THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, June 1, 2023
The Standing Senate Committee on Energy, the Environment and Natural Resources met with videoconference this day at 9 a.m. [ET] to study emerging issues related to the committee’s mandate.
Senator Rosa Galvez (Chair) in the chair.
[English]
The Chair: My name is Rosa Galvez. I am a senator from Quebec and chair of the committee.
Today, we are conducting a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. I would like to begin with a reminder. Before asking and answering questions, I would ask members and witnesses in the room to 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 will ask my fellow committee members to introduce themselves.
[Translation]
Senator Verner: Josée Verner from Quebec.
[English]
Senator Greenwood: Margo Greenwood, British Columbia. I’m here for Senator McCallum.
[Translation]
Senator Miville-Dechêne: Julie Miville-Dechêne from Quebec.
[English]
Senator Sorensen: Karen Sorensen, Alberta.
Senator Anderson: Margaret Dawn Anderson, Northwest Territories.
[Translation]
Senator Massicotte: Paul Massicotte from Quebec.
[English]
Senator Arnot: David Arnot, Saskatchewan.
The Chair: I wish to welcome all of you and the viewers across the country who are watching our proceedings. Today, we are continuing our study on the Canadian oil and gas industry.
For our first panel, we welcome, by video conference, a representative of the Inuvialuit Corporate Group, Mark Fleming, Chief Financial Officer. Appearing in person, from Kiwetinohk Energy Corporation, Pat Carlson, Chief Executive Officer.
Welcome, and thank you for being with us. Each of you have five minutes to deliver your opening remarks. We will begin with Mr. Fleming.
Mark Fleming, Chief Financial Officer, Inuvialuit Corporate Group: Thank you. For background, I’m Mark Fleming, Chief Financial Officer, which includes the portfolio of natural resources of the region along with economic development. Relevant to my role is being chair of Inuvik Gas Limited, chair of Ikhil Joint Venture, a current natural gas well, and executive on our natural gas development team.
The Inuvialuit Settlement Region represents the Inuit of the Western Arctic and contains significant fuel reserves. The North, in general, is composed of a number of micro-grids unconnected to each other, primarily powered by diesel generators. What this means is that the power corporations that support these grids have limited renewables allowed because of the stability that is required as part of the grid. For the vast majority of these communities, only 20% is allowed from renewable and other resources since it’s important that if the sun goes down and it’s not windy, we’re still able to power, provide heat and people can still cook. Many communities have already reached the 20% limit and are not able to have more renewables.
Still, with the size of the resources underneath the ground, the region imports the vast majority of its fuel. Fuel imports to the North either come by barge, road or, in extreme cases, by aircraft. Much of the fuel comes from Alberta or by ship from foreign ports. When ships are used, fuel lightering — or transferring — is used with barges in the middle of the Arctic Ocean. This process is inherently dangerous and one that the Inuvialuit, as the representatives of the Inuit and the custodians of the land, find concerning.
There are also significant carbon emissions coming from the transport of fuel. Inuvik Gas Limited, which is the natural gas supplier to the region, brings up propane, injects air into the propane and creates synthetic natural gas. This requires a number of trucks to be driving up and down the highway — about 42 hours from Edmonton — to deliver the amount of propane needed to support a town.
All of this leads to the fact that energy in the region is insecure. It travels large distances, and in many places can only be brought in once per year. Road outages and ice conditions can often leave communities stranded. Last year in our community of Sachs Harbour, fuel had to be flown in at extreme cost and impact to the region.
This kind of energy mix keeps Northern communities reliable on the South and means hundreds of millions of dollars are flowing out of the northern economy annually. Further, this leads the residents of Inuvik to pay over $35 a gigajoule for natural gas. The gas distributor in the region, part owned by the Inuvialuit in order to support its people, is losing money at this tariff. This $35 is an unsustainably low amount. By comparison, Ontario charges a variable rate of $7.88, including delivery, supply and transportation for their natural gas.
Inuvialuit Regional Corporation, or IRC, again being the government of the region, has evaluated a number of methods to reduce carbon, increase energy security, provide agency for the Inuvialuit, keep more money in the Northern economy, build capacity and reduce rates. When we’ve taken a look at the number of options available to us for energy transition and energy future, what we have found is that many of these are much further out and much more difficult because of the location and because of the grid.
To ensure a strong, stable future for the region, the Inuvialuit have looked at a number of projects. One that is really interesting to them, because of their resources, is using a local natural gas well to displace diesel in the region and to displace the amount of trucked propane to the region. It will also allow a clean synthetic diesel, removing the sulphur from the end-stage fuel.
Diesel has a higher heat capacity to be transferred more effectively on barges and truck. What this means is by creating both natural gas for the region and synthetic clean diesel, we will be able to more quickly offset other communities throughout the North that will not have local natural gas wells.
As stated earlier and one thing that we find very important is although renewables are a part of our energy mix and our future, renewables are not a short- or medium-term solution for the North. They are just not able to fit in the grids as they currently are, and they won’t be able to fit in the grids for quite a while into the future. Reducing carbon, sulphur and other emissions as quickly as possible is the best way to achieve our emission goals.
IRC, the Inuit body, continually fights to build this project and other projects for the betterment of the people in the region. Inuit, as rights holders, continue to be best suited to consult with and evaluate what is best for their regions. Inuit are watching their land disappear into the ocean and the people are unable to eat due to delays in implementing our views.
Finally, we would argue that regulatory bodies continue to be unaware of their own mandates, and that has caused significant delays in our ability to offset carbon emissions and to make fuel accessible to people who are continuing to live at or below the poverty line. There are tens of millions of litres and hundreds of thousands of trucking kilometres used to provide southern fuel in just the last few years, and price increases have meant that users will pay hundreds of dollars more each year for their heating fuel.
Replacing diesel with much cleaner burning natural gas as a transitionary fuel will allow communities to start seeing the environmental impacts in years as opposed to decades. While understanding that Canada has diverse energy needs, the North also has diverse energy needs. We have to be cognizant of the fact that we can’t leave the North behind just because they don’t fit into a box as to how we deal with our southern energy.
As an Inuit land claims organization, our goals are to better preserve the future for all Inuvialuit, and we again assert that IRC’s elected members are best suited to do that and come up with plans. Thank you.
The Chair: Thank you. Mr. Carlson.
Pat Carlson, Chief Executive Officer, Kiwetinohk Energy Corporation: Thank you for the opportunity to speak to all of you.
Modern industrial economies require a lot of energy. Canada, in particular, is a high per capita energy user among nations of the world. Canada has abundant energy resources: hydrocarbons, hydropower, wind, solar, nuclear and geothermal. The best sources vary by region.
For consumers, energy needs to be clean, reliable, dispatchable and affordable. Petroleum products have served us well because of the high-energy density that they possess, they’re easy to transport and we have systems to use them that have been established over many years of technical evolution. But the direct use of petroleum results in greenhouse gas emissions, especially carbon dioxide, and we are coming to a point where we can no longer use petroleum in our day-to-day functions, such as in our vehicles, lawnmowers, home heating and the heating of a mall and of this Senate building. We need to convert to a form of energy that is clean, reliable, dispatchable and affordable.
We can convert hydrocarbons to the clean energy vectors — electricity and hydrogen — and with carbon capture and sequestration, we can dispose of the carbon dioxide that is a greenhouse gas and damaging to the atmosphere.
For Alberta, energy systems can work well together. Wind and solar can actually be enhanced by natural gas peakers. Natural gas peakers are power generation plants that respond very quickly to the fluctuations in output of wind and solar. They can provide electricity to the grid on short response times. The systems that we’re putting in respond from shut-off to full capacity in less than four minutes, so the grid has to provide power for four minutes until it can be relieved by rescue supply from peakers. That enables a larger percentage of wind and solar to be contributed to the grid. Actually, gas can help get us greener from renewables.
I mentioned that natural gas peaker plants are important, so the natural gas combined cycle is more efficient, and more efficient means you use less gas and emit less carbon dioxide. When you couple that with carbon capture systems, then you can have a lower overall cost.
We need a new and expanded midstream business that converts natural gas from electricity to hydrogen. It’s a business that doesn’t exist right now. The technologies exist, but we have to insert it in our pipelines. We gather the gas. We transmit the gas. We distribute the gas. We have to insert in there, with the transmission, the conversion of gas to hydrogen and electricity.
We still need fossil fuel energy and will need it for many years to come. According to the International Energy Agency, about three quarters of the world’s energy still comes from fossil fuels. It’s a big challenge for the world and a big challenge and opportunity for Canada because of our technical capabilities and our resources.
Energy has to be used in a way that greatly reduces greenhouse gas emissions. This situation is a global challenge. It requires a global solution. Incentives and penalties will be required, but they have to keep the trade balance. They have to keep us harmonized with our trading partners. We need to get to a domestic consensus or as close as we can.
This is the message that I’d really like to leave with you: We have to get the regions and the federal government to stop arguing. We also have to get the political parties within the federal government and the provincial governments to stop arguing because we have to inspire investors to invest. Investors won’t invest if they believe that major changes in the fiscal regime will happen and that they’re unpredictable.
It’s very important for us to reach a general plan that everybody can buy into. Of course, it’s a transition and, over 50 years, there will be tweaks and changes. We will adjust, and everybody in the investment world expects that, but they expect to have a stable environment going in. We need to deliver that as Canadians for the benefit of our children and our grandchildren.
It’s a transition, but it’s urgent. It’s going to take decades, and we’re going to be busy with it, but we have to get started. The longer we wait for consensus or the ideal technology or policy to come around, the more carbon dioxide we put into the atmosphere. We have to work very hard to reach a consensus and get things going soon.
Sustainability and profitability are two sides of the same coin. For electrical systems to be profitable, they must be sustainable, and to be sustainable, they must be profitable. Those are essentially the key messages I have for you.
The Chair: Thank you so much. We are going now to the question period.
Senator Massicotte: My question is for Mr. Fleming. I wouldn’t mind jumping a little bit. I understand completely the difficulty getting energy to your sector and all the challenges. In fact, our committee travelled all of the North — it must be 6 or 10 years ago. Time flies. It was so obvious that you have a strong dependency on diesel, and you have to find solutions.
Basically, you’re saying go to natural gas, predominantly. That is my understanding of what you’re recommending. How does that fit into the overall package? I’m sure you understand where the government is going and what they want to achieve. How does that fit into the overall pattern? Do you agree with it? Does the federal government have the right strategy? Is it working for you? Could you comment on that?
Mr. Fleming: Yes. Thank you for the question. We feel that decarbonization is something that’s important to the Inuvialuit. However, we believe we won’t be able to achieve that right away. We understand that Canada has short-, medium- and long‑term goals with respect to the Paris Agreement and other international goals. We do feel that natural gas is actually a great transitionary fuel for the reason that the amount of transportation involved in the supply chain to get the fuel to the community is quite harmful to the overall environmental impact.
By staging a natural gas well in the North, we can create clean-burning diesel which, again, removes sulphur, which is a significant contributor to acid rain, and a lot of other pollutants. By staging there, we’re able to provide a supply chain that starts in the North and travels much smaller distances to provide fuel. At the end of the day, the amount of carbon is not materially reduced in the end product that’s burned, but it’s materially reduced in the supply chain, which can be again a significant portion.
Senator Massicotte: Can I ask the same question to Mr. Carlson? I hear you. I know where you’re going. How does it fit into the federal government strategy? Do you agree with the federal strategy?
Mr. Carlson: Basically, yes. Kiwetinohk has some minor disagreements with the federal strategy. For example, there’s a ceiling in the Clean Electricity Regulations. If you’re an investor looking at investing in a project and you think that you might be close to the ceiling, then you say, “I can’t invest because if I’m 2% over the ceiling, the plant can’t run. I’m going to invest a billion dollars.” The carbon tax works well. It’s a disincentive to emit, but it’s limitless. If the technology doesn’t work as well as you expect, you still have a power plant to produce. You just pay a higher carbon tax. The carbon tax can even be progressive so that the cleanest portion pays a lower tax than the dirtiest portion. In fact, that would work, too, but an absolute ceiling discourages investment.
As to shipping, there are three stages. There is the collection of energy, whether it’s sunlight or natural gas. There is the transmission of energy, and then the distribution of energy. Hydrocarbons are easy to transmit relative to hydrogen. Hydrogen is difficult to ship because the molecules are so small. If we transmit hydrocarbons and then convert them to hydrogen using existing or new pipeline systems, we can then convert to hydrogen electricity for local uses and distributed uses that are clean.
Senator Massicotte: Who are the investors? I’ve read your annual report. I get a sense of who your investors are, but are you having difficulty finding the money and getting people to invest?
Mr. Carlson: Yes. We’re a publicly traded company, and we feel that, relative to other publicly traded companies that are just in oil and gas and not in power generation, our stock price is low. Part of it is that, in Canada, as far as we know, we’re unique. There’s no one to compare us to. We’re taking that important step. We’re showing that the energy transition can be done and can be done profitably. We have the system right from the gas field all the way through to power lines in our business plan.
Senator Massicotte: Thank you.
Senator Sorensen: Welcome to our witnesses. I direct my question to Mr. Carlson.
You mentioned that the best clean and renewable energy to use varies by region, but at a high level, what forms of clean and renewable energy are most promising?
Then, to expand upon your conversation around peakers, which is the first time I’ve heard that term — but that’s interesting — what role do you see oil and gas playing in the “energy diet,” I’ll call it, in the years to come?
Finally, we just had a brief conversation. It was very convenient that you happened to be in Ottawa this morning, so thank you for being here. You just started telling me a little bit about the group you were here to meet with. What that group is doing, in the very brief time we have to talk about it, would also be of interest to show what the oil and gas industry is doing.
Mr. Carlson: Sure.
I’m not a designated spokesman for the group, but the group was assembled by the Ivey Foundation. It involves companies that see a new economy, and it’s called New Economy Canada. They’re looking for a changing economy and how to facilitate and communicate that, what can be done, how Canadians can contribute and how Canadians can excel and compete well in the world against our competitors in energy systems, both equipment and energy itself. Companies that manufacture equipment, Indigenous groups and labour unions comprise it. We’re an energy company that itself is in a transition.
It’s showing that there can be a consensus in Canada, and that there are people who feel it’s urgent and want to get on with action. I think there’s a consensus around the need for natural gas, but converted to hydrogen and electricity.
Senator Sorensen: And then on those earlier questions, what do you think might work best, and what role do you see oil and gas continuing to play?
Mr. Carlson: The best thing varies by region. For example, British Columbia has lots of natural gas in the northeast portion, but in the southwest portion — the Vancouver area — they have no capacity for carbon capture and sequestration. There’s no place to put the carbon dioxide, so hydrocarbons don’t work in that portion in the longer-term vision; they don’t work in that portion of British Columbia.
Alberta has lots of carbon sequestration capacity and lots of hydrocarbon resources, but we also have wind and solar. So some combination of that gives us clean, reliable, dispatchable and affordable energy.
Of course, in Quebec, they’re fortunate to have an abundance of hydropower. Ontario has hydro and nuclear. Manitoba has hydro.
The best thing is different for different regions. If you want energy that is clean, reliable, dispatchable and the most affordable, it varies from region to region, and that’s around the world, not just across Canada.
Senator Sorensen: Is a peaker something that can be used on any of those alternative methods?
Mr. Carlson: Yes, a peaker is a relatively simple electrical system. It’s designed to respond very quickly to fill in. With solar, the sun goes behind a cloud, and the solar output drops, so you could have a brownout if you’re just relying on solar. Technically, you can overcome that difficulty by having a system that responds very quickly to fill in that gap.
Peaker plants are designed to be operated intermittently and at a partial load. The first plant we hope to make a final investment decision about later this year is 101 megawatts, which is the size of the City of Grande Prairie, roughly. That’s just ballpark; that’s how much it would be. It can go from zero to full capacity in four minutes, and it can operate anywhere from about 5 megawatts to 101 megawatts. It’s designed to fill in just what is needed when wind and solar don’t provide the full requirement.
Senator Sorensen: Fascinating. Thank you.
Senator Miville-Dechêne: I have a question for Mr. Fleming.
You said that networks and systems aren’t designed and ready for renewables. I understand that, but is the solution to invest in more long-term fossil fuel infrastructure that will prolong the use of fossil fuels or use those investments to adapt and build the network or the grid for the use of renewables? Obviously, I know that’s a difficult question, but what is the best way: stay in natural gas or try to move more quickly in the transition?
Mr. Fleming: It is a difficult question, but I don’t think it’s one or the other. In Inuvialuit’s view on long-term energy, where available, we are increasing renewable resources. With the Inuvialuit area being a large delta with many islands around the North, transmission lines are not an option. Unfortunately, without transmission lines and community-to-community transportation, each one is its own energy island. As an energy island, a certain portion must be filled by an energy source that’s ready to go regardless of the weather.
What we aim to do over the medium and longer term is to look for new and renewable resources that provide higher energy capacities, look at different and new alternative technologies and we continue to test those technologies. Our concern is that we’re losing about a foot of shoreline every year to climate change. We don’t have the option to wait 10, 20 or 30 years to find the technology that will suit our region. We need to reduce carbon emissions now, and we feel this is the best option to reduce carbon emissions immediately.
[Translation]
Senator Miville-Dechêne: You talked about extracting natural gas in the Arctic. Is it purely for local consumption, or do you hope to export it?
[English]
Mr. Fleming: The Inuvialuit Petroleum Corporation is a not-for-profit. Its only reason for existing is providing energy security to the North. There are sometimes economies of scale with providing to the South. However, we have no plans and no modelling to supply anywhere except Northern communities that desperately need this fuel.
Senator Miville-Dechêne: Okay. Just one last question from somebody like me who doesn’t know the Arctic. Tell me about the problem with electricity and solar. I’m sure solar is difficult up there, but what about electricity, rivers or water?
Mr. Fleming: Unfortunately, there are a number of issues with rivers and putting hydro in for such a small population. Some of the populations in the region range from about 100 people on an island all the way up to 450 to 500 people. There are no rivers with the power, and there are no economies of scale for doing so.
It would also destroy local fish stocks. As you are aware, in the North, sustenance hunting and fishing constitutes the largest portion of their food, and by damming rivers, we make large ecological impacts.
With the grid being such a micro and small grid, unfortunately when you look at wind, wind doesn’t blow all the time. As you note, during the winter, there is no sun, which is when we need it the most. We have an energy research division, which has grown quite significantly, and we’re working with a number of different options. When looking at these long-term plans, we are hopeful that, in the 30- to 35-year time frame, we will see differences. However, in a shorter time frame, regarding this gas well, we are planning for this to be a 100-year well; we’re planning for this to be a stopgap measure to immediately provide savings to our people and environmental impact.
Senator Miville-Dechêne: Thank you.
Senator Anderson: Thank you to the witnesses. My question is for Mr. Fleming.
In your statement, you said the regulatory boards are unaware of their own mandates. Can you elaborate a bit on that statement, please?
Mr. Fleming: Thank you, senator.
One of the issues with this project that we’ve had, and it’s been very eye-opening for us, is that the southern energy regulators are not used to a northern landscape. Where we talk about gas generation, the Inuvialuit Regional Corporation — a great example — is a steward of the land, the owner of the land and the rights holder. Its primary interest is in ensuring that the land continues in a pristine form.
What we have found throughout the process is that the energy regulator has focused much of their attention on the consultation process, which the Inuvialuit have spent years doing and have successfully done, to the point where every single consulted party sent a letter to the regulator saying, “Stop consulting us,” all the way over to the fact that there were conditions, as we continue to evaluate the region and the land, where there are ice roads and other roads required. What we’ve seen when we try to clean up our activities from this exploration — and exploration is light in this case because the well is already drilled, but it’s bringing trucks in and putting in all these ground tethers — the energy regulator feels like they have to regulate the cleanup process as well.
For example, a creek two kilometres from the well site where we had built an ice road, gravel and debris built up. At the end of the season, Inuvialuit wanted to clean that up and remove the gravel and debris so that it wouldn’t destroy the fish stocks. The energy regulator said it was within their purview to approve such a cleanup. We were not permitted to do it without their approval, threatening Inuvialuit with jail time and million dollar fines for cleaning up their own land.
What that leads to, because the Inuvialuit have spent the last 40 years — and very successfully fighting for their rights which were taken away from them — is a much larger jurisdictional issue in this case, where under the bill the Inuvialuit are able to take control of the land and non-petroleum areas and really manage that process. But the energy regulator has spent most of their time attempting to regulate items completely unrelated to fossil fuels — land, consultations and other items. That has delayed the project approximately four years. Those four years have cost the region significantly. It is expected the cost of the well will increase by about 80% due to the delay of four years, during which I must admit hardly any review of fossil fuels has gone on.
Further, we have brought tens of millions of litres of southern propane up and hundreds of thousands of kilometres of trucks burning diesel fuel driving up those highways potentially turning over and spilling.
Overall, we found that the focus has been in the wrong place.
Senator Anderson: You have been speaking about the project, but you haven’t really elaborated on the project except to speak briefly to it being a well. Can you elaborate a little bit, please?
Mr. Fleming: Thank you for the question. This is my favourite topic because it meets every box that Canada could possibly ever want and the Inuvialuit could ever want.
So the M18 well is a natural gas well that was drilled by Devon many years ago and has put a plug in it, which makes it still accessible to us. It has 100-plus years worth of natural gas available to it. It’s in a region which is now accessible because of the local investment of the Inuvik-Tuk Highway which is the finishing piece of the Trans-Canada Highway.
What that has meant is that a previously inaccessible resource is now accessible with minimal disturbing of the land and minimal cost, which for the Inuvialuit has made all of the sense. It is also on Inuvialuit private lands. Inuvialuit private lands are the lands that were returned to the Inuvialuit rightfully upon the signing of the Inuvialuit Final Agreement. It is a controlled resource in their land which they can control.
The Inuvialuit themselves are the 100% owners of this well, and they will be the 100% owners of the facility that produces all the way down the chain. What that means is that the Inuvialuit — again as the local government, as the local rights holder — are able to control the safety. They are able to control the consultations. They are able to control the gas output. They are able to control the impact for the local Inuvialuit. This came to be as a great project.
What this will do is create jobs in a region where the average Inuvialuit earns somewhere in the $25,000-a-year range, while the average imported non-Inuvialuit is earning well over the $100,000-a-year range. What that allows is for a skill gap to be filled. What is important is, as most of us will remember, in the 1980s, the Inuvialuit region was subject to significant development. That development led to an entire generation of individuals being told that if you learn how to do oil and gas, you can be successful earning money being brought in from their tradition harvest, being trained and then the bottom fell out. We have a whole generation of individuals who want to support their families who have this specific skill set. We have a well that can support these individuals.
Further, we can reduce the amount of fossil fuels being trucked up the highway and create other fossil fuel products from this well if they support our mandate of reducing the overall carbon emission while also supporting the region.
Finally, what we have found is economic development in the North is very tough. Try owning a business in Ontario at $8 a gigajoule, and then try owning that same business where you have fewer people but you’re paying $35 for your heating fuel. It’s unsustainable. It leads to the high cost of groceries, to the high cost of transportation and to high costs for all of your other goods and your cost of living.
A significant portion of the Inuvialuit’s annual income goes toward all of these costs, whether it’s through the groceries or whether it’s through paying their heating bills. That leaves less money for them to invest for their future, less money for them to buy food and less money for them to be successful. This well allows for all of this to come together to reduce that cost of living and actually will reduce food insecurity, transport insecurity and energy insecurity all as a not-for-profit organization where every dollar we save by building this project efficiently is transferred directly to the Inuvialuit.
The Chair: Thank you.
Senator Arnot: Thank you. I have two questions, one for Mr. Carlson and one for Mr. Fleming.
Mr. Carlson, you talked about the need for a more collaborative or cooperative approach federally, a new ethos to work to build a consensus to move forward as fast as possible. I know you have done work with the Pembina Institute. I wonder what you might say about the need to educate the public in a more focused and concise way on climate change and build a communications program for the Canadian public to move the public in a direction where policy-makers can respond to a better understanding of the public of what has to be done and why in a transition to green energy. What would you say about the need for better education and communication?
Mr. Carlson: Thank you very much for that question. It’s a very important one to me on a personal basis. I have supported personally the Pembina Institute in its efforts to promote communication about climate change in Alberta.
I think it’s important for all Canadians. It’s one of the most important issues facing people on the planet. I think that a lot of the differences we have — we see it reported on the news between political parties and between jurisdictions — come from an ignorance and lack of understanding. If there was a shared understanding, there would be a better chance of coming up with a sound policy that people could stay more or less true to for a long period of time, it would reduce the investment risk and make moving forward quickly possible.
I think that’s a really important thing. In fact, I wrote a letter to the Prime Minister asking for that some three or four years ago I believe, before COVID anyway. I think it’s one of the most important things that needs to be done.
Senator Arnot: You haven’t got a response to your letter I gather?
Mr. Carlson: I think I did get a response, yes, not from the Prime Minister but from a cabinet minister.
Senator Arnot: All right. Thank you, sir, for that answer.
Mr. Fleming, what you’re saying is that in the North you have a very unique situation; it requires a special approach. You have difficult challenges and you’re very frustrated, I take it, with the fact that energy regulators and policy-makers don’t recognize or understand how unique your situation is, and you’re fighting a battle of non-understanding. It seems to me that you are in a very unique situation and you need to get policy-makers and all Canadians to understand that things have to be much different in the North. We all have a vested interest in having a unique and different approach in the North, is that right? Can you elaborate on that if you will, please?
Mr. Fleming: Yes, I think when we meet with the chiefs of staff or government officials, what we find is a one-size-fits-all approach is generally what is considered first. The idea that 35% of Canada’s land mass is completely run by 100,000 Inuit and is completely separate than the rest of the country. A variety of islands almost like when you go to the Caribbean and Canada says, well, each of these islands should be connected by a power pole to a hydro facility somewhere. You can’t do that; it’s not possible.
Each of these is their own distinct community and has their own distinct heritage. What is important is that we recognize the only individuals capable of deciding how their future should go are the individuals that live in that community and have voted to govern their communities. Each of these has their own government.
These governments — the Inuvialuit is a great example — have a land division; they have an environment division.
When I talk to policy-makers, what I say is by not getting a well across the line, I’m going to keep my job. But if I spill a drop of gas or destroy the environment, which is so prime to the Inuvialuit, that is where they will come back at me.
The main focus of these governments is the preservation of their land, the preservation of their people and the preservation of their environment. It is, first and foremost, safety. So when we hear that a southern regulator wants to check on whether we have asked someone down the street, who, by the way we walk down the street and talk to every single day — because there are only 3,000 people in Inuvik and 100 people in Sachs Harbour. We see these people and we have to look them in the eye every day. When we go to the grocery store, they are in the checkout line in front of us. Of course we know what they want. When they have issues, they don’t form a committee. They walk into our office or knock on our front door.
This process has been in the works for many years, and just because the regulator got involved four years ago doesn’t mean it started four years ago.
The Inuvialuit, again, as I say, because they are so distinct — and I appreciate your question — the Inuvialuit have spent so long building this project and building consensus that when the regulator asked for consultations, the letters back to the regulator, every single letter, from every single group, including consultation groups completely out of the region, just said, “Stop consulting. We have done consultations. We want this. If we have an issue, we’ll go talk to the real government of our region, the Inuvialuit.”
Senator Arnot: Thank you.
Senator Verner: My question is for Mr. Carlson. One of the objectives of the study is to determine how the oil and gas industry is competing against international competitors who have different taxation and subsidy levels.
[Translation]
I’d like you to tell us about the fact that Canadian industry must compete, possibly at a disadvantage, with those who don’t have the same objectives or standards to reach in the future. Could you explain a little more about the disadvantage industry is facing in this situation?
[English]
Mr. Carlson: Today, a large percentage of our production of oil and gas is exported, particularly to the United States. There are opportunities to export more hydrocarbons offshore, particularly as liquefied natural gas. Canada can compete, but as we move forward and as the globe needs to consider climate change and the importance of reducing greenhouse gas emissions, there will have to be harmonized policies and regulations between countries that trade. That’s something that has to be coordinated.
In that sense, we would hope that the Government of Canada would look to leadership from the United States in particular because so much of our trade is with the U.S. and the U.S. is such a strong economy among free market economies in Western democracies.
We can have internal debates, but in the final analysis, we won’t have complete say in how things go because of the realities of marketplaces and the realities of our size, position and influence in the world. That’s something that has to be taken into account. It doesn’t matter what the leader of this party says relative to the leader of that party, federally or provincially, or what the provincial position is relative to the federal position. If the United States determines something and we don’t fit with that, it may affect our markets severely.
Recently, I did an analysis. At that time, Alberta and British Columbia were producing 17 billion standard cubic feet of gas a day, and Alberta was using 10 gigawatts of electricity in Alberta’s use of electricity. If you converted that 17 billion cubic feet a day of natural gas production from Alberta and British Columbia into electricity, it would be 12 Albertas — 12 Albertas’ power consumption — that’s how big the problem is with just gas. If you take the hydrocarbon liquids we produce, that’s more than 20 more times Alberta’s power consumption. The problem for the Canadian economy goes way beyond our domestic need for power. There is what we produce and export as well.
We have to find ways that we can send clean energy. My counterparts’ comments that applied to the North also apply, to some degree, in the South — not necessarily to the same degree — but what energy you produce or collect from nature, how you shift that and how you use it depends on the region and the opportunities that are available in the region.
We can ship natural gas, which is cheap and easy to ship, if the user can sequester the carbon dioxide. That’s the easiest way to go. It’s very hard to ship hydrogen because the molecule is so small. It fits through other materials and leaks, and so it can’t be at a high pressure.
I hope that answers your question. It’s a different solution for different problems and different regions. One size doesn’t fit all in Canada.
Senator Verner: Thank you.
The Chair: Before the second round, I would like to ask some questions.
You’re saying that Canada exports its Albertan oil, 80% of it, to the United States. I think it’s higher than that. We extract our oil for export, and the United States refines it and then sells it somewhere else because the Americans don’t need our energy. They are independent with the back end and all they have. They don’t need our oil. So they refine it, and they sell it for a bigger price, I suppose, to international markets. My question is why is this situation happening? Why don’t we get the value that we should get from our oil here in Canada?
My other question is: Are you saying instead of increasing or concentrating in the production of oil, we should shift to natural gas in order to reduce our greenhouse gas emissions?
Mr. Carlson: Natural gas is inherently less polluting than oil because oil has a higher percentage of carbon relative to hydrogen, so the carbon to hydrogen atom ratio within the molecule determines how much carbon dioxide is emitted. So larger molecules, which come in liquid form in oil, generally speaking, for the amount of usable energy, we get more carbon dioxide. Natural gas is inherently cleaner.
I’m sorry about the percentage. I didn’t mean to indicate a particular percentage. I don’t know what it is. I did look up the International Energy Agency’s information which indicates that the world uses about three quarters or more of fossil fuels for the energy supply for the world.
And then please restate or remind me of the rest of your question.
The Chair: Why don’t we export directly to international markets? Why don’t we pass by the refineries in the United States that bring up the price of our oil? Because they produce all the aviation fuels, the diesels and the gas, and what we send is raw. No? That’s my understanding.
Mr. Carlson: Well, when you send crude oil, you’re sending one liquid to a market, and then it goes to a refinery. The refinery makes that one liquid into multiple products, such as lubrication oils, jet fuel, diesel fuel and gasoline. It’s easier to distribute the multiple products closer to the use. That’s one reason.
The other reason is that the investment climate, in my career, seems to be more favourable in the U.S. Canada doesn’t own a lot of the companies that operate in Canada. We have a satellite economy, somewhat, to the U.S. economy.
In terms of natural gas, if I may expand the question to include natural gas, we don’t have liquefied natural gas export facilities and the United States does. But we can get our gas to the U.S. liquefied natural gas export facilities, and that’s being done.
The Chair: Thank you.
Mr. Fleming, so we are clear on the difficult issue you are facing, what can this committee concretely do to help you? If we can make a recommendation to the government on your issue to help you, what can we say?
Mr. Fleming: Thank you. That is a very kind offer. It’s something that the Inuvialuit will find very kind.
What we would ask is that you discuss with the Minister of Natural Resources that this project is a nation-building project, that this project will reduce fossil fuels and help reduce carbon emissions and that the regulatory environment under the current bill is not one that is suited to be properly evaluating projects and properly following the consultation process.
The bill, as passed, has the ability for the minister to allow the Inuvialuit to be part of this process and to allow the Inuvialuit to help pass the consultation and other phases of the project. We would ask that the minister and government bring the Inuvialuit in, and in the future continue to bring the local Inuit government into it in more detail.
At this point, we would ask that the minister explain to the regulator the importance of this project — we understand it’s an independent regulator — and, most importantly, that the project has to meet certain timelines. Very specifically, the North has barges that leave every June and they get there in about September or October. So if the materials aren’t on the dock by June, then it’s another year of delay, and every year of delay is costing us millions.
What we would ask is that you ask the government to speed up the approval process.
The Chair: You mentioned a bill. Can you repeat what this bill is?
Mr. Fleming: I apologize. I had it written down and I lost it. It is the bill that created the Canada Energy Regulator. The Canadian Energy Regulator Act.
The Chair: Can you send the details to the clerk of our committee?
Mr. Fleming: I will do, thank you.
Senator Massicotte: My question was answered.
The Chair: It was answered. Any other questions? Okay.
Colleagues, for the second panel, we welcome by video conference, from Unifor, Mr. Dirk Tolman, President of the Local 707a.
Welcome, Mr. Tolman. Thank you for being with us. You have five minutes to deliver your opening remarks.
Dirk Tolman, President Local 707a, Unifor: Good morning, Madam Chair and members of the committee. I thank you very much for the invitation to speak with you today. I’m here as Unifor’s national executive board representative for the energy sector and as president of my local union, Unifor Local 707a, based in Fort McMurray, Alberta.
Unifor is Canada’s largest private sector union, representing 315,000 working people across the country in virtually every major sector of the economy. That includes nearly 14,000 Unifor members working in the energy sector, which also includes a large portion of workers in the oil and gas industry.
Canada’s energy sector is the lifeblood of our economy and supports nearly 1 million jobs across the country. As one of the energy sector’s main labour unions, Unifor knows first-hand just how important the energy sector is to the economic fortunes of Canadians everywhere.
My local union, Unifor Local 707a, has a long history in Fort McMurray, going all the way back to the 1960s. Our members have seen it all, booms and busts and the transformation of the oil sands into the huge economic engine that they are today. There’s so much to discuss about the current state of the oil and gas industry and how it is responding to the climate challenge. However, I want to focus on what I know best, which is the experiences of workers.
Oil and gas workers know that they are usually the first to be sacrificed when the industry faces headwinds or decides to change its business strategies. While Unifor members naturally want to see the oil and gas industry, along with the broader energy industry, thrive, we have no illusions about the risks that confront oil and gas workers as the industry adapts its business model to the realities of climate change. Those risks come from a number of sources: automation and employment of new technologies, stricter limits on carbon emissions and changing investment patterns.
We also know that those changes will only accelerate over the next decade, which means that the time to introduce protective measures and ensure no worker is left behind is now.
On that front, Unifor has been consistent in calling upon government at all levels to introduce a package of policy measures and programs that would help to protect not just oil and gas workers but workers across all industries that will be affected by the move to a lower-carbon economy. Such measures include an overhaul of Employment Insurance to improve support for workers transitioning between jobs, targeted training programs for workers in affected industries, sector- and workplace-specific risk assessments to determine how existing jobs can be transformed rather than eliminated and funding dedicated to providing income supports for impacted workers.
We’ve also called upon government to make sure those measures are tailored to the economic realities of specific sectors and regions. The government needs to recognize the different industries and regions that have unique characteristics, strengths and challenges that require customized solutions to ensure a fair shift toward a more sustainable future.
That is especially important in the Canadian context. In this complicated landscape, we need more social dialogue and stakeholder participation to make effective decisions and inclusive policies. When workers have a seat at the table and are able to participate in decision-making processes, they feel a sense of ownership and are more likely to support and actively engage in transition efforts.
Workers also need to see that there is money on the table. For oil and gas workers in particular, the lack of funding for workers’ protections is particularly frustrating when we see employers in the industry receive handouts in the form of clean tech, hydrogen and other tax credits without any guarantee that they will maintain our members’ jobs and livelihoods.
Members of the committee, I want to end by stressing the fact that Unifor members have a vision of what a truly dynamic economy of the future looks like, one where new forms of advanced manufacturing, transportation and resource extraction are powered by lower-carbon energy sources and where workers are thriving in jobs that have yet to be created. Unifor members already manufacture and operate sustainable transportation options, such as made-in-Canada electric buses, trains and subway cars. Our country will benefit greatly from realizing the potential of developing a strong local manufacturing base to build what Canadians need to move to a sustainable future.
We also need a strong energy sector in Canada, one that will include oil and gas for many years to come.
Once again, I appreciate the invitation to speak, and I look forward to answering any of your questions. Thank you.
The Chair: Thank you. We will go ahead with questions from senators.
[Translation]
Senator Verner: Thank you, Mr. Tolman, for your presentation. I understand that currently, many questions remain without satisfactory answers. The Canadian government announced an engagement process to ensure a fair transition. We understand there’s no satisfactory concrete action, or at least none leading to tangible change for your workers.
There’s also the fact that industry and industry owners seem to have already started changes thanks to government subsidies. However, your workers are not here at the table.
Currently, all the changes we want to make to move towards cleaner energy affect thousands of workers in various sectors. We’re all in favour of it. How do you want to move forward? The most important thing is for workers to suffer as little as possible throughout it all.
[English]
Mr. Tolman: Thank you. That’s a great question.
The impacts of changing from fossil fuel, I believe, are definitely far in the future, but the time is now to start planning and to ask what the workers want. They obviously want to keep working and making a good living. The question is where.
There are still a lot of questions in this whole process. Who is responsible? How much of the burden is on the worker, how much of the burden is on the energy companies and how much is on government? Ultimately, it will be a shared responsibility, but as I’ve said, it’s far in the future. The time is now to start planning, thinking and collaborating. We’ll get to what the workers want or can have eventually, but it’s in the infancy of the whole process right now.
Senator Verner: Thank you.
The Chair: Mr. Tolman, we know that the post-COVID period has brought record profits to oil companies.
Are you informed about how much of these record profits have been recycled in greening the oil sector and on the training and protection of oil and gas workers?
Mr. Tolman: From my own experience, I’ve seen the record profits of the company I work for. To ask how much is being recycled, there were record profits last year and early this year. Suncor bought out the Fort Hills project, so now they’re 100% owners of that. That is recycling for sure and putting more money into the investment and long-term success of Suncor. So there’s that. Other companies and what they’re doing, I have no idea, but there is strong investment in the oil sands by Suncor for sure.
The Chair: The reason I’m asking is because we read in the news about how much the wildfires affect the northern regions in Alberta. We’ve recently read in the news that many wells needed to be shut down because of the intensity of the fires, which affect hundreds of thousands of hectares. I believe that you must now need extra protection for the workers, such as respiratory masks.
Can you give me an idea of the new equipment that you need in order to keep working under these new conditions brought on by the wildfires?
Mr. Tolman: I first had experience with the wildfires three years ago when we were evacuated. They evacuated the whole city of Fort McMurray. We were off work or out of work for six weeks. As far as protection working before that, obviously, you’d be wearing a dust mask or something like that.
As for an oil well in a region that was in the forest that was on fire, it would be evacuated obviously. Right now, there is a fire near or in Fort Chipewyan and those residents have now been evacuated to Fort McMurray. They are in our city now.
The Chair: Thank you.
Senator Arnot: Thank you, sir, for coming today and telling us what we need to know. You have been very precise about what you want to see in terms of protection for workers. You’ve listed out the issues very clearly. You’re talking about regional approaches, customized solutions to the regions and how one size doesn’t fit all in Canada. You’ve also talked about the need for social dialogue and effective, more robust engagement, particularly with community agency and stakeholder agency, for which Unifor is a big player in the discussion that needs to occur. And that discussion has to take place with a background of knowledge.
I’m wondering from your experience what kind of education and communication is required. Can you describe some of the messages or ideas that you consider to be effective in creating an understanding not only in the industry but in the larger Canadian public, and what needs to be done to bring the public to a point where they understand what you believe they need to know? That’s my first question. I have a couple more if I have time, but I’m really interested to hear your thoughts on those issues.
Mr. Tolman: Thanks for that question. Yes, I think education of the general public is important. I think education for our workers is also important, to understand exactly what is happening with climate change and how much fossil fuel is affecting it. Obviously, everyone needs to understand that, but we need to understand the actual facts of what is happening with climate change and how we are affecting climate change, or fossil fuels in general. How much is it truly affecting climate change?
I can read one study today that says that climate change is a natural progression. We’ve had climate change before and we’ll have it again, regardless of what we do. Is that the fact that we should be adhering to? Or do we listen to other studies? If we stop doing what we’re doing now, will it affect climate change? I think that’s important for everyone to know. If we stopped fossil fuels tomorrow, how will that affect climate change?
Senator Arnot: Just one follow-up, if I can, sir. I like what you’re saying. I think I understand what you’re saying. I’m just wondering, what are the recommendations that you think we should put in this report that we’re going to make specifically with the issues that you’ve raised? Certainly, anything with respect to the engagement, the dialogue and the leadership on that. Unifor should be able to play a role in that in some way. What do you want out of this report that will help you and will also help the Canadian public?
Mr. Tolman: What we need in the report is action on economic transformation, or just transition, and the responsibility of it. I’ve mentioned before, obviously, there are three bodies responsible: the worker, the companies that are bringing in huge profits from the fossil fuel industry and the government. How does that happen?
We were in Ottawa in November, and we spoke to quite a few MPs. I think Unifor talked to 110 MPs in total. I think I had six or seven whom I met. There were differing views there. One MP said if the workers know the jobs are going, they’d better do something about it, so that was strictly the workers’ problem. Other MPs talked about extreme profit taxes, which could be funnelled into programs for workers. That would be funded by the energy sector, obviously, on their profits, but it would be run by the government because they would be collecting the taxes. That’s sort of two people responsible there, the government and the companies. Other MPs said we should be demanding that the companies have retraining processes in place and that they pay for it.
What I would want in the report is that we need to get started on this. Personally, my belief is we’ll be in the oil sands for 50 years. I don’t think the fossil fuel industry is going to shut down tomorrow, but we need to get something in place because we know that we’re going to be out of the business at some point. Fossil fuel-wise, yes, but still in petrochemicals there is still a need for plastics, manufacturing, et cetera, and pharmaceuticals. The simplistic view is if we’re not burning gas in cars anymore, there’s a huge decline in demand for fossil fuels.
Where are we going to with it? That has to be in the report. We have to get started. We have to begin the dialogue and get the studies going.
If we look at Fort McMurray only, we have a town of 80,000 people strictly in the oil sands industry. If you shut it down tomorrow, 80,000 people are going to move, be and work somewhere else. How does that happen? I get that will be a transition. Fort McMurray may not be 80,000 for much longer or 30 years from now maybe it’s down to 20,000 because there’s very little left in the oil sands, and that’s a gradual transition.
There’s a lot of work to be done, but I believe it’s just starting.
Senator Arnot: Thank you.
The Chair: I have another question that I asked to our previous witnesses. We know that 90% of our petroleum is sent outside of Canada to the United States for refining. I asked these questions also to CEOs of petroleum companies, and one of the answers, among others, was that there’s not enough investment to construct refineries or there aren’t the skills to operate refineries. Yet we know that in Quebec, where I live, we have two refineries.
Our oil is sold at a very low price because it’s crude, it’s heavy and it needs a lot of refining. We don’t have refineries here that can deal with heavy oil. In the workers’ opinion, could this situation have been addressed in the past so that we could have obtained better prices for our natural resources?
Mr. Tolman: For the record, I’m a heavy equipment operator in the oil sands, so I’m certainly not a petrochemical engineer. A simplistic view on this is why aren’t we mining the product and shipping it to refineries in Alberta or Canada and selling it in Canada? As I’ve said, it’s a simplistic view, I get it, but it was recommended by our provincial government years ago that we need the refineries here, we need value-added here to keep the product in Canada, to make profits on the byproducts, whether it’s gasoline, naphtha or whatever it is. There is a market, but we’re not taking advantage of that. We are shipping to our only customer, which is the U.S.
In simple terms, more refineries in Canada and getting the value added from our product would be beneficial.
The Chair: Thank you.
Senator Greenwood: Good morning and thank you for being here. I have a question. I wondered if these kinds of conversations have happened among the workers and your colleagues. I was wondering about the environment. I know you could be there another 50 years, as you were saying. If we had 80,000 people who had to move, that’s huge. Where would they go?
But what would happen to the land? What’s left behind after 50 more years of the tar sands? What are the conversations around the land?
Mr. Tolman: As far as what’s left, the projects going on right now are reclamation projects. Many areas in this area have been reclaimed from oil sands mining over the last 50 years. What would be left — again, the government regulations on reclamation are there. You mine the land and you reclaim the land. There are huge tracks of land up here that have been reclaimed that are vibrant forests and are home to wood bison, all kinds of animal life, including birds, buffalo, fox, everything. Like I said, vibrant forests, marshes, et cetera. The land has been reclaimed and I would insist that the land continue to be reclaimed.
Senator Greenwood: Does that include the waters?
Mr. Tolman: The existing waters or the waters that were there before, yes. Obviously, the issue at this point is the tailings ponds, and I get that. Part of mining is tailings. At Suncor, in particular, we have the first reclaimed tailings pond. Again, it’s a vibrant ecosystem right now. At Suncor, we’re certainly all very proud about the fact that a tailings pond has been reclaimed. It’s certainly hope for the future.
The Chair: Thank you.
Senator Massicotte: I wouldn’t mind getting your thoughts. It’s a complicated question, and maybe it demonstrates a bit of frustration on my part.
This week, predominantly, the major oil and gas companies, international companies, have reported on their financial results in preparation of their shareholder meeting. In each case, there have been a bunch of resolutions about how these companies could become more responsible for environmental change and so on. There are some very good examples, like Shell, which is acting very responsibly, and many of our Canadian companies are very responsible and doing a good job. However, some of the major international companies basically refused any consideration of the climate change resolution proposed by a bunch of environmentally sensitive people.
Do you have any comment on that? Is that something we should accept? In fact, you mentioned in an earlier visit to Parliament, you met some people who thought we should tax — obviously the governments are sovereign, you could tax the excess profits they made which is significant and probably temporary. What would your comments be in that regard?
Mr. Tolman: I think when you have an industry that’s facing opposition from environmental groups, or any group, it is going to oppose that group or believe that maybe there’s a group that’s out to get the industry. If we look at just the fossil fuel industry, certainly there are climate activists that speak out against the business. Like I’ve said earlier, what facts are we relying on? Where are the studies? If we weren’t here, what effect would that have on climate change? Would climate change still happen? I believe it would. Can we do something to reduce the effects? Yes, I believe we can. As you said, in Canada, I think most industries do believe that and they have green energy plans or plans to reduce emissions.
The conflict between a fossil fuel company and climate activists is always going to be there. I think national governments should regulate their industries. If you’re in a country that is going to let you run your fossil fuel industry with no regulations or no limitations, obviously you are going to have problems.
I don’t know if that’s the answer you’re looking for.
Senator Massicotte: I appreciate it. Thank you.
The Chair: Mr. Tolman, I have a question. At the beginning of your speech, you mentioned that you want the workers to have a position at the decision-making table.
I was wondering if the industry or the company shares their plan with you? You said the governments give regulations. We have to get the greenhouse gas emissions reduced. Are the workers informed of what steps, activities and actions will occur that are going to bring these greenhouse gas reductions into reality?
Mr. Tolman: I believe all of the companies are communicating to their employees what their initiatives are. Suncor, for example, certainly kept us informed on the coke boiler replacement project which will reduce emissions, and they will go to a natural gas-fired cogeneration plant. They will have two cogeneration units and then get rid of the coke-fired boilers. That’s going to reduce emissions. They do keep us informed, yes.
The Chair: How much of the greenhouse gas emissions have been reduced on your site?
Mr. Tolman: No, I don’t have those statistics in front of me.
The Chair: Okay.
Anybody else have questions? No? Okay. So we have exhausted the questions. Thank you so much, Mr. Tolman, for your presence. I will adjourn, but before adjourning, I will ask my steering to stay so we can finish the report on the budget. Thank you so much.
(The committee adjourned.)