THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Tuesday, May 16, 2023
The Standing Senate Committee on Energy, the Environment and Natural Resources met with videoconference this day at 6:30 p.m. [ET] to study the subject matter of those elements contained in Divisions 20 and 36 of Part 4 of Bill C-47, An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023.
Senator Rosa Galvez (Chair) in the chair.
[Translation]
The Chair: Good evening, everyone. My name is Rosa Galvez. I am a senator from Quebec, and I am the chair of the committee.
Today, we are conducting a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
I would like to begin with a reminder. Before asking and answering questions, I would like to ask members and witnesses in the room to please refrain from leaning in too close to the microphone or remove your earpiece when doing so. This will avoid any sound feedback that could negatively impact the committee staff in the room.
I would like to ask my fellow committee members to introduce themselves.
Senator Verner: Good evening. Josée Verner, from Quebec.
Senator Massicotte: Paul Massicotte, from Quebec.
[English]
Senator Sorensen: Karen Sorensen, Alberta.
Senator McCallum: Mary Jane McCallum, Manitoba.
Senator Arnot: David Arnot, Saskatchewan.
[Translation]
The Chair: I wish to welcome all of you, and the viewers across the country who are watching our proceedings.
[English]
In accordance with the motion adopted by the Senate on April 27, 2023, we continue our pre-study of the subject matter of Divisions 20 and 36 of Part 4 of Bill C-47 (Budget Implementation Act, 2023, No. 1).
For our first panel, we welcome in person Bob Larocque, President and Chief Executive Officer, Canadian Fuels Association; and by video conference Carolyn Kim, Senior Director, Communities and Decarbonization Group, Pembina Institute; and Don O’Connor from Renewable Industries Canada.
Welcome, and thank you for being with us. Each of you have five minutes for your opening remarks. We will start with Mr. Larocque.
Bob Larocque, President and Chief Executive Officer, Canadian Fuels Association: Good evening, Madam Chair and members of the committee. Thank you for inviting us to participate in the study on Bill C-47, the budget implementation act.
I would like to begin by acknowledging that I am today on the land of the traditional unceded territory of the Algonquin Anishinaabe people.
[Translation]
Our members employ more than 111,000 workers across Canada. They operate 15 refineries, 75 terminals and more than 12,000 stations.
Our sector produces 95% of the gasoline, diesel and marine, rail and aviation fuels used every day. Just to give you an idea, this represents more than 100 billion litres per year. Our members also make more than 35% of biofuels produced in Canada.
[English]
Three years ago, we released Driving to 2050, which outlined the foundational contribution that our industry can make to support our climate goals. Our most recent update highlights $8 billion in member investments to support 10 million tonnes of GHG reductions per year and create and support over 10,000 jobs.
For the topic at hand today, I would like to begin by emphasizing that we support the Clean Fuel Regulations — CFR — and we have worked closely with government on design and implementation since the CFR was first announced. The CFR is technology neutral. It does not pick winners and losers. All GHG-reduction projects, including biofuels, are based on life cycle analysis. Regarding biofuels, it is predicted that Canada will need an additional 600 million litres of ethanol and more than 2.3 billion litres of renewable diesel by 2030, and this is just the minimum. The question that we have at hand today is whether or not we will make these fuels in Canada or whether we import them from the United States.
As the committee is aware, the U.S. Inflation Reduction Act, or IRA, is a game changer. The IRA introduced a production tax credit, or PTC, for biofuels such as ethanol, renewable diesel and sustainable aviation fuel, as well as hydrogen. The North American fuel market is fully integrated, and Canada competes with the U.S. for investments. The IRA has intensified this competition, and we are already seeing Canadian agricultural feedstock going directly to the United States to take advantage of the PTC. Furthermore, U.S.-based clean fuel production would be able to generate carbon credits in Canada under the Clean Fuel Regulations. As demand grows with the CFR, if Canada does not produce low-carbon fuel at home, we will have to rely on U.S. imports, undermining both our energy and climate security.
Budget 2023 did provide a response to the IRA for hydrogen in the form of investment tax credits but contained no specific measures to address the gap for biofuels. It did recognize the importance of biofuels and did commit to consultations on targeted measures. We understand this process will get under way shortly, and we are committed to supporting these consultations. We are at a critical juncture for clean fuel production in Canada. Member companies are making final investment decisions on projects before year-end. It is imperative that a policy comparable to a PTC be announced in the 2023 fall economic statement.
Budget 2023 refers to a clause — the reason we’re here today — to create an environmental economic instruments fund under the Canadian Environmental Protection Act, or CEPA, to establish a compliance fund to collect contributions from parties regulated under the CFR. I would like to highlight that the CFR has five potential options to comply with the regulations. Compliance category one is for projects that reduce GHG in the production of liquid fossil fuels. Compliance category two is for production of low-carbon fuels such ethanol and renewable diesel. There is also another compliance category for projects that replace end-use liquids, such as electric- and hydrogen-charging stations, for example. Another way is for companies to buy credits from the CFR credit market, which is supplied by credit generators. Finally — and this is why we’re here today — there is an emissions reduction fund where companies can pay up to $350 per tonne for up to 10% of their compliance requirements.
While we do not have a lot of information at this time on the process to distribute these funds under the CFR emissions reduction fund, I would like to suggest to the committee that the fund should adhere to the following principle to ensure transparency, fairness, timeliness and efficiency. The fund should support projects that fall within the compliance category mentioned above, which is consistently supported by the life cycle analysis tool under the CFR. The fund must also show emission reductions within five years. Therefore, the funding should be allocated within six months to a year after application. It should not take two or three years to allocate those funds. A big project can take up to four years from engineering all the way to operations. The application process must be simple, timely and efficient to ensure that proponents are informed and able to make final investment decisions. Funding should be allowed if proponents are also receiving funding from other programs. Since any person can apply to create a fund, the funding program should be science-based, technology neutral, robust, efficient and held to the principles listed above.
Budget 2023 is critical for the transportation fuel sector. We need to make sure we get it right. We need to send a signal in the fall economic statement for biofuel production in Canada, we need to make sure that the hydrogen investment tax credits are finalized and we need to ensure that the CFR emissions reductions fund is set up properly.
[Translation]
Thank you very much for giving me the opportunity to appear before you today. I’d be happy to answer any questions you may have.
The Chair: Thank you.
[English]
Carolyn Kim, Senior Director, Communities and Decarbonization Group, Pembina Institute: Good evening, Madam Chair and committee members. Thank you for the invitation to speak on this panel today.
I’m speaking on behalf of the Pembina Institute, a non‑partisan, national charity that advocates for climate and clean energy policy development in Canada. We are also part of a coalition of clean fuel industry and environmental non‑governmental organizations that have supported the CFR since 2016.
The objective of my remarks today is twofold: First, to communicate our support of the regulations and, second, to provide recommendations on how the federal government may clarify the intent and scope of any eligible fund established by different players under the regulations. There is a risk that funds could unintentionally be used for activities beyond the scope of the policy. This is an opportunity for the federal government to create a properly functioning compliance framework and thus ensure the regulation delivers the anticipated greenhouse gas emission reductions.
First, the CFR is an essential tool to achieving Canada’s 2030 climate plan and achieving net zero by 2050. It has proven to be a cost-effective means to incentivize oil and gas producers and suppliers to reduce life cycle emissions of fuel production and attract new investment in clean fuel technologies. When fully implemented, the regulations are expected to reduce emissions by 204 megatonnes of carbon dioxide equivalent by 2040. The success of achieving this objective depends upon an objective compliance framework.
For your consideration, as per the regulation, the Minister of Environment and Climate Change may establish a federal compliance fund or authorize eligible funds. Primary suppliers can contribute to a compliance fund for up to 10% of their annual reduction requirement. While the stipulation is commendable, the intent and scope of any eligible fund remain vague. To provide greater clarity, we recommend the following:
First, provide overarching policy direction for eligible funds. While this pre-study is for the Environmental Economic Instruments Fund, please note that the regulation offers the flexibility for more than one compliance fund to be established. Provincial governments or Canadian non-profits can also apply to create an eligible fund. Greater clarity is needed to ensure that multiple compliance funds do not undermine the environmental integrity of the regulation.
Second, establish that the funds would be used for near-term emission reductions. Contributions made to the compliance fund must be used to use support projects that will achieve emission reductions in the short term. To achieve this, funds should prioritize investing in projects within a one- to three-year period of receiving funding. Funds should be directed solely to lowering emissions associated with transportation fuels in Canada. The minister should prioritize investments that directly reduce emissions from combusted fuels and displace the use of fossil fuels. Funds should not be used to primarily meet the goals of any other regulation. Another consideration is that funds should be efficiently used to incent emission reductions that can demonstrate financial need for support.
My final recommendation for your consideration is to ensure that the compliance fund is the last resort to meet compliance. It must be clear that an obligated party purchase all available credits pledged to the market-clearing mechanism. If they are still in a non-compliant position, they become eligible to purchase credits from the compliance fund. The fund represents a ceiling on compliance costs that comes into effect when cheaper options have been exhausted.
In conclusion, I would like to thank the committee for the invitation to speak today. We commend the Government of Canada for operationalizing a key element of the Clean Fuel Regulations, or CFR, and we hope that the committee considers our recommendations to strengthen the Environmental Economic Instruments Fund to ensure that its intended purpose remains intact and transparent.
The Chair: Thank you.
Don O’Connor, Renewable Industries Canada: Thank you to the chair and the committee members for having me here today to speak on behalf of Renewable Industries Canada, or RICanada, the national representative of Canada’s first and foremost renewable fuels producers.
I am a long-time technical adviser to Renewable Industries Canada on carbon policy. As well, I am the president of S&T2 Consultants, a firm that specializes in understanding energy and environmental issues worldwide, including life cycle carbon assessment, which is a significant mechanism in the new federal Clean Fuel Regulations, which I will refer to as CFR. As well, I have experience in other jurisdictions with similar programs, such as British Columbia, California and Oregon.
RICanada represents biofuel producers that deliver low-carbon petroleum replacements, such as ethanol, biomass-based diesels, biogas, hydrogen and sustainable aviation fuel. Using current technology, these fuels can attain or have already attained a net-zero carbon intensity on a life cycle basis.
The committee is studying a specific aspect of the CFR; that is, the creation of a compliance fund that allows credits to be purchased when a fossil fuel supplier has not sufficiently attained its carbon intensity reduction targets. It is important to understand what this aspect of the CFR means in terms of achieving the overall carbon market that the policy creates.
The carbon market is created when a policy allows for the measurement of greenhouse gas emission reductions to be counted and traded against obligations to reduce emissions, so the creation of this compliance fund will have an impact on the health of the carbon market and vice versa. A dysfunctional credit market in the CFR will put undue pressure on the compliance fund that we’re here to talk about. This fund will help companies that are regulated by the CFR to comply with the emission intensity reductions required, should the market fail to deliver adequate compliance credits, acting as a pressure relief valve more than an actual compliance pathway. The fund is designed to ensure that should the market fail or come up short, companies can still comply.
I have two recommendations for the fund: First, given that the fund is designed to serve as a compliance mechanism of last resort, the funds given to it must go towards correcting the market imbalance that necessitated companies paying into it in the first place. As such, Renewable Industries Canada recommends that the funds put into the compliance fund be used to support the activities that will lead to the generation of more credits for the Clean Fuel Regulations. Whether this funding supports the production of low-carbon hydrogen, renewable diesel, electric vehicle charging or increased production and blending of ethanol, it will reduce emissions and generate more Clean Fuel Regulations credits. This will help to achieve the aim of the Clean Fuel Regulations and correct the market imbalance.
Second, these goals can only be realized if the capital that is paid into the compliance fund is easy to access and rapidly deployed. Many of the funds made available by the government to support the deployment of low-carbon fuels like the Clean Fuels Fund have been slow to deploy capital, delaying projects. When these critical projects are delayed, fewer low-carbon fuels are available to Canadians to reduce their emissions and companies are less able to meet compliance under the Clean Fuels Fund. As such, I recommend that any funds provided to the proposed compliance mechanism be delivered through an entity that is experienced in delivering project funding in a timely manner, even if that entity is not directly within the purview of the Minister of Environment and Climate Change. Entities like the Business Development Bank of Canada and Sustainable Development Technology Canada, or SDTC, have a track record of deploying capital at the speed of business. Therefore, I recommend that the government look to entities like them to deploy any funding received through the compliance mechanism.
This compliance mechanism is a necessary tool of last resort and must be treated as such. That is why funds received need to be used to alleviate the market conditions that necessitated its use in the first place.
I thank you for the time, and I look forward to your questions.
[Translation]
The Chair: Thank you to our witnesses. We’ll go to question period.
[English]
Senator Sorensen: Welcome to the witnesses.
I will direct my first question to Mr. Larocque. I am interested to know if the instruments fund is going to incentivize energy companies to reduce emissions. I am coming from the place of if it is going to have a significant impact or if the work is in the process of being done regardless, and, I guess to add to that, I would assume with the funds it might make things move more quickly.
Mr. Larocque: For me, it is just another opportunity to fast‑track the funding, to be honest with you. I do agree with the rest of the witnesses that this is a last resort, so we will look at all of them.
I think it is really important — to answer your question — that it is directed to the three compliance mechanisms that we already have. That would be projects at the refinery level or to make low-carbon fuel or in the electric charging or electrical stations. So if we could keep it within that, it is a fund that could be helpful in the later years of the CFR, like from 2028-30.
Senator Sorensen: I would be open to anybody responding to my second question. In a Globe and Mail article in August 2022, Kendall Dilling of Pathways Alliance argued that the government should extend Clean Fuel Regulation credits to lower-carbon oil or fuel intended for export, stating that the government’s decision to not include these fuels might affect the economic viability of carbon capture utilization and storage. I’m open to comments on that. One of the other witnesses might want to jump in first.
Mr. O’Connor: I will respond to that.
Employing carbon capture in the oil sands projects would be mainly done for bitumen production, and most of our bitumen in Canada is exported. It has the potential to create a huge number of credits and would slow down the implementation of low‑carbon fuels throughout Canada. If that had been part of the program, then the target should have been set higher. I think that you have to look at both sides, the stick and the carrot, to make sure that they are balanced to meet your objectives.
Senator Sorensen: Thank you.
Ms. Kim, any comment?
Ms. Kim: Yes, thank you.
I would also concur that we agree that this policy was right to exclude exported fuels as a part of the policy.
I do want to note that there are several policy measures available for upstream oil sand producers in Alberta — the tier credit, the CFR credit and the ITC once it is finalized. We estimate that these stacked incentives would be worth at least 350 tonnes sequestered for oil sands facilities. In other words, there are sufficient incentives on the table to achieve emission reductions and to also decarbonize the oil sand sector in Canada.
Mr. Larocque: I agree with Ms. Kim and Mr. O’Connor.
[Translation]
Senator Verner: I’d like to thank the witnesses for being with us this evening. I wanted to clarify something. We all agree that creating a fund like this — we can’t be against virtue, obviously. Personally, I still have some questions about accountability to Canadians and parliamentarians, but that isn’t your responsibility. I’ll put the question to the right people in due course. Mr. Larocque, my question is for you. Did I understand correctly that your industry sector doesn’t qualify for certain programs? Did I misunderstood what you said in your opening remarks?
Mr. Larocque: My opening remarks were about the United States inflation reduction act, which changed everything. Before that, there were fuels going to Canada and the United States, but starting in 2025, all biofuels must be produced in the United States. Not all biofuels produced in Canada are eligible. The United States has 31 cents per litre, and when they send their biofuels in Canada, they have access to the same programs we do. They have access to clean fuels regulation credits, and they would have access to the emissions reduction fund credits. There is a disconnect between Canada and the United States because of Mr. Biden’s decision in August 2022.
Senator Verner: There is nothing that we can correct?
Mr. Larocque: If you want to talk to the committees and say we’re working on it — Consultations are under way, but the federal government absolutely must make a decision by September or October, or billions of dollars of investment in Canada will be lost.
Senator Verner: Thank you. It’s important to note that.
[English]
Senator Arnot: Thank you, witnesses. I have a general question and then some specific ones.
The general question is that there is commonality in what has been said by the three witnesses here, but did your organizations have direct input into the changes to the Canadian Environmental Protection Act and the creation of the environmental economic instruments fund? If so, were your inputs accepted by government and in fact show up in that legislation?
There have been some comments about concerns about the funds inside the environmental economic instruments fund being employed beyond the scope of the policy. I would like to hear your comments on how that could get corrected.
You are saying as well, Ms. Kim, that the intent in the scope is vague and that, overall, it needs to be more specific. You have a transparency issue with the minister, not knowing how these funds may be employed to be in compliance.
I certainly understood Mr. O’Connor’s point about if the capital goes in, it has to be paid out and deployed rapidly, the same points that Mr. Larocque made.
Do any of you have estimates about how much money will go into that fund? I assume it is millions of dollars?
And what is the likely uptake of the members of your organizations putting money into that fund? Do you have any comments about that and how you see that playing out?
Mr. Larocque: That is a lot of questions.
As far as the emissions reduction fund being a compliance pathway, part of the Clean Fuel Regulations, yes, we were aware of that. We worked with Environment Canada on that aspect of it. There were a lot of conversations during consultation about 10% or higher, lower, and some limitation into the Environmental Protection Act. So 10%, we kind of knew this all along.
As far as how the fund would operate, though, there is not a lot of information. I’m like Ms. Kim on this one. It has been very vague and unsure. That is why I’m glad we are here today, because we are concerned about how to scope. That is why you heard unanimously you should use the tools within the CFR so we’re ensuring that the credit market is more viable.
To give everyone an idea about the projection, we are talking about 30 million credits by 2030. Assuming 10% — and I do not think that it is going to be used at 10%, senator, but worst-case scenario — that is three million credits at $350 a ton, so you are talking about a $1 billion fund. We’re not talking about $50,000 or $1 million here.
I do not think that it will be used fully, to be honest. We have faith in the credit market, but it is a safety valve, like Mr. O’Connor was saying. California has it. British Columbia does not, that I’m aware, and we saw the price go up to $600, $500 a ton, for example. I think that it will be used, but I do not think that it will be used at the 10%.
Senator Arnot: Any other comments from Ms. Kim or Mr. O’Connor on those issues?
Ms. Kim: Thank you for the question.
I would like to reiterate how Don described it. A necessary tool of last resort, I think is a great way to put the compliance fund.
My point about providing clarification on the intent and scope of the compliance fund was simply because the CFR is unique in that there is not just one compliance fund that could be created. As mentioned, provincial governments or Canadian not‑for‑profits are also able to apply to create an eligible fund. Because of the multiplicity nature of that, it would be our recommendation for further parameters to be given on how the investments would be used.
From our perspective, we would want to see the funds to be used in a short-term basis. I suggested one to two or three years. We heard from other panellists that it should be even within a shorter period of time. Six months, I believe, was mentioned by one member.
We also recommend that it be directed solely for reducing carbon emissions associated to transportation fuels in Canada, not to be invested in projects that are outside of that purview. We want to stay within the purview of the regulation.
The Chair: Mr. O’Connor, would you like to complement the answer?
Mr. O’Connor: Yes. I agree with what has been stated.
I think these funds can be very useful. We have something similar in the B.C. low-carbon fuel standard except it sort of works backwards. In the B.C., low-carbon fuel standards, the government has been able to issue credits to companies who want to increase the production or the availability of low-carbon fuels. They award credits which companies can turn around and sell to raise capital in the low-carbon fuel market. That program was instrumental in the construction of the first renewable diesel plant in Canada that is just about ready to be turned on in Prince George, British Columbia. So these funds can be very helpful in raising capital in Canada.
Senator Arnot: Thank you.
[Translation]
Senator Miville-Dechêne: My question is for Mr. O’Connor, but perhaps the other witnesses would like to answer it. We learned from the Auditor General’s report last April that the department took far too long to develop the clean fuel regulations. In fact, the Auditor General said that it was essential to accelerate efforts to reduce greenhouse gas emissions and reduce their damage. Do you think the fund proposed in the budget is an effective way of achieving our climate objectives and reducing greenhouse gas emissions?
[English]
Mr. O’Connor: The fund is required at the back end of this process. It’s only going to be implemented if companies can’t reduce their emissions. If the companies are successful in blending enough biofuels and having enough electric vehicles, then they won’t need this compliance fund.
During the development of the regulations, there were discussions about whether it should be front-end-loaded, so there’s a larger reduction required in the early years when it’s easy to do things, or back-end-loaded. The government ended up in the middle, with a linear progression, which at least learned from mistakes in California and British Columbia where it was far too easy to generate credits in the early years and was a missed opportunity to accelerate emissions reductions. From that perspective, it could have been better, but it could also have been a lot worse at getting reductions quickly.
Mr. Larocque: It is a last resort. Therefore, my expectation is that the other categories of compliance will all be used first. I think this is more of a 2028 to 2030 play than a 2025 play.
[Translation]
Senator Miville-Dechêne: Thank you.
Senator Massicotte: I want to thank the witnesses for being with us this evening.
We’re talking about British Columbia and California, but I think you can buy credits in Quebec as well. At the beginning, we bought credits, and people were unhappy because they felt we were abused them.
If I understand correctly, in our case, as you said, we said at the beginning that we would try to invest in programs. However, if you don’t have enough credits, you have the option of buying them for $350 a tonne.
Where can you buy those credits, and how much does it cost? This price of $350 per tonne is high, and I’m surprised that it might be necessary. In Saskatchewan, it was announced that they were going to prioritize carbon capture and trade, and it was maybe $150 or $175 a tonne. Is that really a relevant figure? Obviously, this will have a major impact. Will some companies reach that point in year 8 or 9? They may not be able to do so and won’t have the money to do so. It could lead to bankruptcy.
Mr. Larocque: I would like to clarify a few things. In Quebec, for example, there is a carbon market; that’s trade. What we’re talking about here is a credit on the biofuels envelope. Based on an analysis by Environment Canada, the average price in 2028-30 will be $200 a tonne. Those are the numbers that most companies look at to see if it’s worth investing. So if you’re talking about $350 a tonne, we’re not very far from that. We’re not talking about $50 a tonne. That’s the cost of getting to where we want to go, in addition to the 15% reduction provided for in the regulations.
In California it’s $US250 plus inflation, so it’s going to be very close to $350 a tonne. In Quebec, you’ve got a good point about trade. However, I would like to add that in Quebec, with respect to ethanol and other products, it’s one or the other. You can get that money from Quebec or from the clean fuel regulations; you can’t have both. So in some cases, depending on where the programs are located, even if it’s possible to get money for carbon programs or provincial programs, you also have to allow those companies to use the fund. Otherwise, it’s one or the other, and that doesn’t really help anymore.
Senator Massicotte: Would any other witnesses like to comment?
[English]
Mr. O’Connor: The credits in the transportation fuel market in British Columbia are trading at $450 a tonne. Basically, that represents the marginal cost of compliance, so there are cheaper ways of doing it. That is not the average cost. But unlike things like the cap and trade, this is a cost per tonne of reduction, not the cost per tonne of emissions. If we manage to get a 10% reduction in emissions at a cost of $350 for that 10%, that’s only $35 per tonne of our total carbon emissions.
Ms. Kim: Mr. O’Connor expressed my sentiments exactly. In B.C., the price of credits in the market is around $450 per tonne. What we saw in the B.C. government is that they were increasing their penalty price to $600 a tonne because they found that obligated parties were finding it less expensive to pay the penalty than to reduce emissions from investing in decarbonization efforts. We initially would have thought that $350 a tonne was expensive, but as we look to other low-carbon fuel standards and how their markets are operating, we believe this is a good starting point.
Senator Massicotte: Thank you.
The Chair: I want to take advantage of this line of questioning from Senator Massicotte and come back to the necessary tool of last resort and the predictions of how much funds can be generated and also the life of those funds. We put in place these mechanisms and then the government changes, and what happens to those funds? You’re saying this is a last resort. I want you to give me an opinion on the future of this, please. We have to understand it, and we have to be efficient and accelerate the goal. I have my doubts at this point.
Mr. Larocque: I think we all believe that the CFR will be achieved. We will meet the 15% reduction that is required. That will happen. What is difficult for me to try to predict is whether this is going to be a bit more electric generation or more low‑carbon fuels.
The import/export — I cannot stress enough how important it is. Right now, our members are looking at it, and you can buy an American low-carbon fuel cheaper because it’s subsidized by the IRA, so we might decide not to produce it in Canada and just import it here. It would achieve the same reductions. The reductions will happen in Canada.
But, Senator Galvez, what happens in 2028 or 2029 and we have a geopolitical issue where the border closes or they limit the exports? The supply goes down on low-carbon fuel, and the price goes high. Are we going to use more the compliance fund?
We do see it as a last resort. I see this more in five years. I don’t see it being used in the next five years — or very limited if it’s used. But there’s too much importance in the next two years as to whether we’re going to produce those fuels in Canada. That is the biggest question we face.
The Chair: Thank you so much.
Senator McCallum: Thank you for your presentations.
I have to admit that I don’t understand this area as much as others, so my questions might not apply. You said that if Canada doesn’t produce low-carbon fuel, it would go to the States. How did we get here? How do these companies that have made so much money get here? Why didn’t the companies start addressing this earlier? We’ve had this conversation for so many years? You’re present, and that’s why I’m looking at you.
When Mr. O’Connor said they’re able to obtain net zero on a life cycle basis, I guess that means combustion. Why does it have to go this way? Wasn’t the technology there to ensure that we’re not going down this route? It seems like the government is helping, helping, helping. Why do the companies need funds to be compliant? Shouldn’t or couldn’t the companies be expected to work towards climate reduction on their own?
Mr. Larocque: I’ll let Don answer your question on life cycle carbon intensity because he’s the expert in Canada, and he does a much better job than me of explaining that.
As far as the CFR, we need to realize that when this started, it applied to every fuel in Canada. It applied to natural gas or any industry. It was a wide-open thing. There was a lot of uncertainty about what that would mean. It took about four years of consultation. I think it was in 2019 when the federal government finally decided to limit the scope only to transportation fuel. For those three years, industry did not know exactly what was the policy behind it and what were the rules and certainty. It was difficult to figure out how to invest. From 2019 until 2022, some work was being done on starting to lower that.
The CFR is also to make sure that we combust low-carbon fuels in Canada. There’s nothing about where it’s produced. Yes, a lot of our companies made a lot of money, but you can invest in the United States, produce it there, use Canadian feedstock and then bring it into Canada. The question is whether we want the economic benefit of the production in Canada. The climate one will happen no matter what, but do we want those jobs and the economic activity in Canada? That’s the simplest way I can say what’s changed since last August because before that it was North American free trade. For companies investing in Canada and in the United States, there was no advantage. Now, however, there’s a huge advantage to invest in the United States.
Ms. Kim: I’d like to comment more generally to reiterate the important point of how the Clean Fuels Regulations play a role in achieving Canada’s commitments on climate change. I would also like to reiterate how this is a key pillar to attracting investments into our economies and drawing in that clean energy technology.
We’ve talked about the obligated parties, but the CFR also offers opportunities for voluntary organizations or entities to participate in the credit market system. That means, for example, businesses and utilities, or fleet operators, can earn credits by supplying their own vehicles with low-carbon fuels. In doing so, you’re allowing and incentivizing for greater infrastructure development, more economic growth and development in low-carbon energy.
I did want to reiterate the point how we’ve consulted on the Clean Fuels Regulations for many years, since 2016. I want to support the full operation and implementation of the regulations so that we can move towards a net-zero economy by 2050.
Mr. O’Connor: Addressing the question of how we get to net zero, ethanol produced in Canada today has a carbon intensity under the ECCC model of 35 to 40 grams per megajoule, but that is on the basis that the carbon dioxide that comes off the fermenters is released into the atmosphere. If we capture the carbon dioxide that comes off the fermenters, biogenic CO2, which actually doesn’t count as an emission, and sequester it, we take our 40 and reduce it to 10. All we have to do then is find other ways of getting the 10 down. One of the ways is using bioenergy instead of fossil natural gas to fire the plants. We already have one plant in Canada that’s using some biogas. Renewable natural gas is produced by digesting municipal solid waste. They use that biogas and, because it’s biogenic, again, it has no emissions in the accounting system. That allows us to get down below zero without even looking at what we can do in farming practices to reduce N2O and build soil carbon.
There are opportunities, but they all cost money. As Bob says, we’re in a North American market, and we have to be competitive with fuels that are brought in from the United States. In fact, we’re at a disadvantage because all of our plants in Canada have to pay for some of their emissions under the OPBS. We’re already starting with a bit of a disadvantage to the Americans even before we see the impact of the IRA.
Senator McCallum: When you’re sequestering the carbon dioxide, do you reuse it in some instances?
Mr. O’Connor: You can reuse it, but the problem with most of the applications that reuse carbon dioxide is that it eventually comes into the atmosphere. Putting it underground is a removal from the system. There are technologies that are being developed, called e-fuels. They use renewable electricity to make hydrogen. They combine the hydrogen with carbon dioxide to make methanol, natural gas and gasoline from all of those. You can use fossil CO2 and biogenic CO2, but if you’re using fossil CO2, somebody still has to account for the release of that into the atmosphere because when you burn those fuels, the carbon dioxide from the combustion ends up in the atmosphere.
The Chair: Having exhausted our questions for this session, we will let our witnesses go, but I would like to discuss our report with you because we have 15 minutes. Thank you so much.
For our second panel, we welcome by video conference a representative of the Government of Yukon, Stephen Mead, Assistant Deputy Minister, Mineral Resources and Geoscience Services, Department of Energy, Mines and Resources. I want to apologize for what happened last week with respect to your headphones. I’m very happy to see you back with us. Welcome. We will give you five minutes for your opening remarks, followed by questions by my colleagues.
Stephen Mead, Assistant Deputy Minister, Mineral Resources and Geoscience Services, of Energy, Mines and Resources, Government of Yukon: Thank you. I’m glad the great headphone escapade is over.
Good afternoon, Madam Chair and committee members. I’m calling you today from our beautiful capital city of Whitehorse, Yukon, on the traditional territories of the Kwanlin Dün First Nation and the Ta’an Kwäch’än Council.
Thank you for the invitation to speak on behalf of the Yukon government for the pre-study of Bill C-47, which proposes to amend the Yukon Act to give the federal Minister of Northern Affairs powers similar to those of the responsible Yukon minister under section 37 of the territorial Waters Act.
In 2020, the Yukon government and the Government of Canada reached an agreement to transition the administration and control of the abandoned Faro Mine site from the Government of Yukon to the Government of Canada. It was as part of this agreement that the Government of Canada first committed to introduce this proposed amendment to the Yukon Act.
In the absence of this amendment, and since 2018, the Government of Canada has been directly executing remediation works at the Faro Mine site via a delegation of authority granted by the Yukon Minister of Environment under the Yukon Waters Act.
The need for the amendment is to satisfy the basic public law principle that all government action must be supported by a grant of legal authority. The amendment grants authority to Canada to undertake measures necessary to address adverse effects to people, property and the environment at or from the Faro Mine — in other words, to allow Canada to undertake critical remediation work. The amendment under consideration would remove the need for the current delegation and create a single and unambiguous line of responsibility for the works required at the Faro Mine site.
It’s important to know that the Government of Yukon does not view this amendment as reducing, eroding or diluting the powers transferred to the territory at devolution. Fundamental to Yukon retaining its ability to manage Yukon land and water is the fact that the amendment will only apply where Yukon has first relinquished administration to Canada. This is done according to subsection 46 of the Yukon Act. The Commissioner may, with the consent of the Executive Council and approval of the Governor-in-Council, relinquish the administration and control of public real property.
To conclude, the amendment only applies to Type II sites as defined by the Devolution Transfer Agreement that have been relinquished to Canada by Yukon through a regulation. Changes cannot be implemented without the prior agreement of both governments.
This amendment will not only remove the need for the current delegation of authority but also provide the Government of Canada with the tools needed to best respond to the ongoing challenges presented by the Faro Mine and ensure long-term protection of Yukon’s environment. Consequently, the Government of Yukon fully supports the proposed amendment.
Thank you.
The Chair: Thank you so much.
Senator Duncan: I’m here as support. Thank you.
Mr. Mead, we haven’t met before. My name is Pat Duncan, and I’m the senator from the Yukon. I’m delighted to meet you and glad we could resolve the headset issues.
I appreciate your excellent explanation of this amendment to the Yukon Act, and I’m attending tonight to assist however I might in helping my fellow colleagues appreciate the amendment and understand the Government of Canada’s remediation efforts at Faro and so on. I’m here as support. Thank you very much for your explanation.
The Chair: Thank you so much.
Mr. Mead, I have a question. You’re saying that this amendment is only for Type II sites. We know it is a long remediation project that will last for 15 years and beyond. Once this is remediated and the land can be reused, will you need another amendment? How will you bring it back to you? What happens? Thank you.
Mr. Mead: At devolution, and probably 15 years ago, there wasn’t a clear understanding of how long it would take to remediate the Faro Mine. At that time, it was thought that there needed to be some work done, they would go in, do that work, it would be complete and the liability would be addressed. Over time, we’ve noted that the time frames in which there needs to be active management at the Faro Mine, where there needs to be people doing work protecting the environment, will be measured in hundreds of years. At the moment, the pathway to a point where there is no longer a need for any kind of ongoing, active management is going to be measured in that time frame. Consequently, the concerns about whether or not we need to enable a mechanism to bring the land back in that time frame is something that we haven’t really considered or focused on.
The Chair: Last week we heard another witness who talked to us about the birth of a remediation economy. Can you tell us how many workers we are talking about and the impact of this to the city or to the town?
Mr. Mead: Our current understanding of Canada’s plan is that the capital cost of remediating the site is $1.4 billion. That work will take place over a number of years. There will be an intensive capital delivery program at the front end — lots of construction work and lots of moving dirt. Over time, that will taper off to ongoing water treatment and to ongoing monitoring in that 50, 100, 200-year time frame. It will have a significant impact to the Yukon economy. It will be a significant economic generator. I am unaware of the exact cash flow year over year as that’s a Government of Canada-driven program or strategy, but it’s inevitable that the size of this work will have a significant positive effect on the economy, both the local economy in the immediate area of Faro and on the overall economy of the Yukon.
Senator Arnot: Thank you, Mr. Mead.
I have two questions. Do you have concerns about the ongoing human and environmental impact with respect to the length of time projected for this remediation? Fifteen-plus years has been mentioned. It’s my understanding that these complex mine sites, particularly Faro, have significant potential for negative environmental impact.
The second question is that the committee has heard from other witnesses that some of the most serious environmental contaminants, the tailings, will remain in place once remediation is completed. Do you have any long-term concerns about that? What information, studies, research or testing is being done that would assuage any concerns you have?
Mr. Mead: I’ll answer the first question. We are keenly aware that there are potential risks associated with the Faro Mine site, largely because of the significant amounts of waste, predominantly tailings, that were deposited in the valley and the acid generating potential that it has, which will ultimately, if not controlled, leach metals into the environment. The importance of the amendment and the ongoing and future work are all combined. They’re all necessary to avoid any impacts to the environment. The program has been developed by the Government of Canada and ensures ongoing environmental protection by ongoing water treatment, maintenance of the site and also execution of large remediation works, which takes bigger areas of the site that pose risks and remediates them, changes their condition and renders them less of a risk to the environment. Without that work that’s going on, we would have significant concerns in the Yukon. Provided that work is conducted adequately, properly and under the right conditions, we are confident that that provides adequate protection to the environment.
You talked about long-term concerns with the tailings remaining in place. It is a similar answer. If I may suggest, senator, provided that the structures that retain those tailings in the valley are maintained — first, they need to be upgraded to be protective against seismic and flood events. Provided they remain maintained and adequately monitored, they will retain those tailings in that valley. That is why it is critical that this work continues and why it is critical that we have this amendment that allows Canada to have the tools to carry on this work in the long term.
Senator Arnot: Thank you.
[Translation]
Senator Miville-Dechêne: I’ll ask my question in French.
I’ve seen pictures of that mine. It’s pretty frightening. Obviously, I’m not an expert on these issues, but $6.9 billion is a lot of money. My question is this: How are you going to proceed? Be more concrete. Are you going to excavate, remove all of these dangerous products, put them deeper into the ground and try to put them somewhere else? What are you going to do to try to decontaminate this site, which seems so polluted? What are the methods used, in layman’s terms, of course?
[English]
Mr. Mead: I am happy to speak in layman’s terms. This is a responsibility of the Government of Canada right now. I work for the Yukon government. We do not have direct responsibility for cleaning up the site. Prior to the transition to the Government of Canada, I happened to have the pleasure of being the director of remediation for almost 7 years, about 16 years ago. I do have some knowledge and background. I will translate that into “layperson speak” for you.
Essentially, the risk at Faro is because there are waste materials that are contaminated that have been brought to the surface and laid across the surface, and they react with oxygen and with water. With water and oxygen, they react and create acid. That acid moves through the rock and dissolves the metals in the rock and releases that into the water. Now you have water flowing with high levels of metals. That is fundamentally, in simple terms, the big risk at Faro.
What you have to do to manage that is to try to reduce the amount of oxygen and water that impacts those materials. It won’t stop, but it will slow down that generation of acid. As you slow down that generation of acid, it gives you a better chance of intercepting that contaminated water and preventing it leaving the site into the environment. As you intercept that contaminated water, you are able to treat it in a water treatment plant so that the water quality is adequate to release to the environment.
The other issue is that all these waste materials need to be physically stable. They need to not move around. If they are there, you want them to stay there. If bad things happen, such as storms and earthquakes and rain, you don’t want them to move. You want them to stay there. There are a series of dams in place. It is important that they stay stable so that all of these materials stay where they are and we can ensure that we can capture that acid-rich water as it flows through and off them.
[Translation]
Senator Miville-Dechêne: Thank you. The answer is very clear.
[English]
The Chair: To continue on that, we heard from an engineer who said that they are going to cover it. There was a question of whether it is it covered with concrete or with a vegetable liner. The answer was a vegetable liner. When you say that you do not want the rain or oxygen getting into the tailings, how will the vegetable liner stop the rain from passing through?
Mr. Mead: I can answer that question.
The Chair: Good.
Mr. Mead: Depending on the type of material that you are covering, some material has a little bit of a potential to liberate this acid. It is not very reactive or contaminated. Some material has a lot of potential to liberate acid and metals. Your covers will be different depending on the kind of material that you are covering.
Some materials that have a high potential to liberate metals will have a soil or vegetative cover, but they will also have a liner on top of them as well. There will be a liner, much like a liner that you might put on a pond in your garden. It will be thicker and bigger, but it does the same thing. It stops water moving through it. That will be in certain parts of the site.
In other areas of the site, there will be just a vegetative cover. Depending on how you construct that, it can reduce the amount of water. It will not completely eliminate it, but it can reduce the amount of water and reduce the amount of oxygen, which is important to slow the process down. As you slow the process down, it gives you the ability to intercept that water and treat it.
There is a combination of techniques, Madam Chair, that really depend on what the materials are that you need to cover. Altogether, they are combined to make sure that you either stop those reactions or you slow down those reactions and that you can completely collect all contaminated water.
The Chair: Thank you.
Senator Sorensen: We deal with a lot of complicated issues on this committee, many of which that I do not fully understand. Thank you for that explanation. It was excellent and spoken in terms that we can all grasp. I really appreciated both of the answers to those questions. It is very interesting.
My question has basically been answered. I was going to go down the road of what all of the parties see as a successful outcome of the Faro Mine process, if you want to elaborate any further on that.
I said to the past witnesses we had as well that I’m so intrigued. Everyone seems to love this amendment. We do not always see that. We do not always see the federal government, the provinces, territories and communities all in agreement. It is a beautiful thing. How does that get accomplished at a higher level, beyond your project? I know there are conversations about Clinton Creek and the Ketza River Mine and that maybe this is a model, a pilot, for how we move forward on some of those other projects. I will just turn those comments over to you to comment upon further. The way that I see it, for everyone involved, it appears to be, environmentally and economically, a win-win-win, which is, I guess, why everyone is pleased.
Mr. Mead: Thank you for those comments. Just to let you know, I’m a chemical engineer by qualification and a high school teacher by passion.
Senator Sorensen: I was going to say kindergarten teacher.
Mr. Mead: I was asked for laypeople, so I chose the kindergarten route.
Successful outcomes for the project. Back in 2007, and I was part of that group back then, we set objectives for the overall project. We set a series of objectives that were important. We did those in collaboration with the Government of Canada and the First Nation governments. First and foremost, we’re keeping people safe. That’s always number one. Second, we’re keeping the environment safe. They were the two cornerstones. Subsequent to those as well, there was a real desire to see economic benefits from the project flowing into local communities and benefiting local people. There was also, at the time, a real desire to see if it was possible to return that mine site to a land use that might be productive in the future.
Over the years, we continued to work extremely closely with the federal government and those First Nations governments on designing solutions and coming up with ideas and strategies. It was that real building block of collaboration over many years which has gotten us to a point where, as you have said, we are all agreeing, which is not always a common thing to see. That is the real driver of success to date.
Unfortunately, there are other mine sites in the Yukon that were abandoned and the responsibility of which have fallen to government, primarily the federal government. At this time, the Yukon government still has a much more direct role in those sites, much like we did at Faro prior to 2018. The lessons we’ve learned at Faro would suggest that there is a real opportunity to look at this model that we have at Faro for these other sites. When we made the transition in 2018, we certainly saw a greater acceleration in the cleanup of that site. There was much more activity. I think that largely everyone saw that as a real success. I think that it is a real likelihood that, over the next 12 months, we will really explore those other sites that you have spoken about, Ketza and Clinton Creek, in terms of the applicability of this model to improve remediation outcome, improve social and community support and really land in a consistent approach across the territory.
Senator Sorensen: Thank you.
Senator McCallum: Thank you for your presentation.
I wanted to go back to Senator Galvez’s comment about the tailings ponds. I had asked the question about what they were going to do with the tailings ponds, because there is 70 million tonnes and 320 million tonnes of waste rock.
We were told the tailings will remain in place, and there would be a cover put on it. You say the structures would be upgraded. With the increase in adverse climate changes, and they are getting worse, no one can guarantee safety. When you look at the dams that were built in Alberta for the tailings ponds, they are leaking. There will always be leakage. No one can guarantee that there won’t be. Why is the contaminated water in the ponds not treated? Even with dams in place, they erode. There is going to be some leakage. Why is there not a permanent solution to treating the tailings ponds?
I wanted to ask another question as well. Is the Faro Mine reopening soon? I understand there are B.C. investors who are interested. How would you see the mitigation and the reopening of the mine? How would that work?
Mr. Mead: If I may, can I answer the last question first?
The overall mine itself consists of two parts. You can imagine a dumbbell, and there is a road that connects both ends of that dumbbell. One side we call the Faro Mine, and the other side we call the Vangorda Mine. They happen to straddle what we call a watershed divide, so water that falls on Faro flows one way and water that flows on Vangorda flows the other way. There is currently a plan to allow a company, in partnership with the local First Nation, the Ross River Dena Council, to look to open the Vangorda side of the property. It is quite distinct and separate from the Faro side of the property. They do not interact. Water does not transfer from one to the other. The only linkage is a road. It makes it very possible to sever or cut those two pieces in half. You can deal with the Vangorda side very separately from the Faro side. That is what is currently contemplated.
The idea of opening the Vangorda side is that during the last days of operation of the overall mine, there was significant ore reserves left behind at the Vangorda property. There is now an interest to go back in and rework that property and site the mine on top of the old contaminated footprint and utilize the opportunity for mining to help address some of the remediation work. It is seen as quite an effective way to remediate historic liabilities and to offer an opportunity to develop and extract new resources. That is the current plan that is in front of us at this time.
I will go back to the questions about tailings and permanent solutions and treatment and water. The tailings right now are like sand. They are a solid material. As you mentioned, there’s 70 million tonnes of them. They are in a natural river valley. When they were placed there, the river was diverted around the edge and the tailings were placed in the river valley itself, and they are held in place behind a series of dams. The water is diverted around the tailings. It is clean water. It is kept clean and discharged. The water that rains or comes from snow that falls onto the tailings builds up, submerges the tailings and slowly flows down through those tailings. Like you said, the water moves down the system. That water is captured and treated constantly before it is released into the environment. There is a final pond at the end of this series. There is a series of steps to the tailings, and there is a pond at the bottom where they collect and treat that contaminated water.
The issue of climate change is real. We know that the climate is changing rapidly in the Yukon, and we are seeing climate events that we have not seen before. It is incumbent upon the federal government that when they do the designs of these structures, you have to design them with allowances for what you can model and expect in the future in terms of how much rain you are going to get, the intensity of the rain, how much snow you are going to get and the speed at which that snow melts. You have to design such that you can be adaptable to those climate changes. I know that the federal government right now is doing design work with that in mind, and we encourage them to carry on in that regard.
The permanent solution is the one being proposed. The permanent solution is to keep those dams there, cover those tailings and make sure that the diversion channel that goes around the edge is big enough and stable enough for the long‑term and make sure that you continue to collect and treat the contaminated water that comes at the end.
The only other option that you might have would be to somehow remove the tailings and transport them somewhere and render them in a different environment, but with 70 million tonnes of saturated tailings, that is very challenging. There is a huge risk to moving tailings. When you move tailings, you massively increase the likelihood of contaminants being released from them. If you go in and stir tailings up, it is much more likely that you get rapid leaching of those metals. The First Nation governments, Yukon government and the federal government agreed in 2010, if I recall correctly, that leaving the tailings in place was the safest and best alternative of the options at the time.
Senator McCallum: Did you say that the mine that will open will be operated on top of the contaminated site?
Mr. Mead: Yes. There is a part of this overall property called the Vangorda Mine, and that is where mining happened previously. There are waste materials deposited there. Much like is happening at the other side of the property, although on a smaller scale and more limited, as it is a much smaller part of the property, water is collected and treated as needs be. The mine would be put on top of that footprint.
What it allows you to do is, as you mine new material, it allows you to store that material and cover it, for example, on top of old material. Consequently you get a cover over both the old and the new. You don’t need two covers, one for the new and one for the old. It is a much more effective way of dealing with the liability that is there. By putting it as a part of an operating mine, the operating mine plan can account for and accommodate the materials that are there already.
Senator McCallum: Thank you.
[Translation]
Senator Audette: I’ll speak in French, if I may.
It was a very interesting presentation. I’d listen to you for a long time. It’s rare, because it’s a very complex subject. Thank you very much.
Like my colleagues, the technical side of this issue isn’t natural to me. However, I lived all my childhood in a mining region. It was my playground when I was a kid.
Based on your expertise, can you tell me if there are other remediation plans in Canada that look like this one? We know that a mine has a beginning and an end, whether it is bankrupt or at the end of life. With Canadian critical minerals strategy, will there be more something smarter or more responsible for future generations when the mining project reaches the end of its career?
[English]
Mr. Mead: I will offer an answer to that.
Faro Mine was permitted starting in the late 1960s, through the 1970s and 1980s. It was permitted and licensed with the regulations and standards that were in place at that time. If you tried to advance exactly the same mine plan in the Yukon right now, you wouldn’t get a permit. You are no longer allowed to mine in that way. There are much more stringent requirements not only on how you mine but also on the kinds of securities that you have to put up before you mine and while you mine, including the kind of progressive reclamation that you have to do during the time that you mine and also the obligations to engage and involve local communities and First Nations.
Faro Mine, thankfully, is a vestige of history. It’s an example of a system that was considered appropriate at that time. When it was permitted, it was the licensing and permitting regime of the day. However, fast forward 50 or 60 years, and we have learned in the Yukon and across Canada that we can do mining, but we have to do it differently. We have new regulations and requirements now that means mining today will look very different than the mine did back in the late 1960s when it began.
Senator Audette: Thank you very much.
Senator Massicotte: Thank you for being with us.
I know it is sour grapes and deals with the past, but you made a comment about how today it would be done differently. For a firm that does mining today, does it have to put up an L.C., a letter of credit, or some guarantee that they cannot leave the site without making sure that they pay for the costs of rendering the site suitable again? Is that the case? How do we avoid that ever again? Could you comment on that?
Mr. Mead: Certainly. I can comment within the Yukon context because that is the regulatory system that I’m familiar with and that we work within.
In the Yukon, a company must provide the Yukon government security for what is expected to be the cost of cleaning up the site should the company fail in its obligations. We collect security from all of the operating mines, and we set that security as our estimate of the cost should that company, in the next two years — we do it on a two-year cycle; it’s updated every two years — abandon the site, what would it cost the government to clean it up? We require them to provide us that security before they are authorized to mine.
Senator Massicotte: We actually do it? We don’t just say that we are going to do it, but we are actually getting that cash from the miner?
Mr. Mead: Absolutely. I do not have those figures at hand, but I do know that for one particular mine operating now, we hold $73 million worth of security. That is just one. We have three operating mines. I am careful with my words because on Friday we heard that one of our operating mines had closed down. We are just responding to that situation right now. The security that was provided for that mine may become important to the Yukon. We are actually doing that right now. It is something that we collect. We have a process in place, and it’s a well-established part of the Yukon regulatory framework.
Senator Massicotte: Thank you.
Senator Duncan: Thank you, Mr. Mead, for your presentation.
You were speaking about the remediation work at Faro and the ongoing process. Would you also elaborate, for my colleagues on the committee, on the Rose Creek diversion project as part of the remediation that has gone on at Faro and the success of that particular project?
Mr. Mead: I can certainly do that. It first started on January 4, about 15 years ago, when it was minus 35 and I was standing on the face of a dam when the water was coming out of rock where it hadn’t before. I have personal memories of that.
For those who may not be familiar with the Rose Creek diversion and the site, I mentioned that there was a creek or a river that the tailings had been put in. The river had been diverted around the tailings. That river is called Rose Creek. That is the Rose Creek River. Its headwaters are probably one kilometre further back than the mine site. It’s a very early part of that Rose Creek system.
Some time ago, new contamination appeared from waste rock that hadn’t been in place before. There was a need to do some large-scale upgrades, changes and improvements to that Rose Creek diversion system to make sure that we kept the clean water flowing across the site clean. We separated it from the contaminated water that was being produced, and we captured that contaminated water and treated it. Canada did a significant amount of work there in recent years. It is important to ensure that we can continue to maintain environmental control at that site. It is an example of the kinds of large civil works that are going to be needed at various parts of that site moving forward.
Senator Duncan: Was that Rose Creek diversion project also not particularly significant to the Ross River Dena Council?
Mr. Mead: Yes. I think it is fair to say that the whole site is particularly significant to the Ross River Dena Council. For those of you who have not had the opportunity to visit, it is in an area that the Ross River Dena people have used for millennia. It was largely their main hunting, medicinal gathering and culturally important area. The site itself has a huge historic value and continues to have value to the Ross River people. Primarily amongst that, the importance of maintaining environmental protection is absolutely paramount to those people who are very intimately connected to the land. Ross River Dena Council is very engaged in the project and has been for many years. They play a vital role in how we guide and the decisions we make on that site. For the Ross River Dena Council people, the river itself and Rose Creek itself, has particular significance. There was a part of that creek where, as long as oral history can track, people gathered to collect water to make special medicinal tea. That was literally in that Rose Creek component of the system. It was very important for that work to get done in that regard.
Senator Duncan: Would you count it, then, as a successful project in terms of the remediation at the Faro Mine site?
Mr. Mead: I think it is an example of a successful component of a large set of components that need to be carried out over the next several decades, yes.
Senator Duncan: Thank you.
Senator Arnot: I’m curious about whether you or anybody in the Yukon government have ever done a comparison of the total cumulative profits taken out of the Faro Mine over all the years it operated versus the costs now to remediate that mine? Did it cost more to remediate that mine for the people of Canada or certainly the people of the Yukon than all of the profits combined?
Mr. Mead: That question has been raised a number of times over the years. I am not certain if the federal government has completed that study. It was permitted and operated largely under federal jurisdiction. The profits from that mine would have become part of a federal system prior to devolution.
I do know that there is a significant research study that had been completed by Dr. Tony Hodge who works for Queens University. He has done a historic review of the Faro Mine. I believe, although I have not read it yet — it has not been released that long — that there is a financial component of that, but I don’t have the answer to whether it will cost more to clean up than the mine ever made. I do not have visibility to that.
The Chair: Very good question.
Senator McCallum: With the remediation project, the First Nations had requested independent oversight. How was that handled?
Mr. Mead: In the case of Faro, the federal government put in place something they call the Independent Peer Review Panel. The Independent Peer Review Panel was a panel of international mine remediation experts who were giving guidance, critical review and perspective on the strategies and the specific plans and designs that Canada was advancing. That continues to be in place right now. It has been in place for probably close to 15 years. I’m not entirely sure of when it started. I recall it, but I think it has been in place somewhere in the order of 15 years. That independent peer review continues to be a forum or body by which you get a degree of independent oversight from a technical perspective. On that independent peer review, they have experts in not just mine remediation but health impacts and impacts to Indigenous governments and Indigenous rights as well. That’s how the federal government chose to manage that independent oversight.
The Chair: Thank you so much, Mr. Mead. We have exhausted our questions.
We will suspend for a few minutes and then continue in camera.
(The committee continued in camera.)