Environment Committee on March 31st, 2022

[The Chair, Liberal, Francis Scarpaleggia]

I call this meeting to order.

I'd like to welcome Mr. McLean, who is substituting for Mr. Mazier, and to Mrs. Vignola, who is replacing Ms. Pauzé.

Welcome to the committee.

Elizabeth May is also with us this evening from the west coast, if I'm not mistaken.

Those around the table can remove their masks while seated and participating in the meeting. If they are not seated at the table, then they will have to wear their masks. Anyone circulating in the room is asked to wear a mask.

We're ready to begin. Mrs. Vignola and Mr. McLean, this is the second meeting of this study on fossil fuel subsidies.

I would ask those participating in the meeting via Zoom to mute your microphone when not speaking.

That's about all I have to say about that.

I have two quick points for the committee. First, I had hoped to have a steering committee meeting next Thursday, but that's budget day, and I'm told that the whips agreed not to have committee meetings that night. So we won't be able to meet, unfortunately.

Second, for the study, it was proposed that the Commissioner of the Environment and Sustainable Development be invited. His name was not put forward on the lists given to the clerk for the study. I would therefore ask for your permission, exceptionally, to invite him to appear as part of the study. Is everyone in agreement? It seems so. Great.

Ms. Collins, do you agree?

[Laurel Collins, NDP, Victoria, BC]

I'm sorry. I have a point of clarification.

Is this for the fossil fuel subsidies study?

[The Chair, Liberal, Francis Scarpaleggia]

Yes. It's to give you a panel list.

[Laurel Collins, NDP, Victoria, BC]

Do we know if either the Minister of Finance or the Minister of Environment is coming?

[The Chair, Liberal, Francis Scarpaleggia]

I haven't received any confirmation.

[Laurel Collins, NDP, Victoria, BC]

Okay. I'm happy to have the commissioner of the environment appear and I really hope that the ministers will also appear.

[The Chair, Liberal, Francis Scarpaleggia]

That's noted.

That's pretty much all I have to say before we begin our first panel.

We have with us today from the Canadian Climate Institute, Dale Beugin, vice-president of research and analysis. From Environmental Defence Canada, we have Julia Levin, senior climate and energy program manager. From Indian Resource Council Inc., we have Stephen Buffalo, president and chief executive officer.

We will start with opening statements of three minutes.

We will start with Mr. Beugin.

[Dale Beugin, Vice-President, Research and Analysis, Canadian Climate Institute]

Thanks very much for the opportunity to chat about this important issue.

I will draw today on a recent report from my colleagues at the Canadian Climate Institute, Rachel Samson, Don Drummond and Peter Phillips. That paper takes an economic perspective on fossil fuel subsidies. It assesses whether government measures support or hinder Canada's long-term economic growth and a smooth transition for workers and communities, especially in the face of the accelerating decarbonization in global markets.

Our research moves away from definitions of “subsidy” and “inefficiency”. It assesses policy according to four criteria. These are transition consistency, value for money, employment outcomes and policy fit.

I'll draw out three specific findings.

First, the global low-carbon transition is a structural shift, not a temporary shock. While governments can be tempted to insulate businesses, workers and communities from market change, impacted sectors and regions will ultimately be better off with strategies that help them prepare for and thrive in the emerging low-carbon economy.

Second, the fossil fuel sector is no longer the secure source of economic growth and job creation that it once was. Coal, oil and gas demand will decline globally, though there is uncertainty on the timing and slope of that decline over the next decade. Public investment in long-lived fossil fuel assets now carries more risk and less certain benefits for society, even within the context of current upheavals in energy markets.

Third, governments must make tough choices in allocating scarce public funds. Public investment in decarbonizing fossil fuel production could generate fewer economic benefits than investment in areas that could capture a share of growing, transition-opportunity markets, such as hydrogen, mining of battery minerals, or low-carbon steel production.

This takes me to five quick recommendations.

The first is that public support for oil and gas firms should prioritize pivots to new, transition-consistent business lines. Carbon capture, utilization and storage, for example, will have the biggest long-term benefits in carbon removal or in addressing process emissions in heavy industry, rather than decarbonizing existing oil and gas production.

Second, Canada should maximize scarce public dollars by making public investments complementary to carbon pricing and other regulatory policies, rather than financing company compliance with those measures. For example, improving methane regulations would be a better approach to reducing oil and gas fugitive emissions than funding those reductions via the NRCan emissions reductions fund.

Third, Canada should explicitly consider future global and domestic market conditions and the risk of stranded assets in all policy decisions. For example, Export Development Canada should continue to ramp down its exposure to fossil fuel production.

Fourth, Canada should focus on mobilizing private investment and sharing risk, rather than fully shifting risk from private companies to public entities. For example, support for cleaning up orphan oil and gas wells should be temporary and targeted at firms most at risk of bankruptcy.

Finally, Canada should prioritize ensuring that new policy measures support transition success, for example, the federal carbon capture, utilization and storage investment tax credit. It can then move toward more difficult measures, such as phasing out fuel and carbon tax exemptions for agriculture.

Thank you very much, and I look forward to your questions.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. Beugin.

We'll go now to Ms. Levin for three minutes.

[Julia Levin, Senior Climate and Energy Program Manager, Environmental Defence Canada]

Thank you for the invitation to participate today.

Last month the world's scientists delivered their starkest assessment yet of the frightening future that awaits us if we fail to act on the climate crisis and limit temperature rise to 1.5 degrees.

We know that, to avoid catastrophic climate change, we must transition our economies off fossil fuels in the next decade. We have the solutions to build a clean energy future, and we know that the transition away from fossil fuels will bring far greater energy affordability, security and better jobs.

Today Environmental Defence released a new report on fossil fuel subsidies. We found that in 2021 the Government of Canada provided at least $8.6 billion to the oil and gas sector through direct subsidies and public financing from Export Development Canada. That's at least $8.6 billion in taxpayer money that went in one year towards making it cheaper to produce and transport the fossil fuels that are destroying our planet. For context, that's a similar amount to what was announced in the ERP, which is to be spent over seven years.

Our report also provides the first estimate of public funding for carbon capture, utilization and storage projects in Canada. The Canadian public has spent $5.8 billion since 2000, and collectively those expensive projects are capturing only 3.5 megatonnes of carbon per year, which is 0.05% of Canada's greenhouse gas emissions, and 70% of that captured carbon is used for enhanced oil recovery, i.e., more production; therefore, those huge public subsidies are resulting in more emissions, not less.

Oil and gas companies know these dead-end technologies won't make a dent in emissions but are using them to justify continued and even expanded fossil fuel production.

Unfortunately, as evident in the ERP, the government is falling for it. Carbon capture handouts are set to grow exponentially. Despite raking in massive profits, oil and gas companies are asking governments to pay over $50 billion to equip the oil sands with carbon capture and have been lobbying for a carbon capture tax credit.

If Minister Freeland goes through with the tax credit next week and makes it available for oil and gas projects, including fossil hydrogen, it would create a significant new fossil fuel subsidy and be difficult to repeal.

The most important steps for decarbonizing Canada's economy are increased electrification, wide-scale use of renewable energy and better energy efficiency, yet these sectors have received limited government support, a fraction of what oil and gas companies receive.

All fossil fuel subsidies are inefficient and must be phased out and, to that end, we are urging the Government of Canada to eliminate all subsidies, public financing and other fiscal supports provided to the oil and gas sector by the end of this year on the timeline that the IEA has said. That includes financial support provided through Export Development Canada without any loopholes for gas, fossil hydrogen or CCUS, redirecting all of that support to the proven kinds of solutions that will do the lion's share of the emissions reduction that are needed and provide a fair transition for all towards a renewable energy economy.

The pathway to zero emissions and a climate-safe future does not include subsidies or public financing for the oil and gas industry.

Thank you, and I look forward to your questions.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Ms. Levin.

We'll go now to Mr. Buffalo from the Indian Resource Council Inc.

[Stephen Buffalo, President and Chief Executive Officer, Indian Resource Council Inc.]

Thank you, Chair and committee members, for the opportunity to speak today.

My name is Stephen Buffalo and I'm the president and CEO of the Indian Resource Council of Canada.

Our organization represents over 130 first nations that have direct interest in the oil and gas industry. Our mandate is to advocate for federal policies that will improve and increase economic development opportunities for the nations and their members. It is with some concern that I speak with you today.

Our organization and our members care deeply about Mother Earth. Many of the things that have been described as fossil fuel subsidies are actual programs and funds that directly support our first nations communities and our involvement in the sector. These go to rectifying some of the economic wrongs that have been done to first nations in the past.

Many of them are programs that are good for the environment and are helping us to reclaim our reserve lands, where we hunt, pick berries and pick medicines so future generations can enjoy them. Still other initiatives are designed to provide relief from the high cost of living for our people, especially those living in rural and remote communities, so that they can have the basic things like heat, electricity, affordable food and access to medical assistance, but because they're involved in oil and gas, they're considered bad.

I understand that some members of the committee want to get rid of these programs. I can't understand that logic. I can't see how that's consistent with the Truth and Reconciliation Commission's calls to action, the United Nations Declaration on the Rights of Indigenous Peoples or the honour of the Crown.

When I first looked at what is considered a fossil fuel subsidy and what the committee is trying to eliminate, I couldn't find any official government sources. I found some reports from NGOs that itemize them, and I'm honestly shocked. One of them is on funding for a diesel generation station in Nibinamik First Nation. The other was on Indigenous Services Canada investment in natural gas and diesel projects, or on electricity price support for the indigenous community.

Honestly, there are no options other than diesel for a lot places. If you do not think our people deserve heat or electricity because it comes from oil, then that tells a really bad story about what you think about indigenous people.

I also saw that Trans Mountain and Coastal GasLink pipelines were on the list because they got loans, not subsidies. You're probably aware that with Trans Mountain, there are many indigenous groups that are trying to buy that pipeline from the federal government. The business case is strong. However it gets divided up, it's going to provide long-term, stable and predictable revenues for our communities. It's going to help us to be more financially independent and to have money we can spend, which we think is important, rather than what the government decides for us, such as under the Indian Act and that regime.

It's the same with Coastal GasLink. Just this month it was announced that 16 of the first nations along the route have entered into an equity deal to buy up to 10% of the pipeline. They asked the federal government to help out and provide them loans to get them up to 30% ownership, and our government said no because it's a natural gas pipeline. I don't think I need to remind everyone that the world needs cleaner energy.

The thing that bothers me the most is the funding of the orphan and inactive well reclamation program. It's on the list too. As part of the COVID recovery, the federal government committed $1.7 billion to clean up orphan wells and pipeline facilities.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. Buffalo.

We're about a minute over time, so we'll have to stop there, but I have a feeling we're going to have an excellent discussion tonight, and everyone will have an opportunity to give their point of view in answer to questions.

We'll start with first round of questions with Mr. Dreeshen for six minutes.

Go ahead, please.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much, Mr. Chair.

Welcome to all the witnesses.

I would certainly like to speak to Mr. Buffalo from the Indian Resource Council.

I know many people who have called or do call your community home. I have coached hockey teams that have played in your arenas, and I know of the services you provide for your people. I listen to you; I talk to you, but I don't talk for you. I think that's really the key issue we have. I have been on the aboriginal affairs and northern development committee where we have talked about the Truth and Reconciliation Commission, honour of the Crown, UNDRIP, and all of these things. We've had discussions with your people, and I think it's so important. We have so many groups—the NGOs, the movie stars, the politicians, the entertainers and governments—all taking their turn to speak on your behalf.

We've just heard of the industry-altering 2030 emissions reduction plan, which is going to affect all natural resource sectors. It will affect the land and those activities like agriculture that are just about, in your communities, helping all of your members. It's going to affect the way you invest and the profitability of your efforts.

I wonder if you could tell us the types of consultations that you had in the development of this plan.

[Stephen Buffalo]

We're definitely trying to move forward. Of course, the objective is to eliminate poverty. Canada is blessed with natural resources. No one in Canada should not have access to clean water and better housing, with the social problems that come with being poor. With the natural resource sector, we're definitely trying to strike a balance of protecting the environment and taking care of greenhouse emissions. We're doing that now in the site rehabilitation program here. We partnered with Alberta. We're very proud of what we've done.

With regard to consultation in this whole process, I know that none of my members from the Indian Resource Council were consulted or even asked questions about this fuel subsidy. You know, it begins there.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much.

I'm just curious to know, from your experience, how many of the NGOs actually represent the aspirations of indigenous communities. Are there NGOs whose work has been detrimental to the goals of your communities? I think you mentioned that you've seen quite a bit of that.

However, trying to keep things going as far as time is concerned, you did speak of the orphan well cleanup joint program with the province and the federal government. You're concerned that in everybody's desire to prove that they know more than you do, this is another thing that they believe should be off the list. There are so many things that have been done on orphan wells, and things that people have learned. I wonder what types of lessons you could tell us about on both the environmental cleanup side and the methane reduction side when it comes to orphan wells.

[Stephen Buffalo]

You know, on the orphan well program, we were given $113 million in Alberta to clean up the first nations land. We have changed over 1,600 wells, pipelines and facilities. Our start date was eight months after everyone else. We are the shining star of this program. We've asked for an extension on it to do more work.

With regard to the methane emissions into the atmosphere, based on the Alberta energy regulation data, out of those 1,600 wells, 933 of them leaked methane. That equates to 2.6 million tonnes of methane per year. So 220 million tonnes of CO2 equivalent equates to about 250,000 cars off the road. We are doing our part. We are cleaning up what mess is there.

Our reserves aren't getting any bigger. Our land mass isn't getting bigger. Our population and our demographics are growing, so we have to clean the land. This is one program that we're very proud that we've been able to work in partnership with not only the Government of Alberta but industry itself. It's employed over 250 young first nations who have taken pride in cleaning the land.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you. You know, if you look back at history, it wasn't too many centuries ago that wood, animal fat, dung and so on were the fuels used by all of our ancestors. Of course, billions of people on this planet still use this for their basic needs.

I'm curious; are there any groups that you know of that have the compassion and foresight to speak for those people? Or are these actions just focused on redesigning the modern western world, of which you are a part and have had certain experiences with in your nations' lifetime?

[Stephen Buffalo]

You mentioned a bit of our history and what has been utilized in the past. As time has evolved, so has technology. When I see fishermen in Musqueam coming in to shore, they're not paddling. They're using two big, heavy, high-powered boats. That's for efficiency. Some of our people are still out trapping. They're using a powered snowmobile or four-wheeler. Again, it's for efficiency. These are things that we just had to adjust with.

As far as I can tell, I've never met a first nation who proudly declares that an NGO speaks on their behalf in regard to their space. The leadership in each community really makes their decisions as to what's best for their people because of the system we live in. You know, we talk about this direction, but we never talk about the Indian Act and what it's done to us. There hasn't been a federal party yet to really step up and help us eliminate that—not the Conservatives, not the Liberals, and not the Green Party or the Bloc.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. Buffalo.

We'll go now to Ms. Taylor Roy for six minutes.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you very much, Mr. Chair, and I'd like to thank all the witnesses for being here and presenting their introductory remarks.

I'd like to start with Mr. Beugin from the Canadian Climate Institute.

Mr. Beugin, I was pleased to see from your background that you're an expert in both environmental policy and economics. In balancing the two, I think your remarks reflected that. I think we all know how important it is to be sure that with our environmental policies we are also ensuring that there is economic growth, a place for supporting our economy.

I am wondering about this. In the 2021 mandate letter for the Deputy Prime Minister and the Minister of Finance, it instructed Minister Freeland to “Work with the Minister of Environment and Climate Change, and with...the Minister of Natural Resources, to accelerate our G20 commitment to eliminate fossil fuel...from 2025 to 2023...”

Do you believe that Canada can meet that target while maintaining a strong economy? Secondly, do you think it's the right time to do it, because we're obviously in a transition and it's a challenging time? Do you think that's possible?

[Dale Beugin]

Member, just as a clarification, please, are we talking about the target of achieving emissions reductions or the target of phasing out fossil fuel subsidies?

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

I'm talking about phasing out fossil fuel subsidies.

[Dale Beugin]

I think my remarks suggest that in fact phasing out fuel subsidies, in lots of cases, can support economic growth, and that prudent management of public funds is a key part of long-term prosperity. In the face of global transitions and big shifts in international markets, 90% of global GDP has committed to achieving net zero.

If they follow through on those commitments, that represents a seismic shift in demand for fossil fuel products and absolutely changes the long-term payoffs of investments, both public and private, in the sector. In terms of sustaining economic growth and prudently managing public dollars, phasing out that support makes economic sense as much as environmental sense.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you.

Basically it sounds like you're saying that this shift is going to happen regardless of what we're doing. We're actually just taking funds from one area and putting them into something that would be more productive, because that fundamental shift is going to happen in any event.