to you.
Hans Marotte, Political Adviser, Fédération des travailleurs et travailleuses du Québec: Honourable senators, we would like to thank the Standing Senate Committee on Energy, the Environment and Natural Resources for inviting us to take part in this very important consultation on the Canadian oil and gas industry.
I’ll say a few words about the Fédération des travailleurs et travailleuses du Québec, or FTQ, which, as you probably know, is the largest labour union in Quebec. The FTQ represents more than 650,000 members across every sector of the economy, including the petrochemical, oil and natural gas industries. The FTQ is also affiliated with the Canadian Labour Congress, Canada’s largest labour organization. The FTQ’s membership includes Unifor Québec, which emerged from the country’s largest private sector union and represents the majority of workers in the fossil fuel sector.
Climate and energy issues are nothing new to us. The FTQ has always taken a pragmatic approach, but the climate crisis now demands that we take more ambitious action, demonstrating the responsibility and foresight future generations need.
We are a Quebec-based union, so it will come as no surprise that we clearly support a swift exit from the fossil fuel sector. As we see it, there is no other way for Canada to reach its emissions reduction targets of 40% to 45% by 2030. In fact, we consider the target to be too low for Canada to achieve net-zero greenhouse gas emissions by the year 2050 and meet its international commitments. That is why the FTQ supports Quebec’s membership in the Beyond Oil and Gas Alliance. That is also why the FTQ has endorsed the Fossil Fuel Non-Proliferation Treaty. We urge Canada to become a signatory to the treaty and join the alliance.
Of course, we can’t ask governments to get out of the fossil fuel game by handing over a blank cheque to the industry. We want a plan for a just transition, starting now. Canada has spent too much time waffling over terminology since 2017. We are asking for immediate action and demanding that Canada honour its international just transition commitments. The issue is too important to reduce it to sustainable jobs and reskilling. Social protection, labour rights, the right to employment based on gender equity and, above all, social dialogue are the pillars of a just transition. Quite clearly, that means the discussions about solutions have to involve workers. There is no other way. The workers of today are the ones contributing to the well-being of their communities, not the workers of tomorrow.
It’s time for government to stop making the climate crisis worse by handing out subsidies. We are very skeptical when it comes to the results of carbon capture and storage technology. An Environmental Defence report released in March 2022 reveals that, since 2020, Canada has provided $5.8 billion in public funding to carbon capture projects, which have resulted in a capture rate of barely 0.5%. What’s more, the technology is being used to increase production, not lower it. That is unacceptable.
We urge Canada to follow Norway’s lead. Carbon capture and storage projects in Norway are funded strictly by the private sector, and only industries that benefit the economy receive funding. The country also has a just transition plan to support workers.
Furthermore, we are very concerned about how the Government of Canada defines the term “inefficient subsidies.” According to our sources, financial factors determine whether a subsidy is inefficient, not environmental ones. If that’s true, the government is basically saying that, the industry can continue to prosper as long as it remains profitable. It is imperative that the government use the most stringent environmental assessment factors — not financial principles — when determining whether a subsidy is inefficient.
Canada needs to commit to the production of renewable energy immediately and establish a plan to exit the fossil fuel industry. Not only does Canada’s long-term economic health depend on it, but so does the country’s climate record. A number of industrialized nations have begun that shift. Despite the war in Ukraine, the European Union is repositioning itself as a renewable energy leader. Even countries like Saudi Arabia are embracing green hydrogen. Canada will have a serious trade deficit on its hands if it doesn’t follow a similar path, especially since the experts all agree that it takes an average of seven years to bring a new energy system to profitability.
In closing, I want to remind the Senate committee of something the International Energy Agency made clear in its last report: industrialized nations must halt the expansion of fossil fuel production by 2025 — which is around the corner — to have any hope of passing on a healthy planet to future generations.
Thank you for this opportunity. We would be pleased to answer any questions you have.
The Chair: Thank you very much.
Senator Miville-Dechêne: Thank you, Mr. Marotte, for being here today.
I actually want to discuss the green transition and the just transition you talked about. You’ve no doubt heard Minister Fitzgibbon in Quebec say that the province has no plans to develop the green hydrogen sector. Do you agree with the CAQ government on that, or do you think it’s a bit too early to close that door?
Patrick Rondeau, Union Adviser Responsible for the Environment and Transition File, Fédération des travailleurs et travailleuses du Québec: Thank you for your question. Yes, the Quebec government made the decision not to develop that energy source on a large scale. It was a political choice. Building out a sector of that magnitude requires research and development and significant investment.
The CAQ’s decision to explore the possibility was never met with the necessary investment, so Quebec missed the boat. That’s not the case everywhere in Canada, namely Alberta, which is looking for an alternative. Green hydrogen may be an alternative for Alberta’s economy and, by extension, Canada’s economy.
Senator Miville-Dechêne: Your just transition, then — I listened to your presentation, but I’d like you to speak to the right to employment and social protection. What are you looking for? What is missing from government promises to exit the hydrocarbon sector? What exactly do you want to see when it comes to the right to employment?
Mr. Rondeau: We didn’t come up with the definition for a just transition. It emerged from international consensus, through the Paris agreement, which Canada ratified and ties in with the Decent Work Agenda, which Canada also ratified under the leadership of the International Labour Organization.
In addition, Canada signed the Silesia declaration in 2018 and the COP 26 just transition declaration. It also agreed to the Sharm el-Sheikh decision on the just transition approach. That means Canada has already made many commitments to a just transition in connection with the International Labour Organization’s Decent Work Agenda. The agenda has four pillars. First is social protection, which can be interpreted as support for workers and a range of enhanced social policies, as compared with our employment insurance program, for instance. Second is social dialogue, which brings together unions, employers and governments, including indigenous governments, in support of stakeholder consultation. Third is the right to employment, in other words, gender equity and equity in the face of discrimination in newly created jobs. Fourth is labour rights, which should also be prioritized.
Those are the things we are working on with our Canadian counterparts. Thus far, we don’t have anything concrete, despite the agreements Canada has ratified. Since 2019, we have been waiting for just transition legislation, a legislative framework and dedicated funding, similar to what exists in the European Union, which also has cross-compliance mechanisms in place for companies that receive funding. That way, they can plan for a just transition driven by the decarbonization of economic sectors, including workers, while paying special attention to communities and the impact on them. Along the way, it will be necessary to establish support and reskilling measures, and to develop clean and effective technologies, culminating in an examination of our economic system.
Senator Miville-Dechêne: Thank you.
[English]
Senator Arnot: I would like to explore that same issue. Everybody knows that the biggest negative impact with the reduction of fossil fuels will be in Alberta and Saskatchewan. Alberta produces 80% of crude oil in Canada. Saskatchewan is second at 9%, but that 9% translates to $6 billion of Saskatchewan’s GDP. A just transition or any transition has the potential to have a very catastrophic effect if it’s not managed responsibly.
One would think that the Government of Canada should be leading on this if there is a vacuum there. Who should lead? Is there a role for stakeholders — both corporations and unions — to work together to take a lead on defining just transition and putting forward constructive ideas? As you say, they are not forthcoming at the moment.
Could you amplify your ideas about that just transition and how you see it working in a practical way? What kind of timelines would be required? How do you see that evolving? Who should be managing it? Who should be taking a lead on it?
[Translation]
Mr. Rondeau: Thank you for your question. We’ve been discussing that with the federal government since 2016, ever since the Paris agreement, which set out the principles for a just transition. Since then, the question we have been asked is whether we are sure the terminology is appropriate. The whole time, we have been discussing semantics, instead of planning the just transition. That is entirely unacceptable.
In our view, the federal government, in conjunction with the provinces, needs to show leadership. Just as it did with Canada’s climate plan, the government should establish a federal plan in consultation with the provinces, one that aligns with their plans. The federal government should follow the same process. The process leading to the passage of the Canadian Net-Zero Emissions Accountability Act brought together a number of stakeholders. Similarly, the process leading to a just transition should be meaningful and comprehensive. We don’t think the process should be led by activists. We believe the people affected, workers and the organizations that represent them, should be at the table with employers and the organizations that represent them. The process should also involve governments — on a departmental level — and First Nations, whom we consider to be governments.
That work needs to happen quickly in order to ensure a just transition. An assessment of the industry’s impact on public health, the country’s economy, and regional and local economies should be undertaken right away. Of course, the environmental impact needs to be examined, taking into account science-based targets on which there is international consensus. The recommendations issued by the Intergovernmental Panel on Climate Change as well as the International Energy Agency should inform planning around decarbonization scenarios using various indicators. Once we have those indicators, we can use modelling to determine the impact on jobs and make the necessary adjustments at the industry and job level.
What we are doing now is the opposite. The focus is on making as much profit as possible in anticipation of the transition, which there is no plan for, first of all. Second of all, there is all this talk about the jobs of tomorrow and the skills required, without knowing the repercussions on those jobs. It’s all backwards. We have to start at the beginning, and that takes political courage.
You’re from Saskatchewan, which is home to a real success story when it comes to geothermal energy. When jobs and skills are transferred to the green economy, the focus is usually on so-called problem jobs. Saskatchewan is a great example. Refinery workers were put to work producing geothermal energy because the job requires the same skills. That’s a success story you can share now.
The Chair: Thank you.
[English]
Senator Sorensen: My question is probably directed to Mr. Rondeau. I’m curious about your members, and I’m looking for a best-you-can-do, high-level comment. Are they enthusiastic with the planned transition or is there a lot of fear attached in terms of job security et cetera to the planned transition? I’m also curious to know what’s happening today on a day-to-day basis to help those employees move forward as we transition.
[Translation]
Mr. Rondeau: Thank you for your question. You represent Alberta, where the situation is rather delicate. We understand the fears that our colleagues in Alberta have right now, and we very much support them. Quebec and Alberta have two different realities.
One thing I would say is that, after COP 22 in 2016, when the federal government announced that it would phase out coal by 2030, Alberta’s coal workers, thousands of them, found out through media reports that they were going to lose their jobs, without there being a plan in place. The just transition task force wasn’t created until a year later, after hundreds of workers had already gotten pink slips. When people think of the just transition, especially in Alberta, they certainly associate it with losing their jobs. The opportunity or positive side of the just transition doesn’t come to mind. I’m talking about assessing the industry impacts, establishing decarbonization scenarios and planning how to address the problem to reach targets. If all people get out of it are job losses, they won’t want to participate in the just transition. Their narrative around the just transition focuses on job losses and fear, so fear is what prevails.
Until we involve people in the process of identifying solutions — solutions available to them — they will fear the worst and refuse to get on board. That’s just human nature.
We can look to countries such as Italy, Spain, Australia and the U.S., whose energy sectors have all undergone difficult transitions, including in the natural gas arena. When countries approached the just transition carefully, engaging all the affected parties in the process, the transition worked out well for workers and their communities. We are talking a lot about workers, and you know as well as I do that they are the lifeblood of their communities. The way Canada has been built, some communities revolve around a single industry, so if you shut down the industry, you shut down the community. It’s quite devastating.
I think we need to have the courage to start this dialogue with workers, which is what we are doing at the FTQ. I’m not saying that the unions don’t do it — let’s be very clear, they do it too — but the issue is much more difficult, particularly because of the coal situation since 2016; there was no plan and it was all very difficult. Even the report of the Task Force on Just Transition has been shelved since then. We hope to see results with the Canadian just transition bill, but we are still waiting, and we’ve yet to see the outcome of that discussion.
In Quebec, we have been having this discussion on just transition with our members since 2016. At the moment, we have interesting discussions on just transition in other sectors, because it’s not only an energy issue. We have the same issues for aluminum smelters and forestry. In Quebec, we have two refineries. We have these concerns and discussions with workers, communities, municipalities and the government. This allows us to explain that the just transition does not necessarily mean job losses; it means that we plan to provide support to protect jobs, create opportunities and achieve our decarbonization and climate change targets.
[English]
Senator Pate: Thank you to both of our witnesses. I’m not sure who this would be directed to whether it’s Mr. Marotte or Mr. Rondeau. Mr. Marotte, in your introductory comments, you mentioned the learning from Norway in particular. I’m curious if there are other emerging technologies that your union and federation have looked at in terms of technologies that could be implemented that you would recommend that the government invest in with respect to reducing and ultimately eliminating emissions in the oil sands industry.
[Translation]
Mr. Marotte: Thank you very much for your question. There are indeed solutions. My expert will be able to provide a better answer than I.
Mr. Rondeau: Thank you for the question. The case of Norway is interesting. From the international perspective, just transition is interesting in that people work together. Participation in the COP is not just a charade; it allows us to work all year long to find solutions that are put forward elsewhere.
In Norway, there are relatively high and interesting capture rates because, as my colleague explained earlier, the funding for technologies comes from private industry. So they have an interest in making it work. I’m not saying it’s the other way around here, but it’s clear that when you put your own money on the table, you want results; that’s a given. You understand that you have a greater financial responsibility. That’s what they’re doing in Norway and they are decarbonizing sectors that are critical to the future of the country. There is a consensus that Norway is a big hydrocarbon producer, but most of the captures are not processed by the hydrocarbon industry because they know they will have to plan an exit at some point.
Such examples exist in several places. This can be done by including new energies. We can go back to energies like green hydrogen. There are extraordinary examples in Sweden in terms of just transition processes and rigorous consultation where green hydrogen is being introduced to produce steel. There is carbon neutral and even carbon negative steel in some respects.
Solutions do exist, but what we see here in looking at the reports we get, unfortunately, is that despite the money being pumped into the fossil fuel industry to capture CO2, the results are not there. The balance between money and results is also relatively unacceptable. At the moment, no expert is able to demonstrate, scientifically speaking, that carbon capture will be achieved, even in 10 years. This is still an unknown. It’s not millions of dollars, it’s billions of dollars that are being sent to the industry — and let’s face it, it’s an industry that’s making billions of dollars in profits in the process.
It feels like we’re swimming against the tide, because we’re using technologies to keep an industry going and extend its lifespan, when eventually that industry is going to faceplant, if only because the resource will become less abundant, as will the demand for it. We don’t have a plan B to get there.
So when we are told that we are condemning our own members and industry workers by calling for the abandonment of oil and gas, we respond that doing nothing means condemning these people to job loss.
Senator Galvez: Hello, and thank you very much for being here and for the quality of your answers. You have knowledge and experience that we can recognize.
We have had the opportunity to talk about all the things you have discussed in the past. I meet very often with workers’ organizations; also, technical issues are very important to me as an engineer.
I agree that we have to call it a transition, but this transition is becoming a bit eternal, because we have been talking about it for 30 years. There are a lot of words, but not much action.
[English]
You have mentioned that one of the big problems is lack of leadership, and I agree with you. I agree with you because we are going at a pace that is very slow compared to other G7 countries. You said that the federal government has a role to play and it’s not playing it. You also said that these oil and gas companies are reporting record profits.
I would like to know if they are reinvesting in their own training of workers and if they have, according to you, a road map to get to net-zero emissions by 2050? What is the impact of all the subsidies that the government gives to that because you said we are trying to prolong the life of an industry, however we are not helping the workers by doing that. Can you expand on that? What can we do? You are talking to senators, so what can we do to help accelerate this transition? Thank you.
[Translation]
Mr. Rondeau: Thank you for the question.
Indeed, there is no transition plan for these energies, insofar as when we talk about just transition, for example, we talk about transformation.
So it is not just a matter of transiting and moving, for example, from point A to point B, but also of performing a transformation between the two. This means moving from fossil energy to renewable energy by making profound changes. It also requires political courage in relation to economic priorities. As long as we put forward an economic model like the one we have at the moment, we will always say that it makes no sense to change the economic model, because it is profitable. That’s what we’re talking about when we talk about transition: there must be a transformation between the present and the future.
As soon as people put forward economic and financial principles and Canada’s GDP, for example, the answer will always be modelled according to the vision we have. When we say that there is no just transition plan, we mean that there is no plan where the impacts are properly assessed to the extent that we want to exit the industry. We don’t have a decarbonization scenario because we want to capture CO2 to meet the economic vision. We don’t have a plan to transition this industry, because we want to keep it going to finance the transition.
Naturally, you see that as long as the economic paradigm and vision remain the same, the response is not the one we would like to see. That’s why we face — not only Canada, but also Quebec and other countries — a response where governments try to find the easy answer, in the same economic logic. The easy answer we often hear is to ask what new jobs can be created, what green jobs can be created, what are the jobs of the future, what are the skills of the future; how can we integrate young people into this new economy, and so on. However, all of this is based on an economy that doesn’t change; that’s where we don’t get it right, because if you model new jobs and skills without having assessed the impacts and the needs, you’ll never get it right.
We need to be able to start from the premise that the industry will have to change and transform, and from there, model the changes in terms of change, not in terms of continuity.
Even if you want to assess what skills will be needed in the future to develop wind, solar or geothermal energy, when you send funds to continue work and production on the fossil fuel front, there is a dichotomy between the two. This is where there is a major problem: a political vision based on an economic vision of the country. It’s a big job and it takes a lot of courage to change the economic vision of a country. Nevertheless, if we want to reach our reduction targets and be carbon neutral by 2050, we have no choice. That is where we absolutely must go.
What can you do, as senators? That is an excellent question. I think it is important to have this meeting today. Inviting us as stakeholders was also a good idea and we appreciate it, because we are always in solution mode. If we can continue this dialogue with you, we will be happy to do so in order to see progress on this issue.
However, we would have to know the limits you have; I know there are financial limits when you introduce bills. If you could support the efforts to get the file to fruition, even simply the just transition legislation, that would be a lot.
We have been lobbying our union colleagues, whether it be at the Canadian Labour Congress or Unifor, but also environmental groups like Climate Action Network Canada and Environmental Defence. We’ve sent briefing notes to the federal government and to all the opposition parties, and we’ve included what a just transition act might look like. Maybe you could get that legislation done? The matter of a just transition fund also needs to be dealt with, because that’s something that’s never discussed; that would be a priority at this point. Finally, we should continue to be involved in the discussions, as should the industry. We have no problem sitting down with the industry to have this discussion. We do it in Quebec and we find that dialogue gets us much further than isolated discussions with individual players.
Senator Miville-Dechêne: My question is for Mr. Rondeau. As you know, there is an urgent need to act to save the planet. Given all that, is it possible that, by grafting on several social and trade union demands, as you are doing — I am thinking of parity, the right to work and labour law, and the energy transition — we are weighing down and delaying progress?
Should we make the green transition conditional on the adoption of trade union positions, or rather decouple the two issues to move forward more quickly on this?
Mr. Rondeau: I thank you for the question. You know, when we talk about the just transition principle — I’ll say it again — we’re talking about a concept that was developed and guidelines that were adopted by the International Labour Organization in 2015, following work that lasted two years.
Senator Miville-Dechêne: Yes, you already told me that. I’m interrupting you because what I want to know is whether there is a way to decouple the two issues.
As you know, it’s not going fast enough in Canada; we don’t have a just transition law. Should we block or slow down this transition until we have worked out every detail of the transition for workers? Action is urgently needed, so it is very difficult to combine several issues together. I don’t deny that there are important trade union issues, but shouldn’t we give priority, first and foremost, to this green transition, if the planet is to survive?
Mr. Rondeau: That’s what I was going to say: this is not a union issue. That’s exactly what I was going to say. When you have employers, unions and countries around the table agreeing on a plan at the international level, and Canada ratifies agreement after agreement, it’s not a union issue. It’s a tripartite issue that we’re putting forward, and that’s what we are asking for.
I could also ask the question the other way around: If we only address the green transition issue with industry, will we get there faster? At the moment, what we see is an expansion of that industry, not the other way around.
If you look at the latest IPCC report, which is about solutions, it’s very clear; the 1.5-degree Celsius target is still achievable if — and the “if” is really underlined in bold — governance undergoes major transformations. If the just transition does not include social measures and protections, states will fail, because workers and communities will turn off and block the process on their own. If they’re not at the table, it means you’re making them spectators, spectators who will simply be impacted. At that point, forget it; it can’t work.
So we need to put the process into one basket and move it forward, but above all we need to keep in mind that a just transition is not a trade union demand or concept; it is a tripartite concept supported by international consensus. Some countries have made a lot of progress; there is a commission in Ireland, one in Scotland, a European Union-wide fund, an office and an institute in Spain, bodies in New Zealand, South Africa and so on. We have to be careful not to turn this whole thing into an activist concept and a strictly trade union issue.
Senator Cardozo: Thank you for your presentation, Mr. Rondeau.
My question is about the term “just transition,” which has been around for some years. You talked about a broad consensus; however, I’m hearing opposition to those terms from some of the unions on one side, and the Alberta government on the other. Ms. Smith said this a few days ago: “I don’t want any just transition in Alberta.”
In that case, what can we do? You talked about the lack of leadership from the federal government, but what would be your recommendation for moving forward, when there is no consensus on the term?
I’d like to add that I don’t think all the people who are losing their jobs in the oil and gas sector are going to find another one in the green economy quickly. What do we do in this situation?
Mr. Rondeau: Thank you for the question. As I mentioned earlier, the example of coal, particularly in Alberta, has been devastating. The fact that people associate the transition with job losses is perfectly natural at this point. However, examples and practices have shown us that a just transition does not mean job losses. Rather, it means ensuring the transformation of a sector by including workers.
Some unions are not opposed to this, even those that are resistant to a just transition; they are not opposed to the principles of transforming the economy, because this transformation allows them to have an impact on their members by including them in it. They are trade unions that are not opposed to social dialogue or social protection; they are opposed to co-opting the concept of just transition by associating it strictly with job loss. They don’t want a sector to close, employers to be compensated and communities to be left in the lurch; no one would want that kind of just transition.
We are calling for a rigorous just transition, based on the factors we named earlier: protection, dialogue, laws and rights, and equity. At this point, we need to shape this transition with the men and women who will be impacted by it. In this way, we will succeed in moving forward.
We are well aware that the term is being used incorrectly right now, for the same reasons. We could use a different term, as the federal government wants to do, and talk only about renewable jobs. Then Canada would withdraw from international agreements it has signed, and that is something we cannot accept.
We stand firm with our colleagues from Alberta, Saskatchewan and other provinces, but the principle of just transition and reaching greenhouse gas reduction targets in Canada does not involve the oil and gas industry alone. It involves all sectors of industry in Canada, including Quebec.
We want a just transition. The members of our union will tell you they want to be part of a just transition process, because that would allow them to keep their jobs and improve their working conditions. So it depends on the approach taken. Without planning and a strict approach, we will be condemned to repeat what happened with coal.
With regard to renewable jobs, you are right. We do not want to simply take someone, move them to a green industry and say everything is solved. As my colleague said earlier, it can take up to seven years for a new, renewable energy system to become profitable. Recently, Saskatchewan showed courage by moving to geothermal energy, and found that the same skills are needed in the oil sector as they are to produce geothermal energy. So there are transferable skills, as we already know, but if there is not enough will to launch a new sector, those jobs will not be created.
At the same time, doing nothing right now means condemning tens or even hundreds of thousands of workers to no jobs in the end. We have to be responsible and start planning for this transition.
Finally, transition involves transformation, but also planning. We are not saying that the oil and gas industry has to be shut down immediately; rather, we are saying that we have to work together to plan the transformation of these sectors in order to achieve a positive outcome. Unfortunately, that is not what we are doing right now.
Senator Cardozo: What do you recommend to the federal government for the future? The Alberta government has said no. What approach can we take, in light of that?
Mr. Rondeau: It becomes difficult because everything has crystallized. Job losses have systematically been linked with just transition. Legislation is needed. That legislation will have to include the parameters needed to address the dichotomy that links job losses with just transition.
You have to listen to Alberta’s needs relating to the transition and firmly state that Canada must move forward with the transition; we have no choice. This principle has to be crafted with the principle of transition.
Alberta and the Alberta Federation of Labour have the same position, and yet we talk about Alberta. They have made recommendations to begin the just transition with very specific principles for that industry, in particular, by putting in place an independent body, such as a standing commission or a Crown corporation on just transition, in order to discuss workers’ concerns regionally.
The federal government can enact broad federal legislation to manage the just transition, but issues relating to occupational training and energy system development are provincial issues. In that legislation, there must be flexibility to allow the provinces the freedom to adapt the transition to their own needs.
I would refer you once again to the Alberta Federation of Labour’s recommendations, which we support.
Senator Galvez: Thank you very much. I completely agree that a just transition does not mean a loss of jobs. In many situations, it can mean an increase in the number of jobs.
I would like to get back to what can be done at the federal level. You mentioned Saskatchewan as an example of the shift to geothermal energy and said that workers’ skills and abilities are transferable. In Canada, it is Alberta that produces the most solar energy. The workers developing solar energy come from the oil industry, so it is possible. In Newfoundland, for instance, a platform will be built in Baie du Nord, but the technicians and workers might come from the hydroelectric energy production industry.
That brings me to the following question: Why are we providing more support to a Baie du Nord project when the Muskrat Falls clean energy project in Newfoundland has been there for a long time? What can we do to get the provinces to work together more horizontally, instead of working from Canada to the United States with respect to energy, transitions and transferring workers?
Mr. Rondeau: Thank you for the question. We have mentioned provinces that develop hydrocarbons, but if we look at another province, such as Quebec, it is the opposite. In Quebec, there is the same Bill 21 which prohibits hydrocarbon exploration and operations within its borders henceforth. As a federated state, Quebec has also joined ranks with the Beyond Oil & Gas Alliance, along with other jurisdictions that are calling for an end to hydrocarbons. So there is an international movement in this direction.
These are political choices that are reflected in decisions and an economic vision. Until we change our economic vision, we cannot change the direction of the actions taken. It all goes together in a way.
So, to answer your question, I will once again refer to the report on the Canadian just transition bill. Both the Senate and the government — and not just the government in power, but all opposition parties — have everything they need to move forward. In the Just Transition Task Force report, there is a recommendation to create just transition centres at the provincial level. That means that, under the terms of that act, in keeping with their areas of jurisdiction, provincial governments must have the leeway to address different issues, such as occupational training and the development of systems. That must all be done together.
I would refer you once again to the pan-Canadian climate change plan, which is designed that way. A bill has to be developed along the same lines. Federal governance is required, with funding specifically earmarked for the federal government along with environmental conditions and mechanism for all the provinces, just as the European Union has done for all its countries. If the European Union is able to manage a just transition fund with all its member countries, I do not see why Canada cannot do the same thing with its provinces and territories. It is a similar principle: There must be accountability rather than a blank cheque with funding that is simply used to fund the rollout of capture technologies in certain provinces only. This requires a major, pan-Canadian dialogue.
Senator Miville-Dechêne: Mr. Rondeau, I am listening to you, but am still a bit confused. Do you think we can make this transition without any costs, without anyone suffering any losses whatsoever? It will not be a scientific transition in which we can take a job and transfer it into the green energy sector, with that same person in that job. Not everyone will be able to make the transition. For businesses and employees, there will not necessarily be a period of uncertainty in the transition as there is in all economic transitions. Consider free trade. I am wondering if you are somewhat idealistic in saying that everything can be prepared and organized, that everything can be planned out so that no one loses anything. Wouldn’t you say it is somewhat idealistic to think that way?
Mr. Rondeau: That’s not what I said. I said this transition must absolutely be planned as soon as possible by evaluating the impacts, creating decarbonization scenarios, measuring and modelling the impact on jobs, and then making adjustments. I never said that undertaking a just transition would preserve all the jobs and that would be the end of it. Far from it. What I did say is that the longer we wait to put this process in place, the more we will condemn workers to losing their jobs. In any event, all countries have agreed to achieve carbon neutrality by 2050.
I am actually inviting you all to think of the youngest person you know, and to think of 2050. That person will be a young adult then. That is tomorrow morning. We are no longer talking about a fiction in the distant future. It is coming very fast.
Secondly, all or most of the provinces and the federal government have enacted legislation to end the sale of gasoline-powered cars. We are moving towards the electrification of transportation and the launching of mass transit, which would be public, ideally. We are heading towards the end of this industry, one way or another.
Let me ask you the following: Will we wait until the last minute and do what the coal industry did, saying it is finished and we are closing up shop, and too bad for the communities? Or we could start planning this transition right away. The examples we see around the world show us that the sooner we start working to transform a sector and to involve the people who will feel the impact of these transformations, the richer the dialogue and the more diverse the solutions, with fewer impacts. We are not saying people will lose their jobs. That is not what we are saying. We are saying that, to minimize job losses, preserve jobs and improve working conditions — because it can create jobs and lead to expansion of a sector —, the transition has to be planned as quickly as possible, with assistance programs for those who will lose their jobs. Doing nothing and simply saying that the impact will be too great will mean dealing with more harmful repercussions later on.
The Chair: Your contribution is clear and important, and we thank you for it. Thank you for being with us this morning.
For our second group of witnesses, we welcome Sonia Marcotte, Chief Executive Officer of ADEQ, the Association des distributeurs d’énergie du Québec, Quebec’s association of energy distributors, who is joining us by video conference.
We also welcome from the Canadian Gas Association, Paul Cheliak, Vice-President, Strategy and Delivery; and from the Canadian Fuels Association, Bob Laroque, President and Chief Executive Officer, and Lisa Stillborn, Vice-President, Public Affairs.
Welcome to the witnesses and thank you for accepting our invitation. Each association will have five minutes for their opening remarks.
We will begin with Ms. Marcotte, followed by Mr. Cheliak, and then Mr. Laroque and Ms. Stillborn, who can share their five minutes of speaking time. Please go ahead, Ms. Marcotte.
Sonia Marcotte, Chief Executive Officer, Association des distributeurs d’énergie du Québec: Thank you. Mr. Chair and members of the Committee, thank you for inviting Quebec’s association of energy distributors or ADEQ to appear before you to discuss these important issues relating to climate change.
Founded more than 60 years ago, ADEQ represents the energy distribution companies operating in Quebec which meet many of the energy needs of the public and companies.
Our members employ about 17,000 skilled workers and have close to 2,300 service points throughout Quebec. Originally specialized in the retail sale of oil and gas products, our members are already diversifying by offering new types of green energy.
The fight against climate change and the decarbonization of the economy are at the heart of our concerns. Energy is our bread and butter, as well as our field of expertise and our passion. A number of years ago, we adopted a proactive approach to the energy transition. Further, our distribution infrastructure — including our service stations and our fleet of trucks — is ideal for offering a diverse range of energy types to meet the public’s energy needs.
The expertise of our members, which has allowed them to survive different eras, is unique and valuable in attaining Canada’s targets. Our members are particularly interested in the distribution of renewable fuels and combustibles such as ethanol, biodiesel or biofuel, and hydrogen, and in setting up electric charging stations within their networks. In fact, there are already charging stations at many service stations. In Quebec, a first service station has added hydrogen to the types of energy it supplies. The same company will be taking part in the pilot project for hydrogen-powered rail in the Quebec City area by providing the green hydrogen needed.
Energy security is central to our activities. We distribute the energy needed for transportation, heating, industrial applications, agriculture and many other daily energy requirements. Heating fuel distributors not only provide residential energy security by supplying safe and reliable energy, but they also lighten the load on the electrical grid during peak periods in the winter, specifically with the dual-energy program.
Our distribution activities are essential during electrical power outages to supply the generators needed for the operation of essential services, including emergency services, hospitals, pumping stations and communication towers. Our members, which include a number of family businesses, have invested several hundred millions dollars in distribution infrastructure, including their service station networks, fleets of trucks and headquarters. They offer well-paid jobs, give back to their community, and generate significant economic spin-offs. Thus far, we have shown real leadership on energy diversification and transition, despite the obvious financial and business risks.
The electrification of transportation is an inevitable part of the energy transition. Access to the energy needed for electric vehicles requires the installation of well-placed charging stations at strategic, hassle-free locations, all along travel routes. Our well-structured network of service stations fully meets these criteria, because they are well-located, accessible, well-lit and safe, have dedicated employees, and are already familiar to eclectic vehicle users. In short, these are perfect locations for charging stations.
Nonetheless, the charging stations are not profitable under the current business model. The model needs to be revised to encourage private investment and a rollout that is well-structured and effective, at the best locations. In order to meet all needs, we must also remember that electricity must not be the only type of green energy in the transportation sector.
We are ready to move quickly on the development, rollout and distribution of low-carbon footprint energy types, while maintaining our mission of distributing traditional energy types, which are still essential to economic activity in Quebec and Canada. We have to rely on the diversification of energy types in order to meet the public’s needs and provide energy security. We are ready to take part in the implementation of promising solutions to contribute to the fight against climate change and the energy transition, while meeting energy needs in accordance with demand and product availability.
Thank you.
The Chair: Thank you.
[English]
Paul Cheliak, Vice-President, Strategy and Delivery, Canadian Gas Association: Good morning and thank you for the invitation. My name is Paul Cheliak, Vice-President of Strategy and Delivery with the Canadian Gas Association based here in Ottawa. Before I begin, I would like to send a special thank you to the committee and to all of the energy workers across Canada from all sectors for keeping the heat going, keeping the lights on and keeping our vehicles moving.
I’ll talk to you briefly about three issues today: An overview of the domestic and international natural gas markets, a discussion on energy transitions and how the industry is leading in emission reductions.
First to markets. The Canadian Gas Association members operate 575,000 kilometres of pipeline infrastructure across the country. Through this infrastructure, we deliver 40% of all of the energy needs in Canada, and that 40% is delivered to 20 million Canadians every day. Forty percent of energy end use in Canada is approximately double the energy that is delivered via the electricity system in Canada. At a national level, natural gas is the single largest fuel in the residential, commercial and industrial sectors, and the market continues to demand the product. We have added over a million new customers to our system in the last decade.
Internationally, the dynamic on natural gas is something that many of you have probably followed closely. Russia’s invasion of Ukraine has sent a shock wave through the geopolitics of energy and the international market for energy. Russia was supplying Europe with 40% of its natural gas, and Europe represents 25% of the world’s natural gas consumption.
The pivot away from Russian gas in Europe is frankly one of the most important and drastic market developments we have seen in the energy market in a generation. What does this mean for Canada? We have seen our allies visit us here. We have seen them be very clear. They want our product. They want it reliably and they want it clean. The ball is in our court as a nation to determine what we do with that. Will we answer the Germans, the Japanese and the South Koreans? I think we ought to. I think there are creative ways we can, and as a nation we serve to benefit from that.
I would like to talk a bit about energy transitions. There will be a handout that may be in your package, but if it’s not we’ll get it around to you after. What we show is the history of energy use in the world dating back to 1800. What you’ll see is we don’t take energy supplies out of our system. We add new ones in. In the 1800s, all we used in the world was biomass. Then we started using coal. Then we found oil, natural gas, nuclear, modern biofuels, wind and solar.
What’s important in this is conversations around substituting one energy source wholesale for another ought to be looked at very carefully. We ought to place a lot of attention on is this: How do we clean our existing energy systems? Whether it’s biofuels and gasoline or hydrogen or renewable natural gas into the natural gas stream, that’s how we’re going to reduce emissions. Suggesting that one energy form will be brought out of the mix entirely and substituted by another has not worked in the last 225 years since we have been tracking how we use energy globally. As you think about emission reductions in the oil and gas sector in particular, think very carefully about how we can clean the existing systems. Fuels in our pipelines, fuels at our gas stations and electrons on our wires.
In terms of the natural gas industry, I’ll talk about two of the leading ways that we’re reducing emissions now. Both hydrogen, which I’m sure you have heard some things about hydrogen around this table. The different colours, all of that good stuff. Renewable natural gas is another tremendous opportunity. Anywhere where there is a landfill, farm manure or a wastewater treatment plant, you have methane and that methane is natural gas. It’s the same thing. It’s created through the decomposition of organic matter. What we’re doing across Canada is capturing that methane — renewable natural gas it’s called — we purify it and then we blend it in our systems.
For scale, in British Columbia, the current volumes of renewable natural gas that are coming into the system are equal to the energy equivalent of the Site C dam, which is a 1,000-megawatt hydroelectric project. All of that renewable natural gas is being blended into a pipeline and being delivered to consumers without any new pipes and without any changes to end-use equipment. There is a premium for the product, but it’s a good example of what I spoke to earlier about energy transitions. How do you work with what systems you have, but clean them along the way? Hydrogen and renewable natural gas are both options to improve the carbon intensity of the gas energy that we deliver to 20 million Canadians.
Let me end on a few key points. We think it’s about time — and very smart at this moment in our history — for Canada to embrace the existing natural gas infrastructure this country has. We should look very carefully at it and think about how we can deliver low-emission energy such as hydrogen and renewable natural gas through those pipelines that 20 million Canadians — and the number is growing — who use that infrastructure every day.
Second, we think we need clear and decisive signals that Canada is open, willing and ready to step up to support our allies in getting them the liquified natural gas in the near term and the hydrogen and ammonia in the long term that they need to continue functioning as economic societies.
Third, we recommend continued, independent research on the cost and pathways to reduce emissions in Canada, and to clearly and transparently articulate those for Canadians so they have a full sense of what emission reductions are, how we’re going to get there and what it’s going to cost.
Thank you.
Bob Larocque, President and Chief Executive Officer, Canadian Fuels Association: Good morning, Mr. Chair and members of the committee. Thank you for inviting us today to participate in the study on climate change and the Canadian oil and gas industry. I would like to begin by acknowledging that I am, today, on the traditional, unceded territory of the Algonquin Anishinaabe people.
[Translation]
Our members have more than 111,000 employees, right across Canada, operating 15 refineries, 75 terminals and more than 12,000 service stations. Our sector produces 95% of the gas, diesel, marine, rail and aircraft fuel that is used every day. Just to give you an idea, that adds up to more than 100 billion litres per year. Our members also produce more than 25% of the biofuel produced in Canada today.
[English]
Canadian fuel facilities are part of Canada’s critical infrastructure, providing safe and reliable access to fuels that are vital to personal mobility, movement of goods and operation of essential services such as first responders. We believe there are significant opportunities to scale up domestic production of low-carbon liquid fuels starting today by using proven technologies and adapting our existing infrastructure. This is also key to maintaining energy reliability and affordability as we continue to diversify our energy mix.
Three years ago, we released Driving to 2050, which outlined the foundational contribution that the transportation fuel industry can make in support of our climate goals. Our most recent update highlights $8 billion of investments our members are making, which support 10 million tonnes of greenhouse gas reductions per year and which create and support over 10,000 jobs from coast to coast to coast.
However, for today, I would like to focus my remarks on the impact of the U.S. Inflation Reduction Act, or IRA — I’m sure you have heard about that — in the context of Canadian energy production, consumption and security. The U.S. has several well-established programs that have created a robust, low-carbon fuel industry. These include capital investment programs and tax incentives like the blending tax credit. Canada has also introduced select programs to support capital investments in low-carbon fuel, such as the Clean Fuels Fund two years ago, which puts us roughly on par with the United States on capital program spending.
However, the IRA changed everything. They doubled down with a suite of new measures, including something called a production tax credit, or PTC, for biofuels such as ethanol, renewable diesel, sustainable aviation fuel and hydrogen. The North American fuel market is open, it’s fully integrated and Canada competes with the U.S. for its fair share of investment. The IRA has intensified competition for investments with the potential of low-carbon Canadian fuel projects going to the United States to take advantage of their new PTC. Furthermore, U.S.-based production would be able to send their fuel to Canada to generate carbon credits under the Canadian Clean Fuel Regulations. The PTC will also result in more Canadian-made feedstock being exported to the United States, which can now offer a higher price. Added to this is the fact that as demand grows for the clean fuel regulation coming into effect this mid-year, Canada will have to rely on U.S. imports to support our net-zero objectives, undermining both our energy and climate security.
The Fall Economic Statement recognized that the IRA is a game changer and underscored that urgent new measures were needed to ensure Canada keeps pace. We agreed, which is why we are recommending a low-carbon fuel PTC for Canada. This credit would apply to all low-carbon fuel produced in Canada with the rate varying according to carbon intensity reduction. The more you reduce, the higher the incentive. For road transportation fuels, for example, the highest carbon intensity reduction would receive a tax credit of 34 cents per litre, equivalent to the U.S. PTC of a dollar a gallon. For sustainable aviation fuel, the highest carbon intensity will receive a tax credit of 63 cents per litre.
We are also recommending incentives for fuel infrastructure upgrades to enable access of low-carbon fuel to consumers. Over 70% of retail stations are owned by small and medium-sized enterprises, and this funding will reduce the cost to install and upgrade new equipment such as fuel dispensers and storage tanks.
In closing, investment parity with the United States is key to unlocking Canada’s potential of a low-carbon fuel producer with significant benefits to Canada. Let’s work together to ensure that investment dollars stay in Canada, that we achieve our climate goals with Canadian production and that we create thousands of jobs during construction and hundreds more permanent jobs through the fuel supply chain. We would also be leveraging Canadian feedstock to make value-added products in Canada, and we would be protecting our energy and climate security.
[Translation]
Thank you very much for the opportunity to be here today and answer your questions.
The Chair: Thank you.
[English]
Ms. Stilborn, did you have anything to add?
We will start with the questions.
Senator Batters: My first question is to both the Canadian Gas Association and the Canadian Fuels Association.
I’m wondering if you could tell me how many jobs in your industry have been lost and what you anticipate for job losses during this so-called just transition. I should say that I’m from the province of Saskatchewan, so obviously this is a very important issue to people in my province.
Mr. Cheliak: The industry currently employs 13,500 Canadians in eight provinces and one territory, including Saskatchewan. Our infrastructure and the investments in that infrastructure are approved by independent regulators. Whether sustainable jobs or a just transition would have direct implications for the natural gas distribution industry, I don’t know. If the pipelines simply carry natural gas and there is a reduction in natural gas use in Canada, then perhaps there would be a reduction in the number of individuals needed to operate that system. However, when you build it, you need to maintain it. To maintain it, you need a certain workforce. For the utility industry itself, I don’t see a significant impact of a just transition on building, operating and maintaining natural gas pipeline systems. We may stagnate the number of people because we are not building new infrastructure, but I don’t see a significant and direct impact from a just transition legislation.
Mr. Larocque: I think we’re in the same space as the Canadian Gas Association. We’re for the sustainable jobs. We see this as transitioning or adapting our existing workforce to new products like low-carbon fuels. We’re very hopeful that as we transform the energy and transportation fuels sector, we’ll be using our existing infrastructure and our existing workforce but also producing new products in the future versus what we’re doing today.
Senator Batters: How many employees?
Mr. Larocque: We have 111,000 employees across — and I want to be clear — refineries, terminals and gas stations. We call it the downstream industry.
Senator Batters: Do you have any anticipated number right now as to estimated job losses?
Mr. Larocque: No. We are pretty consistent. We lost one refinery in Come By Chance two years ago. However, they are restarting as a renewable diesel plant, and some of those jobs are being recreated, if you wish, or repositioned.
Senator Batters: Okay. I would like to know the federal government’s level of consultation with both of your organizations in developing their just transition plan. Did you consider that to be satisfactory?
Mr. Cheliak: Yes, we had opportunity to comment. My observation — and this is consistent with the government’s — is that the level of activity, the level of consultation and the level of energy-related regulatory and legislated matters have grown x-fold over the last five years. There are a lot of competing priorities as to where we spend our time. Just transition is one that has only just begun to capture our attention, as we’ve been quite preoccupied dealing with regulatory measures that are imminent. We anticipate a scale-up in the engagement.
Obviously, there is a lot of commentary on what to call it, how to define it. I think that’s the essence of your question today, but we anticipate more consultation, not less.
Senator Batters: When you say you had an opportunity to comment, how much notice did you receive for that? Was it something that you just had an opportunity very shortly before the just transition plan was announced by the government? I’m just looking for a sort of time frame. How robust was that opportunity to comment?
Mr. Cheliak: I think it was sufficient.
Senator Batters: How long before did you —
Mr. Cheliak: Weeks. I’ll say weeks. But we knew of it. It had been around in circles. People had been reporting on it for months. It didn’t come as a surprise because we knew it was coming. Obviously, we always want more time. I think that’s a fairly consistent approach to any consultation, to have more time than we do.
Mr. Larocque: I would say the same thing. Regulatory priorities last year were the Clean Fuel Regulations, the oil and gas emissions cap and the zero-emission vehicle mandate for electric vehicles. There were lots of regulations going on. We were aware of the just transition. We were given the typical time that we would have expected.
Senator Batters: What would that be?
Mr. Larocque: They would give you 60 days or 90 days to provide some comments. They would provide a white paper and we were able to react to that. They asked questions about how we felt things should be handled.
Senator Batters: Did they tell you about the title, “just transition”?
Mr. Larocque: Yes, that is something we’ve had multiple conversations about.
Senator Batters: Did you object to that title?
Mr. Larocque: Yes.
Senator Batters: Yeah. It’s kind of a terrible title.
Mr. Larocque: It’s a terrible title.
Senator Batters: Potentially, a lot of people could be losing their jobs because of it. Thank you.
Senator Arnot: I have two questions, one to Mr. Cheliak.
Sir, you talked about the need to focus on cleaning existing systems. I’m just wondering how those systems are to be cleaned. What recommendations would you have to support that goal? What research is being done on that? What’s your prognosis for success for that pathway?
Mr. Cheliak: We’ve made some great strides on cleaning our pipeline systems in Canada. We now have 20 operational renewable gas facilities in Canada. We have North America’s first hydrogen-blending facility in Markham, Ontario, with more slated. We’re looking at 100% hydrogen communities starting in 2025.
This has happened quickly, right? We’re a 115-year-old industry. For us to transform the fuel in our systems, it takes our engineers time, it takes our safety regulators time and it takes policy-makers and legislators time.
What are we looking for? We need continued codes and standards support to ensure that we can blend higher quantities of hydrogen into our pipelines and R&D support to ensure that appliances in people’s homes — furnaces, stovetops, water heaters — can be what we call “hydrogen ready,” so that when we want to launch a fully, 100%-clean-hydrogen community, that home can be built by a builder with products they can buy that can run on 100% hydrogen.
Senator Arnot: Mr. Larocque, you mentioned that Canada needs to compete with the United States in incentives. The Inflation Reduction Act has really set a mark. We probably can’t match that. What would you suggest in terms of focusing or targeting some areas in energy that could be successful in terms of an effect on the Canadian market?
Mr. Larocque: Canada needs to set up what I would call an industrial policy, if you wish. I can understand about matching the U.S. dollar for dollar — that’s not exactly what we’re looking for, but having a similar system. This production tax credit is brand new and it’s a complete game changer. It’s kind of protectionist. In North American now, all of this has to be used or produced in the United States. We don’t have a similar thing. I’m looking for this type of tax system or credit system to be in Canada. The dollar figure, I understand. It’s a budget decision by the federal government, but just putting this system in place in 2023 with some dollars would be a great start.
Senator Arnot: Time is of the essence here?
Mr. Larocque: I can tell you right now that the United States is signing 10-year agreements for Canadian feedstocks due to the IRA in production. If we wait a year, we will eliminate tonnes of feedstock for the next ten years that we won’t be able to access in Canada.
Senator Cardozo: This is a really interesting discussion, especially juxtaposed on the previous one where we talked about just transition from the perspective of the labour representatives, which is more from the perspective of workers. You have talked about the industry transitioning. I have so many questions, but I’ll try to limit them to a couple.
Are you thinking about your industries sunsetting over a period of time? You’ve been trying to make them cleaner and cleaner, but is there a time when you see them sunsetting as we move to 100% renewables — or to a much larger percentage of renewable resources?
Mr. Cheliak: I don’t think there’s a sunset. Again, we added a near-record number of consumers to our system last year, so the market wants the product. I would say that energy security and energy reliability were taken for granted, I think, globally. They still are here in Canada. For the consumer, how do we ensure that they have reliable, affordable energy? Having multiple systems — a liquid system, an electron system and a gaseous system — that’s how you ensure that you have reliability.
Sunsetting an industry and replacing it with another — again, if you go back to 1800, that’s never happened in the history of the world. I don’t anticipate it’s going to happen in the future either. In my industry, you need molecules to create chemicals. You need molecules to create plastics. You need molecules to create fertilizers. If you want those things, you need molecules from somewhere. You have to deliver the molecules through something. You can’t deliver them through a wire. They are best delivered through linear pipeline infrastructure. Sunsetting? Absolutely not. Transformations? Absolutely.
Mr. Larocque: Remove “transitions” and use “transformation” — it’s the same thing. We’re going to be providing transportation fuels for the next 100 years like we’ve done for the last 100 years. What is it going to look like? It’s going to be diversified. You’re going to have electricity. You’re going to have renewable diesel for marine and jet fuel, for example. You’re going to have heavy-duty vehicles. There will be hydrogen. There will be a multitude. Our members, right now, are transforming to provide that energy for transportation. That’s my answer. We’re going to be here in 2050, 2100 and so on.
Senator Cardozo: In terms of just transition, Senator Batters talked about the term being considerably problematic in some areas. Is there another term that we should be using that would be more appropriate?
Can I have a quick comment from you, Mr. Cheliak, on a slightly different topic? The German and Japanese leaders were here looking for liquid natural gas, or LNG. Did we say no? Maybe you can just enlighten us on that.
Mr. Cheliak: I wouldn’t say it was a “no.” Perhaps the answer was, “There is more work to do there.” There wasn’t a clear and definitive “yes,” and that’s what we were hoping for.
And on your first question, I’m sorry?
Senator Cardozo: “Just transition,” the term, should we be using a different term or do we have to change what we’re talking about when we talk about just transition? Is there more to it?
Mr. Cheliak: I think you’ve already seen some different terms — sustainable jobs, just transition. In some respects, I do think this is distracting from some of the great work that the industry is doing, be it what Mr. Larocque’s group is doing or what my companies are doing on hydrogen and renewable natural gas. If we keep focused on some of the creative things that are happening, I think we’ll all be better off.
Senator Galvez: Thank you so much. Like my colleague said, this is a very interesting conversation. Welcome to the Senate.
I agree with what you all said. We need to increase the diversity of energy sources, for sure. Biomethanization is something that is growing, for sure. We have to have an exit for all the organic waste, so it’s good we are producing methane.
I have a couple of questions. On one hand, I want to know the room for energy efficiency because in Canada we are not good at that compared with the Scandinavian countries. We consume a lot of energy for the same type of weather. I would like your comment on energy efficiency. Also, with this diversity of fuels, we need to build better and increase resilience. We have to have duplicity. We have to be adaptable in a robust system because we are facing climate change and extreme weather events that destroy infrastructure every year and cause billions of dollars in damage per event. How is your industry addressing these two subjects?
Mr. Larocque: I’ll start on the second one with the resiliency. That’s why I do believe we need a diversity of energy moving forward. We can’t just rely on one of them. Just to give a quick example regarding transportation or electric vehicles. We do believe there is room for plug-in hybrids that is under the new regulation proposed by Environment and Climate Change Canada.
Those are the places I think the Government of Canada should not select a specific energy source for either residential heat or transportation, but allow the policies and regulations to have multiplicity so consumers can have flexibility and resiliency moving on in the future. Sometimes, right now, I do believe there are certain types of energy that are favoured. That’s why we want to bring up the topic of energy security and resiliency to the table.
Mr. Cheliak: Resiliency is a fascinating question and topic. The way the industry works on my side is we’re underground. We put our infrastructure underground, so we don’t have knockouts or lose natural gas service. It’s not so much an issue for the natural gas industry. Our infrastructure, again, it’s all underground.
On efficiency, I think we’ve actually made a lot of strides there. It’s important to come back to what we have done. In the last 30 years in Canada, we’ve added I think 3.5 million new residential natural gas customers. The average home in Canada is 36% larger over that period. We’re actually using a little less natural gas in the residential market than we were then. Our homes are built better. The equipment in them is better, but we just have population growth. Let’s celebrate what we have done, which is we’ve kept the consumption flat while we’ve added millions and millions of new residential properties in the country.
Where do we go next? Heat pump technology is the next phase. You hear a lot about electric heat pumps. There are natural gas heat pumps, as well. I think you’ll see in the next phase in the residential and commercial market move from what we call condensing equipment, which is less than 100% efficient, to heat pump equipment, which is more than 100% efficient.
Senator Galvez: You talk about codes. I used to live in Europe and when you buy a house or any equipment, there is a label that tells you exactly where you are in the energy efficiency of your house or your equipment. Are we there in Canada?
Mr. Cheliak: We have the EnerGuide rating system administered by Natural Resources Canada. Yes, when you buy a home, there is or should be a label on the inside of that home. If you want to take advantage of the greener homes grant currently offered by the Government of Canada, you need an energy audit, they’ll score your home and put that labelling inside the home.
Senator Galvez: This is across Canada?
Mr. Cheliak: Yes.
[Translation]
Senator Miville-Dechêne: In the International Energy Agency report entitled Net Zero by 2050 —
[English]
— which was published in 2021, I’m reading from this report that, from today, no investment in fossil fuel supply projects. Which means you are asking for a level playing field, you’re asking for some new programs from the government to clean up. Is it realistic considering where we’re trying to go in terms of climate because this is a climate emergency? What do you think of this particular report as opposed to your position, which is that we’ll still be transporting fuels in 100 years? I don’t know if you were talking about oil or gas.
Mr. Larocque: I’m glad you asked that question, actually. There’s a lot of confusion. I just cannot be more clear that we’re in transportation energy. We’re asking for low-carbon fuel production. It’s incentives for ethanol, renewable diesel, sustainable jet fuel or hydrogen. It is not for gasoline, diesel or crude oil. Anyone can access that incentive. Either you’re a typical oil and gas company that we represent, but we also represent green energy, for example, or Greenfield Global, which is an ethanol producer. That incentive is for low-carbon fuel. It aligns with the IEA.
Mr. Cheliak: Again, we represent the distributors of natural gas, so the type of programs that we participate in and seek would be the clean growth fund that’s currently administered by Natural Resources Canada. In that program, you can receive incentives for hydrogen or renewable natural gas. That’s the two areas we’re interested in. On Mr. Larocque’s side, it would be more the liquid renewables. We’re not seeking government programs to incentivize natural gas production increases, for example. We don’t need money for that.
Senator Miville-Dechêne: A question about figures, you talked about renewable gas issued from methane and our waste. What’s the proportion of this renewable gas as opposed to the proportion of natural gas you’re distributing or selling in Canada?
Mr. Cheliak: It’s small today. British Columbia is looking at a 15% blend, so that 15% of all of the gas in British Columbia by 2030 would be a renewable molecule. Quebec has 10% by 2030. Other jurisdictions are looking at it. The volume of product is huge. It’s 40% of our energy end use in Canada. A good comparison is if you look at wind and solar contributions to Canada’s electricity supply. Combined, I think they’re around 6% today, and that’s been a big focus for the industry for going on 20 years.
When you look at it in that term, I think we’re making meaningful progress.
Mr. Larocque: For us, around 6% to 8% today. We’re looking at 15% by 2030 or more.
Senator Miville-Dechêne: Six percent of?
Mr. Larocque: Liquid fuels. Ethanol in your car, for example, or renewable diesel or biodiesel. But with the advancement for sustainable jet fuel and also with the clean fuel regulations in addition on the liquid side, you’re looking at 15% to 20% by 2030 and increasing. This will happen. It’s just a matter of where’s your fuel going to come from, Canada or the United States?
Senator Batters: What do you think is the most commonly misunderstood thing — if you had just one or two — about the oil and gas industry and its ability to contribute to Canada reaching its climate goals? Now’s your chance.
Mr. Larocque: How much time do we have?
Senator Batters: Just a couple of minutes for each of you, please.
Mr. Larocque: I think we touched a little bit on it — that we always put to the oil and gas industry: Are we going to stay there? Are we going to sunset? I think there’s a total misconception about how serious we are about decarbonizing in the transportation sector.
We’re going to be a different sector in 15, 20 or 25 years than we are today. We’ve been doing it for so long that we’re really well placed with our existing infrastructure. To build a completely new energy infrastructure in the next 10 tens — as Mr. Cheliak was saying, over the last hundred years — that misconception is something for which we try to get the message out every day.
Mr. Cheliak: I’m a bit of a historian, but we’ve pivoted before and we’ll do it again. In 1910, all of the gas — we call it gaseous energy, which is our term; not gas, but molecules — in pipes that were delivered in this country were largely hydrogen. They were delivered by pipeline to operate street lights in Montreal, New York City, et cetera. Then electricity came along, and that business was not only threatened but was going away.
We took that infrastructure and said: What can we do with it? People were heating their homes with coal, and they wanted a different way of doing it. We started building pipelines to help people move from coal to natural gas heating.
We’ve done these great pivots before, and I think we can do another great pivot again. It just won’t happen overnight.
Senator Batters: Thank you.
Senator Cardozo: Thank you for all the time I’m getting on this committee. I’m not actually a permanent member of this committee, so you’ve been kind to put up with me. It’s a fascinating committee with wonderful questions from the members, so I think I want to join you.
If I can ask Ms. Stilborn for her comments on just transition.
Lisa Stilborn, Vice-President, Public Affairs, Canadian Fuels Association: Absolutely. As Mr. Cheliak said, we prefer to talk about sustainability. A lot of people that we talk to — decision makers, all levels of government — increasingly agree with us that it’s about sustainability and creating and maintaining sustainable jobs. There is a transition. It’s an adaptation process. I think that is increasingly understood.
Senator Cardozo: Mr. Cheliak, you’ve talked about gas quite a bit. Can you tell us how we’re using gas today in various industries and homes, and where you see it going in the next 20 years?
Mr. Cheliak: In terms of the residential and commercial market — buildings like you’re in today or the homes you live in — roughly 50% of all of the home and commercial energy use in Canada is delivered by natural gas. A big chunk is delivered by electricity, a smaller amount through propane and a little bit of wood. We’re roughly half of the residential-commercial market.
Similarly, on industrial, we’re about 53% of all the industrial energy use in Canada. Again, a good chunk is electricity and some advanced biofuels are used.
Senator Cardozo: Such as what? Machines and such are driven by gas?
Mr. Cheliak: Anything that needs heat, whether it’s steam to process making beer or whether it’s the upstream oil and gas industry that needs steam to unlock sand from oil sands. Any manufacturing facility needs heat, and that heat has to come from a fuel. Natural gas is the fuel of choice.
We don’t currently deliver much in the transportation space — passenger cars, trucks, ferries, that kind of thing. There is a place for gaseous energy in the heavier-horsepower markets, like ferries and on-road trucking, but the market has been slow to evolve.
Waste haulers have been the quickest adopters of natural gas, so garbage trucks. The reason is that they do a route and then they go to sleep at night. You refuel them at night, and then they do their round the next morning. That kind of return-to-base fleet is ideally situated for a natural gas application.
Senator Cardozo: In the next 10 to 20 years, is that going to change?
Mr. Cheliak: If we add hundreds of thousands of new Canadians each year who are going to need places to live, I have to think that a good number of them will want the reliability and flexibility that gas energy provides them. I don’t see that changing fundamentally.
What I do see changing — if you follow this kind of stuff, there’s a new announcement out of the steel facility in Hamilton. They’re putting in electric arc furnaces, and they need natural gas to operate that new system. They’re talking about whether they can move that to a hydrogen-based pipeline in the future.
The creativity will be fascinating to watch. Where historically it was a default natural gas pipeline, you might now see a lot more conversation about what we can creatively put through that piece of infrastructure to ensure we’re meeting our sustainability goals.
Senator Galvez: Thank you. I would like to place emphasis on the U.S. Inflation Reduction Act and the impact it has, or will have, on our energy industry here in Canada.
Last week, I made a statement about the role that the American Society of Civil Engineers plays in contributing to the rationale behind the IRA. I wish that the societies of engineers will be more involved in the decision making here in Canada. It’s very important.
I sit on the National Finance Committee. In the fall statement, we put aside a $2-billion growth fund to try to balance this IRA trillion-dollar fund. How can we use this better? How can we make efficient use of this in order to have a chance to counterbalance the impact of the IRA?
Mr. Larocque: My advice is that we need to find a simpler tool. Where there’s an application for funding, it takes one or two years to receive an answer on your project. You’re picking winners and losers because we all know that money is limited.
Having a system like a production tax credit, it’s very clear: If you make it, you get it. There’s no application. It’s fair for everyone. If you can monetize that in your investment. That’s what the U.S. is doing.
That’s the system I was talking about earlier. We can have a conversation about the money and the amount, but establishing that fair system — it could be for renewable, natural gas, hydrogen. It doesn’t matter, but it’s simple, it’s clear and it’s in a tax system. It’s not an additional funding program.
Mr. Cheliak: I would emphasize the production tax credit. It’s a challenge because the operating environment we were in up until the IRA was “no” to production tax credit, and then there was a production tax credit.
All the thinking and bureaucracy behind the investment tax credit versus the production tax credit, you have to switch lanes. It’s a lot of work. All the analysis has been done on something that’s kind of irrelevant now. So it’s the nimbleness of the system. And by “the system,” I mean the bureaucratic and political system in Canada. That nimbleness has to be there. If you want to compete and win, you have to be nimble. I think we need a lot more emphasis on being nimble and saying that the world changed when the IRA came out on this type of stuff. What are we doing to do? Do we switch lanes or not? If we’re not going to switch lanes, I think we have to be ready to live with those consequences.
Senator Galvez: Can we afford not to switch lanes?
Mr. Larocque: No. Europe just did it last week.
The Chair: We asked the government representative, including the minister, this same point: Your major competitor has changed. Are we being competitive? And the answer was yes. They thought the announcement they made in the pre-budget comment adjusted our approach to be competitive.
I gather you don’t agree with that answer. Am I correct in saying that?
Mr. Larocque: No, we don’t. We’ve had a lot of conversations since the Fall Economic Statement about demonstrating a $750-million investment in Canada and what that looks like in the U.S.
I’ll raise this again. The misconception is that the federal government — like the Clean Fuel Regulations — has a carbon credit. But the misunderstanding was that the U.S. companies can also access that. There was a border trade issue that was not well understood. They thought the Canadian market was equal to the IRA, but it’s not because the IRA can also access the Canadian credits. Those are the major differences. We’re working with the government right now to explain all those issues.
The Chair: You’re working with the government to correct their positioning to be competitive?
Mr. Larocque: We’re providing information and data to demonstrate that it is not equal.
The Chair: And are they listening?
Mr. Larocque: Yes. But for Budget 2023, the devil is in the detail.
The Chair: When will we know that we’re competitive? Months or years?
Mr. Larocque: Budget 2023 will be very enlightening for many of us around the table, for industry.
The Chair: We’d better get it right because we don’t get a lot of chances.
Thanks to all of you for being with us this morning. We learned a lot and we have a lot to learn. We may seek your advice again. Thank you again for being with us.
(The committee adjourned.)