Evidence of meeting #11 for Environment and Sustainable Development in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was energy.
A recording is available from Parliament.
Liberal
The Chair Liberal Angelo Iacono
Thank you, Mr. Keating.
The floor is now yours for five minutes, Ms. Dovgal.
Margareta Dovgal Managing Director, Resource Works Society
Thank you so much, Mr. Chair.
Leveraging our true potential as an energy superpower for the well-being of Canadians and maintaining the 2030 emissions reduction plan are fundamentally irreconcilable. We cannot have a growth agenda premised on our most productive sector if that sector is also saddled with targets only achievable through costly carbon credits or production decline.
A new mandate from Canadians to respond to the economic necessity of this moment forces a necessary reconsideration of this framework. The resulting policies must therefore also reflect that will and be grounded in reality.
The 2030 plan is ill-suited to our current economic imperative because it relies on unsound models with questionable assumptions that are treated as facts. These models create self-reinforcing outcomes. They rely on prescribed technologies neither proven at commercial scale nor widely available.
Let's look at the specific policies that flow from the plan.
First, let's be clear about the source of the bias. The 2030 plan itself is built on absolute emissions targets. This framework is biased against energy production and allocates all emissions liability solely to the producing jurisdiction, ignoring the consumption of those goods elsewhere.
The oil and gas emissions cap is a flawed expression of that bias. It's an attempt to create a cap-and-trade system for one industry in only four provinces, creating an illiquid market that cannot function well. Moreover, the government's model uses a 2019 baseline that assumed 5% production growth, but by the time the model was released, Statistics Canada data already showed we were 9% above that production baseline. Current Canadian production is almost 20% higher than in 2019, mostly driven by B.C.
Second, the proposed methane regulations are being sold as an easy win. The head of the IEA at COP famously said to just tighten the pipe, but that's a view that involves considerable costs to realize. These regulations, especially measured against the national inventory, are designed to be punitive. They overly impact the natural gas space, which they are designed to do, and that's precisely why Canada's golden opportunity for natural gas production and LNG exports is imperilled by this. This is an industry that we're just starting to build.
Third, the clean fuel standard is a policy intended to reduce the carbon intensity of liquid fuels by blending, by using other reduction options in supply chain and production and by buying credits. In practice, this forces Canada to import biofuels from the U.S., undermining our own energy security for a policy that is little more than a hidden and unnecessary tax.
Fourth, the EV mandate is the definition of a government forcing a technology. A market-based tool like corporate average fuel economy, or CAFE, standards, by contrast, allows for a variety of options to meet a goal. This mandate simply forces an expensive product that most Canadians cannot afford.
Fifth, the clean electricity standard is a clear case of federal overreach into provincial jurisdiction. The models supporting it assume an impossible build-out and an operating environment that does not exist and is unlikely to develop. It also ignores the physics of provincial grids, many of which may not be able to handle a much higher level of intermittent power without risking cascading outages, as we've seen happen in Germany and Spain.
Sixth, the output-based pricing system, or OBPS, is another flawed hybrid, sitting between a tax and a cap-and-trade system. Its performance-based measures are tied to the decline in the sector they are targeting. It is a system designed not to foster innovation but to manage our most productive industries into non-existence.
Finally, this all comes back to carbon credits. They become a convenient illusion of progress rather than a genuine solution. While marketed as a way to offset emissions, most credits fail basic integrity tests. All of Canada's modelling assumes the ability to buy international credits to meet emissions reduction goals. This market, such as under IETA, lacks a double-entry bookkeeping requirement. There is no system to prevent double counting or to prove a single emission was ever reduced.
These self-imposed hits to our competitiveness are absurd precisely because we are already leaders. There's nothing lax about our regulatory system; we've been regulating for decades. Our natural gas sector is a perfect example. According to CAPP, since 2000, emissions from the natural gas sector have fallen by 20% while production has grown by 15%.
On top of this, there's red tape. Our regulatory system is so broken that this government has brought in fast-tracking legislation that deploys political will to sidestep the mess it is ultimately responsible for—a mess that creates significant competitiveness challenges on top of all the policies I have described.
This brings us back to the core problem with the 2030 plan. Where emissions reductions cannot be achieved because the technologies don't exist or aren't economically viable, this framework passes along to industry the cost of carbon credits, a backstop measure that leads to nominal outcomes at best. Where that's still not enough, Canadians are saddled with only one actual outcome: deindustrialization as industry cuts investments and, in turn, production.
That's the real cost. The plan systematically undermines our competitive advantage as an incredibly resource- and energy-rich nation, capable of responsibly serving the world's needs.
Liberal
The Chair Liberal Angelo Iacono
Thank you, Ms. Dovgal.
Ms. Anstey, the floor is yours for six minutes.
Conservative
Carol Anstey Conservative Long Range Mountains, NL
Thank you.
Thank you, Mr. Keating, for being with us today and for the work you do in this very important sector for Newfoundland and Labrador.
Mr. Keating, there's so much to unpack in your opening statement, but one of the conversations we've been consistently having in this committee is with respect to the emissions cap and whether or not it's a reduction cap. I'd like to give you an opportunity to expand on that issue as it relates to our important offshore sector.
Chief Executive Officer, Oil and Gas Corporation of Newfoundland and Labrador
Yes, thank you.
We are probably dominated by the western Canadian view of it as a production cap, and I agree that it is essentially a production cap, but from my perspective, I see it as something more severe: It's an investment cap.
We rely upon investors who can freely go anywhere else in the world. We compete with 40 other jurisdictions for exploration dollars, and what's happened in our offshore after a significant amount of investment on behalf of the province is quite shocking.
The provincial government has put up $19 million to incentivize explorers to come here. The explorers are simply unable to see a pathway to development. This is really troubling, because we have one government at odds with another government about trying to achieve a common objective.
I see it as an investment limiter. It's fully blocked any new growth opportunities, and I don't foresee any resurgence in investment in our offshore until the emissions cap is replaced and we have the signals that the Bay du Nord project is moving forward.
Conservative
Carol Anstey Conservative Long Range Mountains, NL
I think that's very important, given the situation in the country right now.
Further to that, we hear a lot of talk about this government wanting us to be an energy superpower. With this emissions cap in place, do you think we can actually be an energy superpower?
Chief Executive Officer, Oil and Gas Corporation of Newfoundland and Labrador
There's not a chance, really.
I've been to several summits and conferences around the world. While I used to be warmly greeted by people wanting to know about where our next prospects were and about our next resource assessments and licensing rounds, the conversation has turned to asking about when that thing is going to disappear, because we're the only country that, at least in my circles, has any such cap.
I don't think it's at all possible.
When you look at where all the investment dollars are going to meet the world's global energy needs, where else are you going to find the four million to five million barrels a year we need unless it's in the offshore? We have one of the biggest coastlines in the world and one of the best energy endowments; we just have no access to them.
Conservative
Carol Anstey Conservative Long Range Mountains, NL
Based on that, can you also explain for the benefit of our committee the importance of this resource in relation to its access to tidewater, especially as we talk about diversifying trade?
Chief Executive Officer, Oil and Gas Corporation of Newfoundland and Labrador
With access to tidewater, as I mentioned in my opening remarks, we have a 100% export rate to international markets, primarily Europe. In fact, we sell at Brent pricing and not WTI, so while western Canadian crude is sort of captive and sells at a discount to market price, we are actually in the open market.
We have what the world is looking for: advantaged barrels. We have access and security of supply. We have low emissions on the scope 1 and scope 2 emissions, and we have cost-competitive production because we can produce at $35 per barrel or less in terms of full life-cycle costs. Those are the three major ingredients.
Unfortunately, with this cap, it's proving hard even to move any discussions around growth forward.
Conservative
Carol Anstey Conservative Long Range Mountains, NL
As something else that I think is important, in your opening statement you talked about how your main focus has been exploration. Can you speak to how that might contribute to reducing global emissions?
Chief Executive Officer, Oil and Gas Corporation of Newfoundland and Labrador
Exploration doesn't increase emissions. It might be counterintuitive. It basically meets demand.
When you look at the fact that 90% to 95% of emissions are post-offshore extraction, it begs the question of why we wouldn't do more of it. Studies have shown, if we look at our frontier and the scale of the types of developments you see around the world in Suriname, Guyana, Mozambique and Namibia, that when these fields come on, they displace 30 to 40 kilograms per barrel a day emissions-wise with 10 to 15.... Without exploration, we're just going to allow those legacy fields, which are a higher cost to maintain and are more problematic for reducing emissions, to proliferate. Actually, it has happened in other jurisdictions that quite frankly are not so concerned.
From my perspective, for us to target our upstream, our productive area, instead of the consumption area is counterintuitive, and it's not really good policy.
Conservative
Liberal
Liberal
Shannon Miedema Liberal Halifax, NS
Thank you so much.
Thank you to all of the witnesses. I'm sorry I can't be there in person.
What a stark contrast of testimony we've heard in this hour, going from young Ms. Mathur to adults who are gainfully employed in a particular sector.
The study we are working on right now is about our ability to achieve our 2030 reductions and, if we're not achieving them, how to do this better. These conversations seem to be counterintuitive.
I'd like to give some room for Ms. Mathur to share some reflections based on what she's heard. I commend her for her testimony, her bravery and all the great work she's doing.
Ms. Mathur, it's over to you.
As an Individual
Thank you so much for that. I really appreciate it.
As I said, I think conversations about these policies are important, yet it feels like the trade-off of these conversations is the action we are not taking. I've been going to these meetings since I was seven, and it almost feels like they've had the exact same message of protecting certain industries, but we can't do that at this point. Climate change is going to impact my future. Prices are going to get higher regardless of what policy we have or if we have climate change and cannot fix these issues.
Obviously, I'm not coming here as an expert or someone who can give you a quantitative analysis of everything that's going on, but I wanted to be present as a youth so that the discussions you're having are happening in front of the exact future generation that is going to feel the impact of the time spent on these conversations.
Thank you for the question.
Liberal
Shannon Miedema Liberal Halifax, NS
Thank you very much for that.
The role of government is to serve the public. We are public servants. We work towards what we believe is in the best interests of everyone, not just a particular few.
In listening to testimony, I was thinking about the tragedy of the commons. That's exactly what happens when we don't focus on the big picture. We're talking about potential economic losses and opportunity in a particular sector, but we're not talking about all the loss we're experiencing in Canada and around the world from the effects of rapidly accelerating climate change, with wildfires, hurricanes, etc. There are huge economic losses. The conversation that it's economy over the environment, or vice versa, is absolutely false. They go hand in hand, because there is no economy without an environment.
Ms. Mathur, I understand that you attended COP27 in Sharm El-Sheikh, Egypt, as did I. I wondered if you wanted to share your experiences and reflections there, and maybe reflect on why you think it's important for Canada to keep going and accelerate action.
As an Individual
It was an amazing experience to go to Egypt. One memory was going to the Canadian pavilion and checking out all the speakers. I noticed that one presentation at the Canadian pavilion was given by the oil industry, so I decided to attend. For some reason, they did not allow a question period. A bunch of us activists and Canadians came to this pavilion to ask questions, but instead we were dismissed.
Obviously, I think that a lot of action gets done at COP, but it does feel like you're a bit unheard going there as an activist and not someone with money and an economy to bring to the table.
Liberal
Shannon Miedema Liberal Halifax, NS
I'd like to assure you that your voice is well heard by the federal government. In its platform, the Liberal Party had funds for a youth climate corps. I'm not sure if you're aware of that initiative, but we're looking to establish a federal program to get young people involved in the green transition.
Can you explain why young people would benefit from such a program?
As an Individual
I think that's very important. While speaking to many youth involved in climate activism or concerned about climate change, I think they feel there is a bit of a disconnect between them and politicians. When I talk about lobbying when I was seven, they're like, “Do you speak to politicians? What?” I think we forget that politicians exist as our representatives and are here to serve us, so we need to remind youth that they're able to engage in politics, talk to politicians and give advice. That's really important, and that exists.
Liberal
Shannon Miedema Liberal Halifax, NS
Thank you.
I have a question for Mr. Keating.
You spoke a bit about the investments your company has made in renewable energy. I'm wondering if you can expand on that and if you think it is maybe a first step in the inevitable green transition we'll have to go through as a globe. How can your company position itself to still be successful in that space?
Chief Executive Officer, Oil and Gas Corporation of Newfoundland and Labrador
We were created in the image of an analogous jurisdiction like Norway. State ownership is a big deal in Norway. It's how Norwegians balance their hydrocarbon and renewable endowments. They're progressive in their policies toward climate, and the well-being of society is something to admire. They punch beyond their weight.
Newfoundland and Labrador is one-tenth the size of Norway in almost every way. I pride myself as a professional on having the benefit of working abroad. I worked with a Norwegian company for 10 years, and I try to bring that sort of philosophy here. We're—
Liberal
The Chair Liberal Angelo Iacono
I'm sorry. Thank you.
Mr. Bonin, you have the floor for six minutes.
Patrick Bonin Bloc Repentigny, QC
Thank you, Mr. Chair.
Mr. Keating, I understand of course that you are opposed to the greenhouse emissions cap for the oil and gas sector. You did say however that you support practical policies that provide for the decarbonization of Canada's oil and gas sector. Can you tell me which practical policies you support that would provide for the decarbonization of the oil and gas sector?
Chief Executive Officer, Oil and Gas Corporation of Newfoundland and Labrador
First and foremost, most oil and gas companies operating around the world do believe in carbon pricing, as long as it's done in a fair and even way and we don't disproportionately disaffect ourselves in the search for capital. I think that sends the appropriate price signal from the ground up. That's number one.
Number two, I think it's inside the regulations themselves. We have a world-class set of regulators here who know these facilities and these fields at the asset level. They can stand and look at the framework of regulation that's been in place for effectively 30 years and is constantly evolving, even with the complexity that's required, and look at offshore fields and make sure we get the best of them. We look at their uptime. We look at their power demands, because the electricity on a platform is maybe 60% to 70% of the carbon emissions. We look to do things more efficiently. We look to modernize. These are constant and incremental things that are already in place and are already consistent with not just global best practice but Canadian best practice.
I think carbon pricing as a whole is something the industry is generally in support of, but maybe it's about the specific actions of the regulator and the give-and-take of how we execute these projects on a technical level. They have revealed, as I mentioned, a 50% reduction in emissions in the span of seven or eight years for our offshore fields.
Bloc