THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, October 24, 2024
The Standing Senate Committee on Energy, the Environment and Natural Resources met with videoconference this day at 9:02 a.m. [ET] to study emerging issues related to the committee’s mandate.
Senator Paul J. Massicotte (Chair) in the chair.
[Translation]
The Chair: Good morning. My name is Paul J. Massicotte. I’m a senator from Quebec and the chair of the committee.
Today, we’re conducting a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
I would like to ask my fellow committee members to introduce themselves, beginning on my left.
[English]
Senator Arnot: David Arnot, Saskatchewan.
Senator Fridhandler: Daryl Fridhandler, Alberta.
Senator D. M. Wells: David Wells, Newfoundland and Labrador.
Senator Prosper: Paul Prosper, Nova Scotia, Mi’kma’ki territory.
The Chair: Today, from Carbon Connect International Inc., we welcome Darcy Spady, Managing Partner; and from General Magnetic International Inc., we welcome Al Duerr, Chief Executive Officer and former mayor of Calgary. Thank you and welcome. Five minutes is reserved for each of your opening remarks.
Al Duerr, Chief Executive Officer, General Magnetic International Inc.: Thank you, Mr. Chair and members of the Senate. First of all, thank you for allowing me the opportunity to come here today.
My background, as was mentioned briefly, is in government, oil and gas clean tech innovation, and as the vice-chair of the Methane Emissions Leadership Alliance, which includes solution providers in Canada in the methane space.
I appear before you today as a frustrated clean tech practitioner dismayed by the continued focus on aspiration over action on climate change. While frustrated, I’m also optimistic that Canadians can play an outsized role in addressing the global climate challenge.
Many consider climate change an existential threat, but if it is an existential threat, why don’t we treat it as such? I’m frankly tired of all the aspirational comments made and the endless symposia and gatherings of thought leaders when the obvious things that can be done right now with known technology and proven outcomes aren’t being done.
While Canada has been an industry leader in methane abatement for years, I’m concerned that we’re rapidly losing momentum to other jurisdictions, particularly the U.S. and the EU. Why the focus on methane? The best example are the two programs in Alberta that, in 2023, cost $40 million of Alberta government money. These incentives resulted in annual emissions reductions for $40 million, equal to the largest carbon capture and storage facility in Canada, which was built at a cost of about $1.3 billion.
This was all implemented with proven technologies, mostly Canadian, over just a two-year period, but the reality is we have had virtually no new Canadian methane emissions reduction incentive programs offered over the last couple of years. The last federal program — the $675-million Emissions Reduction Fund, or ERF, program — actually saw roughly $400 million removed from the program and reallocated into general revenues. There has been no spending on the lowest-cost opportunity for large-scale emissions reductions. Yet we assert that we have an existential crisis.
There’s a lot of angst right now about the impending federal regulations along with emissions caps and potential production caps on the oil sands. While I accept that the intent of all these initiatives is well-meaning, in practice, my fear is that they can result in significant negative outcomes, not just economic but environmental as well. I’m more than willing to elaborate on this during questions, but to put it simply, the demand for energy is not going away soon. Billions of people are still trying to stop cooking and heating with kerosene, charcoal and animal dung.
Given the demand, the question is who will supply it? Will it be Canadians or other responsible producers, or will it be jurisdictions with no regulations or tools to manage emissions? I spend a lot of my time internationally promoting clean technologies in oil and gas production. Nowhere in the world — other than those jurisdictions that prefer to offshore their emissions — is there any country trying to reduce fossil fuel production. Africa, South America and Asia are all increasing production. The problem is that in most of these developing nations, they don’t have the regulatory frameworks and the tools. There’s little incentive to implement emissions reductions other than through voluntary efforts.
But there is a way forward for Canada to play that outsized role I mentioned. There are three things that I think the federal government could do right now that would have a major impact. The first is to reallocate the $400 million removed from the federal methane emissions reduction program back into a functional methane program. The last program didn’t work very well. Don’t reinvent the wheel. Just top up programs that worked well in the past and deliver critical emissions reductions within a year.
The second thing we can do is support developing countries that need help from a regulatory and policy perspective in emissions measurement, management and mitigation. This can be as simple as providing supportive funding for the existing Canadian clean tech ecosystem to deliver these services and technologies.
The third thing is to earmark Canadian funding to international financial institutions, or IFIs, for climate change programs focused on methane emissions reduction. Every country in the world earmarks their funding — every country but Canada. If climate change is an existential issue, then our IFI funding partners should know that this is Canada’s priority and, further, that we would like to see Canadian companies and institutions deliver these programs.
Thank you for the opportunity to provide these brief comments, and I look forward to questions.
Darcy Spady, Managing Partner, Carbon Connect International Inc.: Canada is a resource nation. We need to celebrate this and own this space. In my opinion, we need to be global leaders in resource management. The world needs to think of us first when it comes to management of these resources, especially related to climate change and energy transition. When water, minerals, wind and energy are the challenge, I believe Canada should be the answer.
The global market in energy solutions, especially while recognizing climate change, is massive. We, as Canadians, are truly global leaders, but we have a recognition problem. Even though our oil and gas industry are the fourth and fifth in the world from the perspective of the volume of oil and gas produced, we are perceived at about number 25. We cannot take a responsible leadership position unless we are in the room.
Let me explain why I say these things. When I graduated from the University of Alberta in Edmonton in 1986 with a degree in petroleum engineering, I was proud to be supplying oil and gas energy to the global market. Some 30 years later, after a rewarding career, I became the international president of the Society of Petroleum Engineers, or SPE. I served my three-year obligation, and I’m now the incoming president of the SPE Foundation. During my tenure, I visited 49 different countries, and I interacted with a subset of SPE’s 170,000 members at the time. I was amazed by two different things: first, the lack of leadership on climate change issues in the global oil and gas industry at the time; and second, how far ahead Canada was with policy and regulations, leading to a very robust infrastructure. To me, that statement — those two things — frames a very significant export market. We can be the global leaders in utilizing the highest practices in resource development and resource stewardship, and we can deliver economic benefit to the country.
I can recall a quote from our Prime Minister some years ago who said, “We no longer have to choose between the economy and the environment; we choose both.”
Given that we have this incredible position, I believe we need to capitalize on this expertise. Action, not just dialogue, is essential. We have proven practices that have removed millions of tonnes of CO2 equivalent from the atmosphere. We’ve increased the efficiency and, hence, our bottom line. It is essential to have government support during this process, primarily national but also subnational, federal and provincial. Just this week, I received a direct request from a state-owned oil company from the Caspian region for managing an emissions reduction. In their case, by following the UN guidelines for emissions inventory, they’ve concluded their emissions problem might be 10 times worse than they originally thought. They have a problem.
We, as Canadians, have the solution, but we will have to direct some of the aid that we pledged to the international community as a government — mostly through IFIs — to assist Canadian companies in this regard. If we do not, others such as the U.S. and Norway are waiting for the opportunity this week — as well as last — and they’ll have funds directed to solve the problem. Why can’t we take a government-to-government leadership position and provide the expertise?
At my company, Carbon Connect International, we just concluded a program entirely funded by large emitters that created probably the largest methane emissions database in the world, and then we followed that inventory with a program that removed 16 million tonnes of CO2 equivalent from the atmosphere. All of this, done for the Alberta Ministry of Environment and Protected Areas, was done for $40 million. This program was a massive global success — not to mention all the efficiency gains in the process — and it can be duplicated globally everywhere.
I am being asked by companies and governments in Argentina, Brazil, Mexico, throughout the EU, Oman, the U.A.E. as well as the Association of Southeast Asian Nations, or ASEAN, members all to help them do the same. They’re asking us because Canada is the leader. All of these opportunities require funding, most of which fits inside the parameters of the World Bank, the Inter-American Development Bank, the European Bank for Reconstruction and Development, the Asian Development Bank, et cetera. Our competitors are funded by aid directed by their government, but we are not. We have the good practices, the expertise and the requests — it’s ours to lose as Canadians.
I want to give evidence to this committee now and have the discussion that, hopefully, we — in the oil and gas industry — can take a strong export leadership role in global climate change mitigation, removing energy poverty and assisting the energy transition, but we will need the directed financial support of our government and Global Affairs Canada to make it happen. Thank you very much.
The Chair: Thank you very much. Now it’s time for the question period.
Senator Arnot: Thank you, witnesses, for coming today. I just want to set some context by saying that I believe a significant task for government and your organizations is to convince Canadians that the reduction of greenhouse gas emissions is necessary, achievable and financially viable. This committee has heard from many witnesses that the oil and gas industry is committed to and spending significant sums of money on innovative technologies to reduce greenhouse gas emissions and other environmental impacts, but there seems to be less optimism about the 2030 targets. I think part of the reluctance is based on two factors: The available technologies to reduce emissions are costly and not universal in the sector, and there is a lot of money to be made in the oil and gas industry using the existing technologies.
Mr. Duerr, as both a former mayor and an industry leader, how do you see the public policy role in supporting innovations? You talked about topping up programs, but I’m wondering about communication and education to the general public. If this is a serious existential issue, why hasn’t there been significant money placed in that in order to get the public behind what needs to occur using the power of education?
Mr. Spady, in your experience as the former SPE president, how does Canada compare to other countries in addressing methane issues? What can the oil and gas sector learn from global best practices? Again, I’d like you to comment on the failure to effectively communicate to the public the need to make these kinds of investments and to make sure that Canada can take its place as a leader on these issues. I really want to give you a platform to amplify what you’ve already said, because I believe what you’ve said is very important for us to hear.
Mr. Duerr: Senator, thank you for those comments. You’re absolutely right; as an industry and as a community, we have to tell the story. Climate change is real. I believe it is an existential threat. Some people get very offended when you say that, but the bottom line is that it is real.
The challenge is this: How do we deal with this? I personally have spoken to the Canadian Energy Executive Association. I was a guest speaker, and, frankly, I had to tell the industry that we have to start getting a little bit more international and not be so myopic.
Canadian companies are all over the world. We’re in Africa, the Middle East, the North Sea and Latin America — we are all over the world. Over time, although the mantra in industry generally became “focus, focus, focus,” which we saw happening throughout the 1990s in particular, Canadian companies aren’t out there in the world yet. Mr. Spady can elaborate on this. We have probably the highest methane emission standards, programs and real action of any jurisdiction in the world, but nobody knows about it.
Industry has to be out there, and industry does have to be more vocal about this and not just deal with this as a Canadian battle. It’s not just an issue in Canada. It’s not East versus West, or producers versus non-producers. There’s an opportunity here, and what we’re trying to convey is that there is a huge opportunity for Canada internationally, but we have to help. If we’re here to suggest to the Government of Canada, “Start directing your IFIs to create a focus and create some funding, and put some of this funding into helping the clean tech ecosystem do the job and help some of these developing countries,” we have to convince Canadians of that as well. We have to convince Canadians that this is the right thing to do.
I speak to those organizations. I’m very vocal out West about the need to do this. We are asked to speak internationally. In the Middle East — the largest oil and gas show — we are asked to talk about methane. More recently, when I was in a forum with international CEOs and when I told the Canadian story, I played my role as a good Canadian by saying, “Well, if I’m wrong here, if we don’t have the largest database, and if we’re not doing the most in terms of action, just tell me because I’m always willing to learn.” And there was a silence. Then the first person — from one of the largest oil service companies in the world — said, “Mr. Duerr, you’re right; Canada is doing more.”
This was from someone — not an Albertan. By the way, there were no major Canadian companies there. All the clean tech innovators were there, but there were no major Canadian companies. Yet when you come here, you’ll see companies from Europe and from the Middle East at all of the major oil shows, but we’re not there. So we have a big communications challenge here in Canada, and we all have a responsibility to get on board.
Sorry if that was too long. I’m a former politician.
Mr. Spady: I would love to add. I hope I can be clear. You had so many questions, so thank you, Senator Arnot, for that question.
We stand at the top of the pile. Part of it is because since 1999, we’ve had the best, the toughest and the most consistent practices put on us by governments that had good policy behind their decisions. I was a producer and CEO of a small oil company, and in the time that came in, I wasn’t a very happy camper at the time. It seemed like an increased obligation and increased taxes and things like that, but in the end, we are now the experts. We’ve been practising this for decades, and we practise it because it’s efficiency.
Regarding your colleague from the offshore in Newfoundland, you guys were leaders because you can’t have methane floating around offshore rigs. It’s an onshore brownfield issue, of which we have a lot of those producers. And so does the world. So does Romania. So does Thailand. So does Indonesia. There are countries all around the world that have a lot of brownfield onshore. We can really be the leaders in that space. We’ve done it for 20 years, and we have the best practices. We just need to open the door and tell people we have the best practices.
I think one of the problems we have as an industry is we don’t like talking about it. We’re myopic. Many of my colleagues spend most of their time arguing about whether climate change is real or not. Frankly, I don’t really need to be bothered with that. It appears that this is the track we’re on. It appears that we have the resources to be the best. It appears we’re a natural resource nation. Why on earth aren’t we giving that message?
My message to my peeps is: Be human. Let’s be part of the fabric of society. Let’s think about energy poverty. Let’s not be arrogant or engineers who like to tell people how smart we are and they’re not. We have a real problem internally to make sure we’re part of society, but externally we are amazingly far ahead because we’ve been practising, not just estimating.
When talking about other jurisdictions, the EU brought in new methane regs in May, and they’ve gone from a complete estimation basis to a complete measurement basis. It will be very difficult for them to go to every single point of release in the entire area and get a full measurement and mitigation in one quick cycle. We’ve been doing this for 10 or 20 years.
I hope I answered most of your questions.
Senator Arnot: Thank you. That’s very helpful.
Senator D. M. Wells: I’m going to have a little bit of a preamble on this. I’m going to ask Mr. Duerr as a former politician because that headspace never leaves the political world.
In your opening remarks, you mentioned angst and you mentioned existential crisis a couple of times, and then a third time when you were answering one of the questions, you talked about how billions of people are trying to get off other fuels; you mentioned cow dung, coal and others. I’m not sure if they’re trying to get off; they’re just trying to survive. In India, they just want warm food and a warm home. I’m not sure if they’re really trying to get off. Maybe the government is, but the 1.4 billion people are maybe not. It’s also in China and other large consuming nations.
Canada’s global emissions are 1.5%. However, 10 years ago, they were 1.6%. Our percentage is going down, which is laudable, but our percentage is going down because others are going up. For the massively high cost of bringing us from 1.6% to 1.5%, and maybe our next target is 1.45%, how much of a difference is this making globally when we’re probably — actually, we are. I looked up the top emitters. China, the U.S.A. and India are about 60% of global emissions. We are 1.5% and decreasing. The EU is fourth, so that’s 27 countries. It’s Russia, Indonesia, Brazil, Japan, Iran and then Canada. So we’re about fortieth in global emissions. We’re nothing. If you removed Canada from the map entirely, our emissions elimination would make no difference to global emissions.
In fact, I would think that if Canada were removed, global emissions would increase because our technology, our clean fuel and all the things that we supply to the world — Mr. Spady mentioned many of them — would disappear. We’re well regulated. In the Newfoundland offshore, we don’t have to remove the oil from the sand. We don’t need rail. We don’t need pipelines. We just put it to market, and it’s easy and requires no refining. It’s the colour of apple juice, and it’s inexpensive to remove.
Are we going down a path where — and we hear it from politicians all the time — the world is burning. We had the minister here two weeks ago. I’m sorry for the longer preamble, but none of my other colleagues are here, so I’m going to take some of their time.
We had Minister Guilbeault here a couple of weeks ago talking about the Jasper fires, which is an important topic for us, and about climate change. When questioned about the recommendations that were made to his department on removal of deadwood that had been there for years and drying out for years, and that the fire was caused by lightning, I’m going to be pushed hard to agree that it was climate change that caused the fires in Jasper.
All that to say, are we putting in way too much? And I like the idea of the market having a big say in the energy mix, recognizing there’s a global consensus on transition. Are we putting too much, and are we spending these massive amounts — you mentioned some funds that were available. Is Canada going down the wrong path? Is the juice worth the squeeze?
Mr. Duerr: Well, senator, you’ve given me a lot to respond to.
In many respects, I would have to concur in principle with what you have just said in your preamble. In Canada, we used to think — and our industry was correct in saying this early on — when we had all the methane regulations and other regulations while just south of the border they didn’t, we were at a disadvantage. Canadians operated at an economic disadvantage to most jurisdictions in the world.
I remember not that long ago, we would hear “dirty Canadian oil” out of Europe when, in fact, most of that was just offshoring the oil out of Russia. That was a reality. There’s so much being said, and there’s so much discussion. When you cut through the top of it and you get down to the reality, it’s a very different picture.
I would concur that someone in India just wants to heat their home with kerosene or whatever, but they are trying to get off it because it’s not a very effective way of doing it. There are a lot of other particulate issues. They would like to have other sources of energy.
The point being, though, I try to not be sidetracked by a discussion of whether climate change is caused by sunspots or by carbon. The bottom line is we know that carbon is a warming element, and we know that’s the case. There may be other factors, but I always just say, “Don’t we want to pollute less? Don’t we want to be as good as we can be?” I said to our industry that Canada’s problem over the last 10 or 15 years is that we were overregulated relative to the rest of the world, but now it’s a significant advantage to us because we are, if not the best in class, close to the best in class on almost all fronts.
Your point about Canada being a very small part of global emissions is absolutely correct. That’s factually correct. How your point relates to what we’re saying is that if you think of the dollars that we spend to squeeze out that last little bit in Canada and if we applied even a portion of those dollars internationally to support those countries that don’t have the resources to deal with their low-hanging fruit, we could have a much greater outsized impact over anything we could do here in Canada. It is a global ecosystem.
The bottom line is, to your point, if we stop production in Canada, someone would just fill the gap. The reality is — again, it’s a fundamental fact — there are a lot of countries in the world that are still buying Russian oil despite the sanctions because it’s cheap and they need it. There will always be someone coming to fill that gap.
I spend a lot of my time in Latin America working with companies to introduce our clean technologies because they usually improve operations as well. No one is reducing production in those jurisdictions.
You look at Africa right now. All around Africa — internal to the continent but offshore as well — they’re all increasing production. The African chamber of commerce recently said, “I hope we don’t get into a discussion which is around environmental” — what is the term I’m searching for? The bottom line is they didn’t want environmental colonialism. They said, “Are you telling us we can’t replace our imports? Are you going to tell us that we can’t earn money and that we should rely on aid?” That came out of the African chamber of commerce, and it’s similar around the world.
The bottom line is I believe we should be the best we can be, but to sit here and pretend that if we just do this, we’ve met our global commitments and the world is going to be better, then we’re kidding ourselves. If we even took the existing money, which is our IFI money — you could talk to most of our Canadian tradespeople around the world — we are the only country of any significance that does not tie its aid to its priorities. There is nothing in our aid that is tied to the environment and to emissions reduction. Yet I can tell you about the competitive countries that we’re dealing with — Mr. Spady mentioned the United States. The U.S. goes in there and provides all kinds of money to U.S. companies to do work in these jurisdictions.
We’re so good at this, and we’re not having the impact that we should, so that’s the change that’s needed.
I don’t want to get into a real debate around the details of where Canada sits. We’re a relatively small portion, but our impact could be huge if we choose to change our practices and choose to focus on where the low-hanging fruit is, and, frankly, that’s mostly outside of Canada.
The Chair: Mr. Spady, did you want to add?
Mr. Spady: I’ll simply add that Mr. Duerr referred to the outsized impact. The multiplier here, in direct answer to your question, is the leadership and experience we have. We can multiply our impact more than one or two times by taking our technology and expertise abroad. We can change that 1% to 10% of the world’s emissions using our skills.
Senator D. M. Wells: You said Canada should be the best it can be. It’s a great aspirational statement.
When we had the officials from Environment and Climate Change Canada here back in May or June of this year, I asked this question: How much does this project of reducing Canada’s emissions cost? They said $4 trillion. They corrected themselves — because they weren’t sure at first — to $2 trillion, but $4 trillion or $2 trillion is the same number. It’s trillions.
It goes back to my earlier question. Are we getting the biggest bang for our buck?
It seems to me that doing things with reduction of emissions is really important — it’s really great — but there’s a limit. You want the best food for your kids, but will you spend $1,000 a day to get the best food? No. You’ll do that risk management exercise in your head.
The top three sources of carbon emissions are burning fossil fuels for heat, electricity and transportation. Would we deliberately choose to eliminate that and go with electric, or go with the higher mining costs — not just dollar costs but also the cost in lives because most of that is coming out of China and Africa, probably without the well-regulated environment that we have in Canada for oil and gas, for sure? I know that intimately.
My question is this: How does Canada grapple with us trying to slice our 1.5% down to 1.4% for trillions of dollars when we will have no effect on the other 98.5% unless we continue to produce? Canada is the fourth-largest petroleum producer, and most of it goes to export. If we don’t produce that and put it out to the globe, then what about Venezuela, which has no environmental standards? What about the west coast of Africa, which has no environmental or labour standards? Or what about Russia, where there is not even a discussion about that? By removing Canada from that mix, which is what the government is trying to do as well as many others when they say there are rising sea levels and the islands will disappear in 40 years — and they said that 40 years ago — I’m trying to grapple with what we’re doing to ourselves when we’re a solution country, not a problem country.
It’s a statement more than a question, but maybe it bears a comment. Then I’m done with my questions.
Mr. Duerr: I think the essence of what you’re saying is correct. We don’t have unlimited resources. The world doesn’t have unlimited resources, so where can we get the biggest bang for our buck? Where will we have a significant impact?
I assert that I’m proud of what we’ve done in Canada to date. I spend most of my time in the methane space because that is the most potent greenhouse gas. It’s also the easiest one to abate, especially when you’re dealing with onshore and brownfields — it’s the easiest one and has the biggest impact.
Regarding the technologies we have in Canada that the program that Mr. Spady’s company delivered for the Province of Alberta, why did Alberta, an energy-producing province, focus on methane? Because the benefit was huge. I referenced the $40‑million program providing some incentives. It is actually industry funded through the Technology Innovation and Emissions Reduction, or TIER, program in Alberta. That $40‑million program that provided incentives resulted in annual carbon reductions equivalent to $1.35 billion — it would be a lot more right now — at Shell’s Quest Carbon Capture and Storage facility. A lot of little producers, with existing technology, ended up having that kind of impact. When I mentioned that in the Middle East, everybody sat back and said, “Wow.” That’s what’s possible.
One of the first things I’d do, if I had a say, is say, “Canada, let’s get out there.” If we actually believe this is an impact, and if we actually want to help a lot of those countries that are going to be impacted, let’s get out there and focus on this low-hanging fruit. That doesn’t mean you don’t pursue carbon capture and storage and those things in the appropriate circumstances, but we know it is an absolute fact that anything you do in methane emissions reduction related to oil and gas and emissions reductions is by far the cheapest at one tenth to one fifteenth of the cost per tonne of carbon reduced. Let’s go help these countries. We don’t have to do it all for them, but let’s go into Central Asia and Latin America and ask, “How can we help? Can we help you hire a Canadian service provider? I’m in the business, and Mr. Spady is in the business; there are a lot. We have competitors in Alberta. Why don’t you choose one of those and take some of those technologies?” Let’s help them develop their regulatory frameworks. Let’s help them put in place these kinds of programs. That will have a massive impact far greater than anything we can do in Canada right now.
We still have some work to do in Canada. I mentioned methane. There is still a lot of work to do, but what happens is we also get excited by big projects. One of the reasons why methane doesn’t get dealt with in a lot of boardrooms is because most of the solutions were on small individual wells. The project that Mr. Spady talked about reviewed 15,000 facilities. Now, he didn’t do it, as they had a bunch of other service providers, but it was 15,000 facilities.
In the past, the solutions — the things that I do like solar chemical injection pumps — have always been operators out in the field. They haven’t been in boardrooms. As an example, I’ve delivered 7,000 solar chemical injection systems in Alberta. We’re a little company in the clean tech space. Each one of those will deliver anywhere from 80 to 300 tonnes of carbon per year reduction — 150 times 7,000 is almost a million tonnes of carbon per year. Literally, I could say that my company has done as much: On an annualized basis, I reduced as much carbon as a billion-dollar or probably multi-billion-dollar carbon capture and storage facility right now, but it doesn’t get the attention in government and in boardrooms because they aren’t big sexy projects. They’re little projects, but when you aggregate them, the impact is huge.
Let’s break through some of this stuff, and let’s start getting very real about what we could be as Canadians. As I said, the technologies are there, the people are there and the experience — it’s all proven. If we just did that one thing and said, “Let’s take that to the world and do everything we can possibly do in that space,” we would have a huge impact, and Canada would be recognized around the world for the contribution it can make.
Mr. Spady: You mentioned the burning fossil fuels primarily going to heat, electricity and transportation. You’re correct. The problem I have as an energy provider is that we have to have a transition and we have to have a mix to a broader system.
You neglected in those comments to talk about fertilizer and cement. Of the world’s grain stuff, 40% is enhanced with fertilizer from hydrocarbons. I wish we had a better solution, but right now, a lot of mouths are also fed because of oil and gas production. Clinking cement is a high-energy process, and you can now do it with electricity, but I long to be part of the solution in the transition. We can’t just be 70% dominant on fossil-based fuels in the world. That’s my trade. I tell incoming petroleum engineers that they have a very good career ahead of them because it is much harder than it was when I went through it, so we need 10 times more petroleum engineers, energy engineers and geological people.
In providing the basics of heat, electricity and transportation, it’s really important to start working on that transition where it makes economic sense, and even where it doesn’t. It’s a massive task. Once again, what does Canada have? We have First Nations here who looked after the land well before we came. We have countries around the world that also have large First Nations populations. We have resource development by First Nations. We have water and energy — we have all these things. Why on earth aren’t we known as global leaders to help people heat their homes and to give electricity and transportation? I think it’s very compelling.
In addition to that regarding Mr. Duerr’s comments about solar-powered chemical injection pumps, they replace something we installed for the last 20 years. We know where we put these things that are designed to vent. All we have to do is start fixing our own engineering designs from years ago, and that also increases efficiency and makes profit.
We have so many answers. We have heat and electricity. We have efficiency. This is commerce, but we have to take this all in lockstep with an energy transition. I don’t mind using the words “energy transition.” We’re energy professionals. I’m an energy professional. My job is to ensure that the world has those essentials.
Senator Fridhandler: There are a lot of interesting comments around the expertise and the technology that we have. I’m just trying to get a sense of how this fits into the global system and whether we’re misdirected to worrying about our own targets when we should be more concerned about the global target. The problem there is that it’s hard to get credit for what happens in other countries when it’s just your technology activating it.
I’m thinking here about funding major carbon capture, utilization and storage, or CCUS, projects. If we funded our companies that have developed technology or expertise to assist other countries, we’d get a lot more bang for our buck in terms of seeing global emissions reductions, but would we get credit for it? It’s the system that doesn’t recognize the efforts, whether it’s directed to your IFIs or whether you take some of our funding programs now and you redirect it to support Canadian companies that would export their technology and expertise. You’d get credit there, but you’d also get the economic benefit of employment and assistance to our domestic industries.
Mr. Duerr: You’re speaking about things under the Paris Agreement Article 6.2, which references international trading. There is still a lot of debate on the mechanisms to make that work, but the point is absolutely correct. We could be just focusing on what we’re doing in Canada and focusing on percentages. But it really doesn’t get it done. What we have to do is ask, “What difference have we made?”
I can tell you right now there is a lot of interest. I just got back from Central Asia, sitting with a large state-owned company. They want Canadian. They recognize that Canada is well ahead of everyone else. But you know who is in there ahead of us? It’s Norwegian companies funded by the Norwegian sovereign fund, and it’s the U.S. Agency for International Development, or USAID, funding U.S. companies to go in there and do something. But they know that we have had more experience. They know that in cold weather technologies, we have the ability to go in.
We’re not perfect as Canadians. Don’t get me wrong. But we’re better than virtually any country in this space. If we take that and focus on it, I believe that we’re going to sort out those Article 6.2 mechanisms where we don’t necessarily — and it shouldn’t have to be. And this is where I have a problem with some of the dialogue right now. It’s all about what is the percentage — we’ll go to a conference of the parties, or COP, and we’ll announce a bunch of things, and then we’ll come back and not come anything close to doing that. That’s not just Canada. That’s around the world. I listen to those aspirational comments, and they just come and go. Everybody has this new challenge, but they don’t have in place the mechanisms to get it done. Again, methane is my focus. However, it’s not the only solution, but I tell you it is the cheapest, the lowest cost and the fastest thing we could possibly do.
When I hear companies talking about doing massive projects in carbon and hydrogen, but they haven’t dealt with all their methane problems, they’re being disingenuous. They’re not really serious about the big projects. So let’s just change that. Let’s ask, “What can we do as Canadians really well? What could we do that would have an immediate impact?”
By the way, when I gave you those numbers when I referenced what Mr. Spady’s programs did for the Government of Alberta, we’re using a methane emission factor of 25 times the general carbon output, and that’s sort of a standard. That’s a hundred‑year methane emission factor.
Most environmentalists would use a 20-year factor, which means it’s 80 times. So any of those numbers I talked about would be four times. When I mentioned that a little company like mine does about a million tonnes a year, if I used the other factor, it would be many times that.
Those kinds of technologies are all over the world. Right now, with the new EU regulations, there are a lot of European producers who are really running scared because they have a lot of really old assets, and now that they’re actually having to start measuring, the rubber hits the road. In Latin America, there is a lot of new stuff that is happening that’s really quite exciting, and again we can play a really outsized role. But we should be documenting this.
To your point about getting credit, it’s not just about giving something. It’s about making a real difference. Let’s get out there and do things where we can document the benefits. If we end up doing something in Central Asia or in Latin America, we can document those benefits. And even if you don’t get a formal credit, we can at least be standing up and saying we made a difference. We didn’t just talk about it. We didn’t say, “Oh, when the oceans rise and they destroy your island, we’ll help to put dikes up.” No. Let’s actually do something now. Let’s make a difference.
It’s pretty simple to me. I know it’s complex to redirect moving trains, but the answers are quite simple.
The Chair: Mr. Spady, did you want to add to that?
Mr. Spady: I think it has been well covered.
Senator Fridhandler: Mr. Duerr, you advocated for the reallocation of funding back to the methane reduction program or whatever the program is called. Given the fact that one might think there is a limited amount of money, would you want that reallocation back to the program that would support domestically, or would you rather have it support Canadian industry to carry out programs internationally?
Mr. Duerr: I would have to say that there is still work to be done domestically.
Senator Fridhandler: You only have a choice of one or the other, though.
Mr. Duerr: Well, you see, I’ve got the advantage to say we don’t actually have to come up with new dollars internationally. Regarding the European Bank for Reconstruction and Development, the last time I checked, Canada had about $2.6 billion in there for various projects. That’s earmarked money.
Just using some of those dollars could have a big impact. But if I had to choose in Canada, the other key thing is how the programs are structured. That federal program was, unfortunately, badly structured. I just have to say that because it wasn’t very successful in terms of — and that’s why I think a lot of the money was pulled out of it.
The Alberta program was extremely well structured, and it was oversubscribed. The federal program had a problem because industry wasn’t subscribing to it because it was creating more problems than it was solving.
How you do those programs is really important as well. I would like to see more of that federal money spent here in Canada, but I also believe that there would be an opportunity to take some of that. Again, we just go back to this: What impacts are we going to have?
When I hear these numbers about addressing climate change‑related issues — and, yes, they’re in the trillions of dollars — what I’m really saying is that for millions of dollars, you could have a massive impact. It’s millions, not trillions. So let’s do that. Let’s not spend our time talking about these massive amounts of money when there’s stuff right now that can be done. Let’s focus on what can be done and what is achievable. When we get through that, then we can start talking about the kinds of massive expansion and the fundamental changes that are going to happen.
No country in the world has done more in terms of renewables than China. On solar power or wind power, no country in the world comes close to bringing on the amount that they’re doing. But they’re also building a coal-fired power plant about every week. That’s the energy reality. And you can play that out in India. You can play that out in other parts of the world.
We’ve got a big challenge. You can throw as many renewables as you want at the challenge, and they’re all welcome, and they’ll all make a big difference, but you’re still going to need a lot of fossil fuel production for a long time to come. Then it becomes a question of how we get the best production. And then it becomes a question of who can best do this. Are we going to get the biggest bang for our buck by squeezing that last little bit out of Canada, or could we take some of those resources and apply those to countries and actually make a real difference in those countries? And in doing that, we’re not just giving them money; we’re hiring Canadian companies to deliver those services, we’re exporting Canadian technology, and we’re making a statement on the world stage that we can actually make a difference here. That’s it.
Squeezing a little bit here is not going to make a difference on the world stage. It might be a talking point at a COP, but the reality is there is so much that can be done right now.
If I talk too much about this or elaborate too much, I’m sorry, but I feel quite passionate about it. I just want to get stuff done. I really think we have to get a whole lot more practical in this whole area and ask the following: What can we get done? What are we good at, and how can we have a big impact?
The Chair: Mr. Spady, did you want to add to that?
Mr. Spady: Yes. I think the reallocation comment that Mr. Duerr made is important because we do fund as a federal government — we fund massive amounts of money into these international banks, and we should. This is our obligation as citizens of the world. I think the ability to direct some of that funding to places where we can make a massive impact is what we need to think about.
I hear it quite frequently: this labelling of industry as extractive and, therefore, we can’t support it sort of talk. That’s a tough one because I think we do have to move away from complete dependence on fossil fuels. It has to be part of an efficient mix. That’s my lifetime and my kids’ lifetime. It’s a long time.
I think it has to happen slowly. It can be done using efficiency, but we’re going to have extractive industries around for a long time, and somehow we have to remove the stigma, as a resource nation, of funding and helping others because it’s extractive. I don’t care. Can we help others stay warm and have energy? Yes. Is it extractive, retractive or refractive — I don’t know the words. It’s less relevant if we can be leaders in responsible resource stewardship when it comes to what we have. That’s where we can be leaders, just by reallocating. That’s on the international side.
In answer to the domestic side, we have amazing programs. The ones in Alberta are industry funded. It doesn’t get much better than that. We had a waiting list because they made economic sense, and it’s efficient. They probably gained 1% or 2% in sales of gas — methane — in the pipeline, of which they get a cut. So you’re better, you’re more efficient, you’re making more money and you’re removing things from the atmosphere.
I want to just quickly comment that as Canadians, we like to be grinders. The world needs a first line, and the first line — the star — is carbon capture and storage, or CCS. These CCS projects are amazing, and they’re necessary, and we have around 25 of them in Canada. They’re the best. They’re big dollars. They’re the first line. But if you have a hockey team that doesn’t have a good third or fourth line, you’re not going to win anything. We can own the third and fourth lines with these little, innovative, smart solutions. I want us to pay attention to the third and fourth lines because that’s going to let us win the cup.
The Chair: I want to add something to that. As you well know, when you’re in Calgary, it’s a different story, and in Alberta it’s a different story, but Canadians still have a significant problem or significant discomfort with oil and gas. In other words, if you see a Canadian producing or consuming only oil and gas, it’s as if it’s wrong.
If you were the Minister of Energy, what would be the best story? You must have tried different ones. How do you explain the fact that in the practical world we live in, we need some of that oil and gas? Yes, we’ll be responsible with it and make sure it does the right things. What’s the best angle to get that story across for the person who’s never seen an oil field but is consuming part of it? We all forget we’re consumers too. Help us out here. What’s the story? How do we best argue the situation?
Mr. Duerr: I think the Canadian energy sector has done, frankly, a terrible job in telling its story. Part of the problem, though, is that when it does tell its story, it’s immediately dismissed by a large component of the population as being self‑serving. It’s a real dilemma.
The point was raised earlier about education. We need to get other Canadians, other advocates, to be speaking about this. For an Alberta producer to go into, say, Quebec or New Brunswick and start saying, “We’re the greatest in the world,” nobody is going to buy that. However, if somebody out of those provinces, such as an industry leader, is saying, “This is important to us, and it is a part of our fabric. Yes, we either consume it or we wear it or we’re driving on it, but these products are going to be absolutely essential to us.”
On bitumen — heavy oil — that’s really bad, but what do you think is the constituent for pavement? Why is all of our stuff going down to the United States to be processed? Because it’s absolutely required. An electric car is going to be much heavier, so it’s going to burn a lot more rubber and pavement. The reality is we’re going to need some of these products. Let’s not vilify the product. It’s been too easy.
In many respects, we’ve created almost an environmental divide here. You either have to be 100% against oil and gas, or you have to be 100% pro-oil and gas. The reality is we need it. Let’s be the best that we can be in doing it. Let’s be good stewards. When we are good stewards, let’s stand up and talk about that, and then let’s try to ensure the other players in this global energy mix are good stewards as well. Because if they’re not, that’s where we’re going to have big problems.
Russian production hasn’t stopped. They don’t do anything in methane emissions reductions, I can tell you right now. But Europe, which was lecturing Canada for a long time about dirty oil, was quietly buying all of that product. In fact, when the war broke out, there was a huge crisis in Europe because of the reduction in the supply of that product.
Some of that has been met up by increased imports or exports out of the Middle East and such, but the bottom line is that if we don’t address this globally in terms of real reductions, not just aspirations, we’re not going to have an impact. We’re going to spend a lot of money in the wrong places. Let’s just be efficient. Let’s be proud of where we are.
We need other voices, though. I guess that’s the point. We need other voices to be speaking like this. It’s not an either-or. Yes, we should protect the environment. I was in water and waste water treatment in Southeast Asia back in the 1980s before other Canadians were down there doing that. When I got out of politics, I got into energy efficiency, greenhouse gas reduction and clean technologies in the oil and gas sector because I believe in it. We need to be attracting people to those things. We don’t have to say, “This is a problem so we should ignore it.” Let’s address the problem. We’re good at it as Canadians.
I hope, if anything, today, we have left you with a bit of hope that it doesn’t have to be an either-or discussion. Let’s be proud of where we’re at. Let’s be smart, directed and focused on where we want to go. Let’s focus on spending those dollars wisely. Let’s focus on having an impact. Frankly, it’s not just environmentally; Canada could improve its stature around the world on many fronts by taking a strong position, especially in developing countries where countries need the support the most, by being there and supporting those entities.
Mr. Spady: I would go back to your original question: If I were the energy minister, what would I do? I think that’s the correct question. That’s a tough one.
I will speak as a petroleum engineer who has spent my whole life in this field. We need to speak less. We need to be better citizens. We need to be more part of the fabric of society. It’s actually what we do versus what we say.
I’m embarrassed by a lot of the rhetoric from my peers in the oil and gas companies. It’s arrogant sometimes. We need to be better citizens. We need to show that we’re improving, not talk about how we’re improving. If I look at the Newfoundland example, 30 years ago, there wasn’t much of an oil and gas industry. The transformational change I’ve seen in Newfoundland and Labrador over the last number of years is an economic transformation and a massive change. The industry was better. It offered a solution. We’re being, we’re doing and we’re not just talking.
As an industry, shame on us. We all huddle in Calgary. We got rid of the Toronto, Vancouver and Edmonton head offices. We all huddle in Calgary if we’re onshore, and the Newfoundlanders have done a better job of being more global in St. John’s. We huddle in Calgary, sit in our echo chamber, talk about how great we are, thump each other’s chests and wonder why everybody doesn’t like us. Shame on us. I’m embarrassed.
If I were the energy minister in Alberta or Canada, what would I do? I would make sure that, first and foremost, we’re putting good policy and regulation in place to quietly help people and make economic change. I think the time for rhetoric needs to go away, and the time for the fourth line to get out there and get the job done is now. We just have to do. That would be my comment.
The Chair: Yesterday, at the COP, they had a discussion, as you know, on subsidies. That’s a dirty word for many people. You can get involved in a discussion, but what is the definition? Does that include depreciation and amortization? It’s a big basket. The general orientation is that they’re very negative against that. As a blanket rule, they say that subsidies are not a good idea, yet we’ve used them in Canada. We’ve had subsidies on R&D for a long time, and now we’re looking at doing it with CCS.
What is your comment on that? How do you deal with that issue? In theory, I’m against it too, but when you get into the details, there are some problems if you don’t help out and if you don’t direct the money properly. Could you comment on that?
Mr. Spady: I think the royalty structure needs to be set up in such a way where if you’re going to assist an oil and gas company or an energy company, it’s because of them doing something they’re already doing or as part of their practice. I try to move away from the word “subsidy,” where we’re handing something out to do something new or different. What we do well in Canada is put on royalty holidays, which are not subsidies but they’re something you’re not receiving due to what you’ve done, which means the ship is moving. You’re doing something.
I do agree with you in principle that subsidies are not the answer. I think as an industry, we need to be more careful to make sure that if we give something out, it’s tied to doing something better. One of the reasons I like the program that we did for the methane reduction is it was 100% funded from a carbon levy, so it was the Robin Hood effect — we’ve taken money from producers who are cranky about it, but we have given that money back with strings attached to the producers while saying, “Prove to me you’re more efficient, and we will fund the methane reduction. This is your money, but we need to help you spend it more wisely.” To me, that’s less of a subsidy and more of assisting in doing something you need to do if it’s on the right track.
Mr. Duerr: If I could add to that, it’s a high-profile topic. If you just think of the oil and gas industry, we’re talking, in most cases, about millions of dollars of subsidies, such as capital cost allowances in the oil sands until the capital costs are paid off; there would be various allowances and such. That’s all lumped into subsidies. I think we have to look at it in this context: In Canada, the industry has delivered billions of dollars to government coffers either in royalties or taxes. If we didn’t have the industry, we wouldn’t have those dollars.
Why do we think all of these countries in Africa and Latin America are trying to expand? They want the revenue streams. With those revenue streams, they can provide other programs and services for their citizens. They want those revenue streams. We have enjoyed those revenue streams for a long time in Canada.
It’s a little disingenuous to say that this is giving something back to the industry. It is supporting the industry, but if we had to do it in one area, it would be in the area of emissions reduction. It’s not just the oil and gas industry that has enjoyed the benefits of being able to operate and make money. As citizens of this country, we’ve enjoyed the massive revenues. There are all kinds of numbers that have been put out about what would happen if we cut back oil and gas production, and the bottom line impacts on the GDP would be significant.
If that’s the case, is it such a problem to suggest that we’ve enjoyed this? Knowing that the emissions were there, we’ve enjoyed those benefits. Why don’t we, as citizens, contribute a little bit back to support improving the overall performance of the industry?
You’re putting back into the source. You had a source of revenue, and you’re putting some money back into it. It would be no different than if you looked at the automotive industry in Eastern Canada. There are industries across the country where, for a variety of reasons, governments have said — and they do this around the world — “We think this is going to generate jobs and income and support our GDP, and we will provide various incentives to make it happen.” Is that a subsidy? Is that giving something for nothing? Or is it basically an investment? I think that’s the larger discussion we have to have.
Senator Prosper: My apologies for stepping out. I really appreciate your testimony and what you have provided to us through that.
My question picks up from some of the dialogue and what was in your statements. Mr. Duerr, you mentioned a bit of aspiration and not much action here and viewing climate change as an existential threat. You also mentioned that there are no mechanisms; we just don’t have in place the mechanisms to get certain things done.
Mr. Spady, I believe you said that we have to “own the space” as Canada as a resource nation. Both of you have itemized the huge potential here that Canada and industry can play in terms of being global leaders with respect to clean technology. Certainly, your efforts indicate such.
You also mentioned Norway and the U.S., which are countries that have been taking a leadership role within the international markets and trying to capitalize, as you mentioned, on some of the low-hanging fruit, and for us to have more impact and to be known in that regard as global leaders.
My question is for both of you. If one were to look at the best practices and the markers of those best practices — specifically, if there were three markers of the best practices that you can think of from what exists out there — what would those be in terms of the approach or the mechanisms that you think we have to undertake here in Canada?
Mr. Duerr: The best practices to undertake here in Canada or as Canadians?
Senator Prosper: Well, as Canadians to be global leaders in the clean energy sector.
Mr. Spady: Number one, I believe, is good policy. In some jurisdictions, we’ve done that within Canada. As resources develop, I think putting good policy down regarding environmental ownership of the land, resources and use of the land is critical, and we’re pretty good at that as Canadians. This whole CCS push and the pore space rights of CCS have been very important, and we’ve done that as subnational jurisdictions.
I was involved in oil and gas development in New Brunswick and, to some degree, in Nova Scotia in the early 2000s, and some of the policy work that went into trying to frame the correct infrastructure was very important and good. Continue to develop the resource with good policy in the jurisdictions where it spreads.
Now I have forgotten the other two things. The second thing, if I recall, is making sure that the money spent is tied to an action. I believe, generally speaking, as humans, we love to get compensated to do nothing, and we can invent many ways to use up time. It’s kind of human nature. I love hanging around the coffee pot and talking, but we’ve been successful because we’ve done. In other jurisdictions that I’ve seen around the world, they might have people from other nations doing the fieldwork, and they have people in the office who are the heads and are in charge, yet it doesn’t connect because this guy is supposed to do this, but they’re not in the same pay band. We really are good at having the guy who sits at the executive desk have the ability to go out, and if she can go out and turn the valve as well as make an executive decision, we’re really good at that as Canadians. I think the second thing would be tying the action to the funding.
If there were three markers, it’s good policy development, tying funding to action, and, honestly, I think we need to celebrate. In a measured way, we need to talk about our success. I’ll go back to the Newfoundland and Labrador example. In my opinion, 40 years ago, it was a different industry, and 40 years later, you have one of the finest offshores in the world. The fact that companies like Equinor are coming to Newfoundland and picking up blocks because it is a stable environment, to me, that’s a celebration. Correct me if I’m wrong, but those would be my three things. Now Mr. Duerr has had time to think.
Mr. Duerr: I’d start out with policy as well, but I’ll take a slightly different bent. We need some regulatory certainty. Policy does not necessarily mean just cranking down tighter.
For example, in Alberta, we had the first carbon offset system and the first carbon tax in North America. It’s been really good. It’s close to Alberta, because Alberta producers contributed. The high emitters contributed to it — that’s the fund that Mr. Spady was talking about to fund that program — and within that, there is an offset trading system.
For a lot of the technologies that I produce and that producers have implemented, they get carbon offsets for that. You’ll get carbon offsets for a period of, let’s say, eight years. That is usually the period. You spend the money, and then you can make that money back over that period of time through the trading mechanism. It’s a market mechanism. There are voluntary systems that are being developed internationally. The difference is that, in Alberta, the price is targeted to the Canadian price of carbon in Canada, and the international market would be $5 to $10 a tonne versus $50 a tonne in Alberta right now.
When you say there’s going to be a new regulation, what happens? Everybody stops. I’ll just use this as an example, although it’s not to beat on it: The federal Emissions Reduction Fund program, which was going to be $750 million targeted to methane in Canada, with $675 million to Western Canada and the remainder to Eastern Canada, was announced in March with great fanfare. It wasn’t until November that the program rules came out, and there wasn’t a lot of consultation with industry, so they didn’t really work. It was roughly a year. It was roughly March of the following year when anything happened.
I can tell you that sales in my company nosedived. For all of the other clean tech companies doing methane stuff in Alberta, their sales nosedived. Why? They didn’t know what the rules were going to be. What’s that program going to be? It wasn’t done in a mean-spirited way. Everybody had good intentions, but those good intentions meant we lost a year of methane emissions reduction. If you have an 80 times multiple, you’ve lost a year of that. That isn’t well understood.
More recently, the federal government has been negotiating on new methane regulations. Again, it had a souring effect on the offset market. Someone may be thinking, “If I get offsets now, will I be able to get offsets under the new regulation?” You get a carbon offset if you do something that isn’t general practice or in a regulation, and the moment it’s regulated, you don’t get offsets. As an example, if they said there would be no pneumatic pumps after 2030, that means as we move up to that, the offset period gets smaller and smaller. Many producers think, “Should I spend this money now or let this well deplete itself over the next six years and then shut it down?” Those decisions are being made right now. It’s an absolutely valid business decision, but in the interim, we will have lost six years of methane emissions abatement for every one of those six years.
Again, these are good intentions, but you can actually do more harm with the wrong policy or improperly constituted policy. Policy is really important. The real discussion on this is: Don’t get in the way. In this case, the policy can get in the way of market mechanisms that are working. So be very careful in policy. Don’t assume that just being stronger and tightening down is going to result in additional benefits.
The second thing I’d do is this: When we make commitments, keep them. Let’s just get this low-hanging fruit in Canada done. There’s still a lot of work to do. We have the really low-hanging fruit, but there’s still a lot that can be done. Let’s just put the resources to it, get it done and stop talking about it. We can get this done. That relates to some of the reallocation of money back into the methane space.
The third thing — and it is what we’ve primarily talked about here — is developing an international focus. It’s part of being proud of who we are and what we’ve done. Let’s take this international; there’s absolutely no reason why we can’t. Other countries are asking for it; they’re wanting to take Canadian technologies. Define a role for Canada. If we say, “Emissions are important, and here’s something we’re really good at,” let’s take this international. Let’s do what we can do to define a role for Canada and bring some dollars, but, more importantly, bring that policy, regulation and technology. There’s a whole innovation ecosystem in clean tech in Canada. It’s been built because of our regulatory framework. It’s been built, and it’s here. Support that.
The government doesn’t have to do it all, but help provide some of the funding mechanisms and work with the international financial institutions. Do everything possible to encourage other companies to hire Canadian companies to provide emission services, measuring services and verification services. Get Canadian technologies into those markets. It doesn’t have to be mine. I have competitors in the business that I’m in. I don’t want to make this sound self-serving. The fact is that there are a lot of people in this space in Canada who can be having a big impact outside.
It’s about policy, keeping our commitments here in Canada and developing an international focus.
The Chair: If I could, I have two questions I want to add.
First, you talk about the importance of certainty, and we hear that quite a bit. You want to be sure what the future looks like before you make all these long-term decisions. Some people would say a lot of that applies to the current environment whereby, within a certain number of months, there will be a federal election. I suppose, as is normal, many of the players would say that given the uncertainty of who is going to be running the country — and maybe the next party will be more generous than the old party — you’ll probably see an important diminishment of dollars being spent and decisions being made. Is that the case, and is there something we can do about that?
Mr. Duerr: Governments do change over time, and you can never anticipate what a new government will do. Frankly, it’s hard enough to anticipate what the current government will do from year to year.
I think you would find, for instance, if a new government came in and said they’re just going to do away with all of our regulatory framework, that is an extreme situation. However, if that happened, you would still find that the majority of Canadian producers would not change a thing because they would know that would not be sustainable. That will not happen. Again, they would want to continue to operate as responsibly as possible.
Certainty comes in when you’re making big decisions and you’re saying that we’re going to invest $3 billion or $4 billion in a major carbon capture and storage facility or hydrogen facility in Canada. It’s a big problem in Canada, not just in the oil and gas sector. We have a big problem with big projects because they tend to get out of control. We saw it with the Trans Mountain pipeline. We have all kinds of examples. It takes about 13 or 14 years to get a mine approved in Canada, so we have some real issues here that I think we have to grapple with.
I don’t have a prescription for how to measure that. I can say that I believe and I’ve heard from major producers in Alberta that they wouldn’t stop doing what they’re doing in methane. They wouldn’t stop doing these things. They see this is what the international community is demanding. They want to be part of that solution, but when a board of directors exercising their due diligence says, “Do you have a commitment?” and when you as a senior executive in an oil and gas company say, “No, but there are some really good intentions there,” they wouldn’t do that. It would be as simple as exercising your due diligence as a board member. You will want to know that there is as much certainty as possible in the deal that you’re signing off on.
I don’t know if that answers your question, but it’s really complicated, and it’s really complicated when there is a potential change in government, especially for the big carbon capture and storage projects. I’m not an expert in that area. I have family members who are, but I think these contracts for certainty are real, and, to an extent, those things signal a longer-term commitment to a project because these are long-term projects. I think those are absolutely essential.
Mr. Spady: I see it a little bit differently. As an oil and gas guy, we have seen much worse. There are a lot of countries around the world where certainty is very up in the air. Kurdistan comes to mind. Who governs Kurdistan? Is it the Iraq government? Is it the Kurds?
There are producers who are in some complex situations. As an industry, this is part of our DNA. We have to live with uncertainty. I’m listing some jurisdictions: Nigeria has amazing methane reduction regulations. It’s very difficult to carry them out, but they have the right. Is that certainty or not? In Saudi Arabia, Aramco and the Government of Saudi Arabia are in lockstep, and they have done amazing things in developing the science behind the industry because there is certainty there.
We as an industry live with everything, and if we can’t react to subnational or national governments, maybe we should stop whining and go back to making sure we’re good business people. Certainty is important, but we are in this business. We need to know what we’re doing. That’s the point.
More importantly for us, I think, is regulatory certainty. The government of the day may come or go, but if the regulator is independent and a flywheel of sorts, that’s more important to us. Our field people need to know that if the regulations are there and if they carry them out, then it will be good.
Then I’ll take it one step further. With new technologies departing from the typical path, then you have to be proactively certain. Something like a carbon offset market is new and different. I think it’s very important to have government certainty because they’re setting the price of carbon, and they have to stick to it between governments.
We as an industry have to react to the general uncertainty of governments. We need to live with that, but in new areas like energy transition and carbon reduction, I think certainty between governments is probably much more magnified.
The Chair: I want your comments on CCS. A lot of people say that CCS requires an immensely important subsidy. Some people question the science and its efficiency. There is still a lot of carbon dioxide that escapes, and, therefore, we’re not there yet. Will we get there shortly? The oil and gas industry is telling us we’re going to get there for sure. The science is solid. Yet there is no project that has been a resounding success. I think that’s a bit of a disappointment. Could you comment on that?
Mr. Duerr: We’re probably not the best people to speak to that, but in a general sense — and Mr. Spady can speak more to this — Canada does have the geology. What happens is you come up with a new moniker in carbon capture and storage, and everybody sees those big multi-billion-dollar projects and gets excited about them. Politicians love them. You go to the COP and to big oil and gas conferences, and everybody is talking about these big projects.
The reality is not every place is a good spot for CCS. We do have good geology in Western Canada. If you can make a project work, it’s probably in Western Canada.
I think there are some real opportunities here. Canada has had experience in that. We have a number of smaller projects. We have some larger projects like Shell’s Quest CCS program that has been in there for quite some time. The technologies are better now.
It’s not so much a technology issue as it is the business case. I have family members who are actively engaged with major entities in carbon capture and storage, and it really boils down to what is the business case? Can you make this work? With a big project, you absolutely do need some certainty that the rules you’re playing with are going to be the same rules 10 or 20 years down the road as you make these decisions.
In the absence of that, what we had in the past was Shell’s Quest CCS project that went ahead. That cost $1.35 billion, and roughly $1 million of that was government money. It was very experimental at the time. It was the first big project, so there was a massive government subsidy there to kick it off and to prove it up.
You don’t need the same thing again, but you will need some certainty about rules around offsets and whatever the calculations are. For these carbon contracts for difference, you will have to have those. Canada has the potential. The geology is better in Canada than in most places. Is that fair?
Mr. Spady: That’s fair, but I think it’s more global. We can fight about that off-site. We do have the infrastructure and the geology together, I would suggest.
CCS is interesting. I was a skeptic a few years ago, thinking it’s a lot of money going, and for what? As I’ve come to learn about it more, I think it’s quite amazing, and it’s something in the future. Canada is absolutely leading. The Boundary Dam project in Saskatchewan has been producing and reinjecting for years. We have about 25 different projects going now in Alberta, with everything from the Quest CCS project and the large projects, right down to Reconciliation Energy Transition Inc., or RETI, which is a First Nations-driven group that is very small scale. I think we can own this space as Canadians.
The subsidies are there; they are large, but what we have is a holistic system. Some countries of the world have CCS operations. Norway has one. Australia has some big ones affiliated with their liquefied natural gas, or LNG, exports in the north. The U.S. has one, but we probably have the strongest and the most working history. To me, what we have, especially in Alberta — and Saskatchewan to a lesser degree — is a holistic system. We have both the producers and the users and the pipeline in between.
Let me get specific. In the Edmonton area, you have cement companies and petrochemical companies that are producing carbon, and you have the sequestration happening in that industrial heartland, but you also have a pipeline carrying CO2, which is the infrastructure that also took government funding, and then you have the users along the line. A thousand-barrel-per-day producer in central Alberta can get carbon from the Alberta Carbon Trunk Line and flood their reservoir subsurface in a very innovative manner because the mall exists: the sellers, the buyers and the infrastructure. We are way ahead of the game. There are some projects in the U.A.E. that are modelling what we’re doing. Number one, it’s a lot of money; and number two, it is very unique technology, but it does encompass multiple industries like cement and petrochemicals.
When I look at CCS, I realize that I’m now a big fan — I’ve moved from the reluctance bandwagon to the supporter bandwagon. Years ago, in Alberta, we put a lot of money into the Alberta Oil Sands Technology and Research Authority, and we spent millions developing this crazy idea of steam-assisted gravity drainage, or SAGD. Today, we have many profitable independent Alberta companies using the SAGD process. It is a global leader because 20 or 30 years ago, we put a whole bunch of money into this new technology. I’m a believer in CCS because I believe that, similar to SAGD, it’s a technology where we can really own that space if we think about it holistically.
The Chair: I ask this question of different people, and I get a different answer. This is really a test to see whether I’m getting good information.
On the CO2 per barrel and the success or the efficiency of it, is it very good? Is it equal to California or Venezuela relative to the oil sands? How clean is that oil compared to many of our competitors in the United States, for instance?
Mr. Spady: Mr. Duerr might have the better answer to that. Are you talking about CCS or general production?
The Chair: General production.
Mr. Spady: In general production, we are leaders. The commodity we start with is a factor. Heavy oil, oil sands and SAGD, for instance, are going to be a higher emission factor, but our processes can negate that. If we get this type of oil produced using the practices that they do in an African country, for instance, they just get it to market quickly, perhaps. We have more standards, so it’s probably much cleaner. I don’t know the definitive numbers, but it is absolutely cleaner.
You used the example of Venezuela, and there were a couple of others there. Absolutely, it’s because of our practices. Even our American friends — I’ve worked there about a third of my career — have 32 oil-producing jurisdictions or states. In some of those states like Pennsylvania, for instance, at the time I was working there, we had 14 regulatory agencies in one of 32 jurisdictions. Start doing the numbers. It’s a lot of different people telling you how to do it.
Thank goodness that in Canada we have one regulator per province, usually, and we have clarity. That makes it cleaner because the standards are consistent across multiple departments.
The Chair: Given the additional cost of making it cleaner, can we be competitive 10 years from now?
Mr. Spady: Yes.
The Chair: Obviously, forget Saudi Arabia, but how about the other competitors? Are we spending all this money to find out there is no market for it?
Mr. Spady: No. We are competitive, absolutely.
Mr. Duerr: The price you pay on the market would be a function of what has to be done with the product. For instance, if you have a product and it requires further upgrading where there is going to be a cost associated with it, that will allow you to sell that product on the market as a clean product, and you will have a price discount associated with that. That’s taken into account.
A lot of our oil, such as the heavy oil that’s coming out of Canada right now, is going to Vancouver. Guess where it ends up? In California. The vast majority ends up in California, and they’re going to be doing the processing there.
Can it be competitive? Yes. It somewhat relates to the question you had asked earlier. What we’re seeing in global markets is that there are a whole series of — and right now it’s still a little unregulated — efforts to create emission factors that reflect the quality of the emissions associated with a particular producer. Tourmaline in Alberta will want to produce and will be able to sell a product at a higher price because it has a lower emission factor attached to it. There are a number of companies involved in that, and that’s where it’s going to go. That’s ultimately where it’s going to go. The EU is going to be putting in those regulations. If you want to ship LNG there, you’re going to have to verify that all of the upstream things — the emissions associated with venting and flaring and all of those things — are documented. Then you can verify that the gas meets a standard, and you’re going to get more money for that gas. That’s beginning to happen right now.
One of the other complicating factors in all of this is that the reporting varies dramatically from jurisdiction to jurisdiction. Getting a really good baseline on this is difficult. I always use this example, but for years we heard about dirty oil out of the EU, and they were just getting it from Russia. I’ve been there, and I’ve seen that. How did that happen? How was that allowed to occur?
You get into the U.S. with multiple jurisdictions. You get some states doing an outstanding job. Colorado is such an example. They’re doing an outstanding job; it’s probably even higher than Alberta and Canada in the methane space. But there are others that aren’t. Again, you can have regulations, but if you’re in Texas and you’re the U.S. Environmental Protection Agency — how many independent producers would you have there?
Mr. Spady: It’s 2,000 or 3,000.
Mr. Duerr: It’s 2,000 or 3,000. In the United States, it is the landowner who owns the rights. It’s the only jurisdiction in the world, virtually, that has that. When you get into actually implementing those regulations, it’s one thing to have them, but it’s another thing to implement.
In Central Asia, we were told that when they applied an international standard to their emission factors in terms of methane, they found that they were 10 times higher than what they had recorded. The International Energy Agency, or IEA, will have the factor that they had before until the new information becomes available. It’s a little complicated because often these numbers aren’t correct.
There will be some countries that don’t care. There are countries that still buy Russian oil and gas for a bunch of reasons, mostly because it’s cheap and they need it. But increasingly, you’re going to have the large consumers demanding that if they’re going to be buying natural gas or oil, they want to see the certificate attached to that which says it’s produced to the highest standard. That’s where it’s going to go.
The Chair: Except that the IEA has predicted that within a year, or the maximum two years, we will actually have — for the first time — a reduction in demand because, finally, we’ll have an adequate supply and they’re being more efficient. We’re going to need less oil and gas, if you wish.
The economic theory would suggest that when you reach that point, unless you have a cartel that’s been created, this can be difficult because the number of players is significant, and you may see a significant reduction in the price of oil and gas. That means there could be dramatic competition that would result from it. Do you have any comments on that projection?
Mr. Duerr: I don’t want to purport to be the expert, but there have been some concerns with the IEA, although they do the best with the information they’ve got.
If you just look at the projections that we have, if you talk about things like electric cars in Canada, which say that we’re going to dramatically reduce our transportation emissions because we’re all going to be driving electric cars, how do we get to that point? There isn’t enough production. We have banned the lowest-cost producers of electric cars. We’ve banned them. Well, we haven’t banned them, but we’ve basically said there’s going to be a massive tax, so exactly who is going to be doing this? Who is going to pay for that? It’s a wonderful aspiration, but no one has in any way indicated how we’re going to get there internationally.
I mentioned it takes 13 to 14 years — those are the numbers that were provided to me — to get a mine approved in Canada. I produce high-performance electric motors in my business that require rare earth elements. Right now, China has 90% of that rare earth element supply. Canada is looking at getting into that industry. Saskatchewan is coming up with projects to do that, but it would be 10 years before that would even be available as an option. The reality of all of this is it’s a wonderful aspiration, but you have to have really good numbers upon which to base that, and I haven’t found anywhere that anyone can say there is a path to get to that point.
My initial reaction is to be very skeptical of those absolute numbers. The other key is all the other companies involved are looking at those numbers as well. They’re not going to be putting money into something that doesn’t have a potential at some point in the future.
What we’ve heard in the past is that bitumen and oil sands are an industry that will be going away because the oil that you get out of Newfoundland and Labrador is a much cleaner oil right out of the ground. That’s true, but you can’t use that to create pavement. You can’t use that to create a lot of the other petrochemical products that you get out of bitumen, like carbon fibre. There is a lot of work happening with bitumen. Is it going to go away? No. It’s going to evolve. It’s going to change.
I think we just have to accept the fact that there’s uncertainty here, but the world is going to have this industry for a long time. How do we make it the best it can be?
Mr. Spady: I like the IEA. I like reading their information. They’re in the business of collecting good data. I do know some current and former employees who have worked there, so I won’t comment on that.
They do good research. I tend to balance what they say with the BP world energy report. The Organization of the Petroleum Exporting Countries, or OPEC, puts out a good document as well. And out of Calgary, the ARC Energy Research Institute is putting out some good stuff now.
As much as it’s worrisome that an end or a peak in demand would lead to price crashing, I’ve heard a lot of things, and I’ll worry a bit when I see it. I take that attitude.
The Chair: Thank you very much for your presentations. I think we learned a lot. We appreciate you sharing your knowledge. Thank you very much. I also want to thank my colleagues for their participation today.
Our next meeting is scheduled for Tuesday, October 29 at 6:30 p.m. where we will meet with the Commissioner of the Environment and Sustainable Development on their Spring 2024 report entitled Strategic Innovation Fund’s Net Zero Accelerator Initiative—Innovation, Science and Economic Development Canada.
(The committee adjourned.)