Evidence of meeting #32 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was question.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Timothy Egan  President and Chief Executive Officer, Canadian Gas Association
Marc-André Viau  Director, Government Relations, Équiterre
Caroline Brouillette  Policy Analyst, Energy and Climate Change, Équiterre
Tristan Goodman  President, Explorers and Producers Association of Canada
Adam S. Waterman  President, Lloydminster Oilfield Technical Society
Pierre Gratton  President and Chief Executive Officer, Mining Association of Canada
Brendan Marshall  Vice-President, Economic and Northern Affairs, Mining Association of Canada
Peter Kiss  President and Chief Executive Officer, Morgan Construction and Environmental Ltd.
Michael Crothers  President and Country Chair, Shell Canada Limited
Soren Halverson  Associate Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance
Cliff C. Groen  Assistant Deputy Minister, Service Canada - Benefit Delivery Services Branch, Department of Employment and Social Development
Elisha Ram  Associate Assistant Deputy Minister, Skills and Employment Branch, Department of Employment and Social Development
Suzy McDonald  Associate Assistant Deputy Minister, Federal-Provincial Relations and Social Policy Branch, Department of Finance
Alison McDermott  Associate Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
Andrew Marsland  Senior Assistant Deputy Minister, Tax Policy Branch, Department of Finance
Geoff Trueman  Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency

3 p.m.


The Chair Liberal Wayne Easter

We'll officially call the meeting to order.

Welcome to meeting number 32, panel one of the House of Commons Standing Committee on Finance. Pursuant to the order of reference from the House, we're meeting on the government's response to the COVID-19 pandemic.

Today's meeting, for everyone's information, is taking place by video conference, and the proceedings will be made available via the House of Commons website.

With that, I want to welcome all the witnesses here today.

Your information is very valuable, certainly to the finance committee and certainly to Canadians. I would ask, if you could, since we have seven witnesses, to keep it fairly close to five minutes. It gives us more time for questions.

We'll start with the Canadian Gas Association, Timothy Egan, president and chief executive officer.

Welcome, Timothy. The floor is yours.

3 p.m.

Timothy Egan President and Chief Executive Officer, Canadian Gas Association

Thank you, Mr. Chairman.

The CGA is the voice of Canada's natural gas delivery industry. Our utilities deliver service to over 20 million of your constituents in homes, businesses and industries through over 570,000 kilometres of energy infrastructure. In 2018 natural gas met 35% of Canada's energy needs. The Canada Energy Regulator forecasts that number will grow to 40% in the next 15 years, almost twice the end use of electricity.

Our utilities are active in communities providing an essential service, but also, through their employees and those of our manufacturer and supplier members, we are helping Canadians live through and plan a recovery from COVID-19. It's been all hands on deck for our members during these challenging times. Our industry's detailed pandemic planning processes, developed over decades, have been leveraged to full effect.

As essential service providers, front-line utility workers have been ensuring uninterrupted energy delivery for Canadians. These are unprecedented circumstances, but there's uninterrupted service. To paraphrase how one utility staff person put it to me, our people rise to the occasion in difficult times because our customers need us. For those customers, utilities have instituted bill deferment programs, stopped disconnects and increased social media and other communications to stay as engaged as possible.

All our companies have instituted work from home protocols. Front-line workers are equipped with necessary PPE and are well trained on specific safety practices.

Energy use traditionally declines after the winter, and this year has been no different, although the industrial decline has been more noticeable. Overall the fact remains that Canadians need affordable, reliable energy, irrespective of circumstances, and we've been providing it. We're working closely with government officials, particularly those at NRCan, Public Safety Canada and Measurement Canada, on various issues that have arisen. I should note how admirably committed those officials have been to their public service duties.

However, we're deeply concerned about the long-term economic picture. As an industry, we're focused on how we can help improve it. Safety is always our first priority. We bring our safety-first culture to how we think about getting the Canadian economy up quickly and reliably. We have a great deal of project work that can advance as lockdowns lift, and we know this will be a real economic stimulus. Direct and indirect spending is in the billions, and we want to proceed.

In response to a request from government, we submitted a list of shovel-ready projects. We are encouraged to note as part of that list those projects that would help deliver on aggressive emission-reduction targets set by government for 2030 and 2050 goals and aspirations. All of our projects contribute to the more effective delivery of clean and affordable natural gas, but in response to the request, we also included projects that would help deliver on these more aggressive targets. Those are more costly than our conventional work and would require stimulus assistance. The total list is 93 projects representing $12 billion in spending with an overall ratio of industry to government spending of 5:1.

An overview of the projects is included in the map attached to the package sent to you. They fall into four buckets: renewable gas and hydrogen, green retrofit projects, alternative transportation fuels, and infrastructure and LNG projects.

Our analysis of the emissions not produced because of the projects is under way, but the 39 we've reviewed so far represent an estimated five megatonnes of CO2 reductions. That number will grow as we complete the analysis.

While those projects focused on more aggressive emission reductions require matching dollars, the majority require no funding but do need regulatory approval at the federal level. Anything to expedite that would be a low-cost action by government to drive economic recovery. We cannot emphasize strongly enough how such action to clear the path for project advancement will be helpful.

As we look forward, apart from the specific asks, we want to work co-operatively with government on a strategy with three broad components: first, to develop a team Canada approach with the natural gas delivery industry; second, to support renewable gases to position Canada on the global stage; and third, to leverage Canada's natural gas clean-tech advantage.

In conclusion, Mr. Chairman, Canadians have been using gaseous energy for the entirety of our country's history, and in some regions longer still. Our industry has stood with its customers through wars, depressions, pandemics, floods, fires and more. Through each, we've delivered, we've adapted and we've grown stronger. Our hope is to do the same again through COVID-19.

Our fuels and our infrastructure are foundational to our country's well-being, guaranteeing the affordable, reliable, clean energy delivery that has allowed Canada to thrive. We're determined to continue to contribute, and look forward to working with parliamentarians and all others in facing this challenge.

Thank you, Mr. Chairman.

3:05 p.m.


The Chair Liberal Wayne Easter

Thank you very much, Mr. Egan.

Turning to Équiterre, we have Marc-André Viau, director of government relations, and Caroline Brouillette, policy analyst.

The floor is yours.


3:05 p.m.

Marc-André Viau Director, Government Relations, Équiterre

Thank you, Mr. Chair.

Distinguished members of the Standing Committee on Finance, I thank you for having us today.

I will be sharing my speaking time with my colleague Caroline Brouillette.

The Canadian oil and gas sector has been suffering suffered greatly since the beginning of the COVID-19 pandemic, as a result of the drop in oil prices.

However, the sector had been struggling long before the arrival of COVID-19, not only because of recent decisions made by the Organization of Petroleum Exporting Countries, or OPEC, to force the price of a barrel of oil to a historic low, but also because of divestment from the finance and insurance sectors, which has been on the rise for years.

Revenue is dropping, as are profits and jobs. The sector is quite vulnerable, and there is no control over market dynamics. The market never fully recovered from the crash of 2014, and the sector is already heavily subsidized by government.

In spite of the trends we were seeing before the crisis, companies in this important industrial sector asked Ottawa for financial assistance through the emergency pandemic programs.

We believe that public emergency assistance will have an impact on how the sector will evolve post-pandemic and that we must pay particular attention to the recent programs.

On March 24, Équiterre, a group of organizations representing more than 1.3 million Canadians, called on the federal government to ensure that any bailout programs target workers in the sector directly.

A few days later, our colleague at Environmental Defence Canada released a secret memo from the Canadian Association of Petroleum Producers, which called for a massive rollback in regulatory oversight, a full stop in the development of any new climate policy, and for the industry to be exempted from the requirement to report on lobbying activity.

In light of these ludicrous demands from the industry, we welcomed the government's announcement on April 14. The $1.7 billion allocated to clean up orphan and inactive oil wells in western Canada will support a just transition, through the creation of sustainable jobs.

This reform is welcome, but the government must implement a polluter pays regime to prevent more environmental liabilities, which would also increase the government's bill. Parliament must oversee the agreements with the provinces receiving this money.

Although we have some reservations, these investments show that Canada is headed in the direction we want, which is to create jobs while helping to reduce the environmental impacts.

Speaking of reservations, I do want to point out that we were concerned about one aspect of this announcement in particular: the loan or credit guarantees through Export Development Canada, or EDC, and the Business Development Bank of Canada, or BDC.

On March 25, the mandate of EDC was expanded through Bill C-13, to enable this organization to support Canadian businesses. Furthermore, this bill increased the organization's total indebtedness capacity from $45 billion to $90 billion. The Minister of Finance and the Minister of International Trade may also now approve a wider range of transactions.

In light of EDC's historical lack of transparency, we are worried that Canadians may never be informed of the total economic and environmental cost of these programs.

I also want to point out that, according to a report published yesterday by Oil Change International, Canada provides the most fossil fuel finance per capita of G20 countries and comes second overall, after China.

I will now give the floor over to my colleague, Caroline Brouillette.

3:05 p.m.

Caroline Brouillette Policy Analyst, Energy and Climate Change, Équiterre

Thank you.

On May 11, the Prime Minister announced the large employer emergency financing facility, or LEEFF, yet we still do not know how much total financing will be available through this program.

LEEFF recipients will have to commit to publishing annual climate-related disclosure reports.

Équiterre believes that the LEEFF program must, at minimum, require the companies receiving this financing to prove that their business plans are in line with the Paris Agreement target to limit temperature increase to 1.5 degrees.

The government must also ensure that the recipients do not simply set a target of zero net emissions with a faraway date, but that they commit to consistently lowering their emissions from now until 2050. There must also be strict accountability measures.

In general, we believe that the government should, as a rule, attach binding environmental conditions to any public assistance to ensure that the assistance is consistent with its climate commitments.

We share the government's objective to support workers in the oil and gas sector, but we have concerns about how this support is being provided. The approach could increase the number of environmental liabilities and expose taxpayers to the financial risk of a sector that, as this crisis has illustrated, makes our economy extremely vulnerable.

We also believe it is important to learn from past mistakes. The Auditor General of Canada noted the following in 2014, regarding the auto sector bailout in the wake of the 2008 financial crisis:...it was impossible for us to gain a complete picture of the assistance provided, the difference the assistance made to the viability of the companies, and the amounts recovered and lost.

We must do better this time.

All of these developments are happening while Canada has committed to eliminating fossil fuel subsidies by 2025. The government reiterated its commitment in the most recent mandate letters. However, Canada is still struggling to complete the peer review it committed to two years ago with Argentina.

We recommend that the government implement transparency and accountability mechanisms to ensure that the total amounts available to the oil and gas sector and the transactions made by EDC and the BDC through the LEEFF program are made public. This includes the new loan required for the Trans Mountain pipeline expansion, granted by EDC.

We realize that emergency financing measures are designed to stabilize the economic sectors, but we believe that any federal intervention in the economy should be focused on a fair recovery, in particular by prioritizing workers and their communities, and increasing resilience to prevent future crises.

We urge parliamentarians to keep this in mind when designing policies and programs regarding our country's economic and social stabilization and rebuilding.

Mr. Chair, members of Parliament, thank you for your attention. We are happy to take your questions.

3:10 p.m.


The Chair Liberal Wayne Easter

Thank you both very much.

Turning then to the Explorers and Producers Association of Canada, we have Tristan Goodman, president.

Go ahead, Tristan. Welcome.

3:10 p.m.

Tristan Goodman President, Explorers and Producers Association of Canada

Thank you for the opportunity to appear before you today.

My name is Tristan Goodman, and I represent EPAC, which deals with the Canadian natural gas and non-oil sands producing companies outside the oil sands mining area.

Under the chair's direction, I'll confine my remarks to English.

My association represents over 100 large and small companies drilling for natural gas and oil in western Canada. We employ tens of thousands of Canadians from coast to coast, and represent over $100 billion in market assets.

We understand and agree with those who want solutions to global climate change as well as indigenous reconciliation. Through working with federal and provincial governments, as well as indigenous nations, we believe there is a path forward for continued responsible oil and gas development in conjunction with Canadian leadership on these fundamental issues.

I would hope my personal background may be of use to the House of Commons committee, as I have senior-level experience implementing energy policy and regulation as a former energy regulator, and I have a relevant academic background with a Ph.D. in natural resource management, specializing in environmental science and economics, as well as several law degrees from Canada and the United Kingdom. My comments are addressed to you based on this background, as well as an approach that seeks to advance the broad Canadian public interest in these difficult times.

As Canadian governments restart the economy over the coming weeks and months, we believe that in many cases the Canadian-based oil and gas sector can quickly respond and dramatically support recovery through immediate activity and job creation. A noticeable proportion of employment in the oil and gas sector occurs in areas such as Montreal, Vancouver and Toronto through professional services, manufacturing, IT, corporate services, automotive and, increasingly, petrochemicals, which are the base components of a wide range of health-related products, such as ventilators, masks and plastic-based equipment.

I am sure you have heard from many over the past several weeks about the importance of oil and gas pipelines, as well as ensuring a competitive regulatory and fiscal environment to undertake business. Propane and other heating and drying products in Quebec, petrochemicals in Ontario, LNG in the Maritimes and British Columbia, broader applications of carbon capture and storage technology, and the completion of approved pipelines all remain critical to our country and workers going forward. However, today I would like to confine my limited time to specific short-term recovery opportunities that should be considered in the coming months, given the difficult economic situation we face.

Turning to the recent federal programs, the federal government has put in place four specific programs that have assisted, or have the potential to assist, Canadian workers who rely on the energy sector. EPAC strongly supports the $750-million methane emissions reduction loan program, the $1.7 billion of support to clean up orphan and inactive wells, and the Canada emergency wage subsidy. We want to acknowledge the efforts of the federal government to work with the provinces in these important areas. We also support the intention of the EDC, BDC and LEEFF programs. These loan programs are of particular relevance, as there are approximately 30 or more companies that should qualify for these programs, if qualifying conditions are reasonable, and thus support workers.

With the federal government's commitment to transparency in mind, we look forward to a comprehensive public understanding on specific uptake and use of the loan programs that have been put in place to support Canadian workers.

What else can be done to support Canadian workers?

Successful economic stimulus to support Canadian workers and families will require substantive private sector investment, given the magnitude of the current economic situation. Canada must have broad inflows of investor capital to be successful. There are additional short-term policies and programs that the federal government can put in place to support workers relying on oil and gas development. A few examples of these are attached to my opening comments as an appendix.

In conclusion, the future of Canadian oil and gas development can be bright and could be a significant contributor to economic recovery, while fitting within the clear policy commitments of Canadian climate change leadership and indigenous reconciliation. EPAC views our industry as part of the broader energy transition that has been occurring for decades.

Given the difficulties Canadian workers are currently facing, short-term policies need continued focus in parallel to the broad macrostrategies of Canada's energy future. Since the founding of Quebec City over 400 years ago, Canadians have been developing our natural resources and increasingly working collaboratively with our indigenous partners. Over the centuries of our young country's development, there have certainly been mistakes in both the development and partnership areas. However, there is now an opportunity to renew our commitment to responsible development within a modern Canadian framework that meets expectations around the environment, indigenous reconciliation and a prosperous economy.

Thank you.

3:15 p.m.


The Chair Liberal Wayne Easter

Thank you very much, Mr. Goodman.

We'll turn now to Lloydminster Oilfield Technical Society, Adam Waterman, president.

Mr. Waterman, the floor is yours.

3:15 p.m.

Adam S. Waterman President, Lloydminster Oilfield Technical Society

Thank you, Mr. Chair.

Committee members and fellow witnesses, I thank you for your time today.

I appear before you representing the Lloydminster Oilfield Technical Society. The society’s founding aim nearly 40 years ago was to provide a forum to discuss technical issues within the industry, along with promoting the industry’s successes. For many within our membership, oil and gas has been the family business for two and three generations.

Our first well blew in on May 4, 1934. This industry is not a passing fancy or an employer of last resort for our membership or the people of this region. It shapes our very identity.

In the five years prior to COVID-19, we lost an average of 600 jobs in direct industry employment per year. This in a population catchment area of 80,000 people. This is equivalent to Oshawa’s GM plant closing this past fall, with the exception that it happened in a population a fifth of the size. That means two people were coming home from work every day to have the hardest of conversations over their kitchen tables—every single day—for five years. That's 10 families' futures cast into doubt this week, and 15 more the next.

This Damoclean sword of financial ruin has hung over this region’s collective head for nearly six years now, and with it, comes the mental toll it's taken on this industry’s participants and their families. Then came COVID-19.

There is no hyperbole that can adequately capture the non-existence of economic activity currently. Medium-sized companies are down to only the owner working. Equipment is being sold at auction to make payroll. In a period where my employer would have had 17,000 rig hours, we had 40. We are finding new depths of desperation daily.

I was asked here today to provide testimony on the Canadian government’s response in support of the oil and gas sector following the economic crisis of COVID-19. To borrow from Mahatma Gandhi when he was asked for his thoughts on western civilization, I think it might be a good idea. Just as Gandhi was remarking that he hadn’t yet witnessed a civilized west, I have yet to witness a plan for oil and gas from this government.

Outside of the CERB and some CEWS benefits, our membership and the industry at large has not experienced much help. As evidenced by Alberta Energy being inundated with applications for the site rehabilitation program, industry possesses a high-volume of shovel-ready projects that can get people back to work today. The industry has not paused because of the virus. The industry has paused as it realigns with the demand picture of a COVID world and into recovery.

However, the federal government waited until April 14 to announce anything industry-specific. It waited until two weeks ago to release inactive well funding and we still wait for a liquidity backstop. Meanwhile, it has been 10 weeks for five full pay periods without an hour of work for the workforce of this country’s second-largest industry and largest first nations employer. With asset retirement funding moving forward at a dawdling pace, the only response from the liquidity prong of the federal government’s April 14 policy détente remains an auto-generated email from the BDC. This is not good enough. People are suffering as a result of this inaction.

The benefits of the large employer program are contingent on an open-ended and vague commitment to the recipient having net-zero emissions in 30 years' time for a one-year bridge loan with a five-year amortization. It would have been more direct to say that oil and gas producers and oil field service companies need not apply.

Furthermore, the terms of the program appear spurious. There is no clarity on effects to the current lending hierarchy. The potential for equity conversion stands to make the federal government the largest shareholder in some of these companies. I’m sure you can appreciate this comes with a hefty dose of apprehension and mistrust from my side of the business.

The statement that the Canadian oil and gas sector is a world leader when it comes to climate change progress, GHG emissions and responsible development seems overplayed, but it’s a base fact. This government’s attacks on oil and gas, in absentia of real supports, has only served to deepen regional divides and worsen climate outcomes worldwide.

In the pursuit of partisan politics, this government has let the opportunity of COVID-19 pass by. It could have renewed the trust of the region’s largest industry, and western Canada at large. Instead, the status quo has been preserved. We remain painted as the contra side of a political dichotomy to serve political interests. We remain convinced the government’s ultimate pursuit is a slow-motion cod moratorium on our industry.

I will leave you with a quote from one of my members, which I feel captures where we're at locally:

I own a small drafting business trying to make it. So, yes, everything I have hinges on decisions that are made now. We do not want hand-outs, we want to work and earn every penny we make. We want to sit down and brag about working 20 days in a row.

It would be a sin to let endeavour like this “rust unburnish'd”.

Thank you for your time, Mr. Chair.

3:20 p.m.


The Chair Liberal Wayne Easter

Thank you very much, Mr. Waterman. We do appreciate your directness.

We have, from the Mining Association of Canada, Pierre Gratton, president and CEO; and Brendan Marshall, vice-president.

Go ahead, Mr. Gratton.

3:20 p.m.

Pierre Gratton President and Chief Executive Officer, Mining Association of Canada

Thank you.

Thank you for the opportunity to speak this afternoon.

My name is Pierre Gratton, and I'm the president and chief executive officer of the Mining Association of Canada.

I'm accompanied by Brendan Marshall, our vice-president for economic and northern affairs. Brendan will deliver the large portion of our remarks today as he has been working, in particular, very closely with our members and with the Government of Canada in response to the pandemic and its economic impact on our sector.

Just by way of background, MAC is the national voice of Canada's mining industry—

3:25 p.m.


Michael McLeod Liberal Northwest Territories, NT

Mr. Chairman, I couldn't hear for a minute there.

3:25 p.m.


The Chair Liberal Wayne Easter

I couldn't either, for about 15 seconds, but he's coming in clearly now.

Are you hearing him clearly now?

3:25 p.m.


Michael McLeod Liberal Northwest Territories, NT


3:25 p.m.


The Chair Liberal Wayne Easter

Go ahead, Mr. Gratton.

3:25 p.m.

President and Chief Executive Officer, Mining Association of Canada

Pierre Gratton

The Mining Association of Canada represents the majority of the production of mineral products across the country, including oil from the oil sands. In light of today's topic of conversation, I would just note that we do represent the firms of Suncor Energy, Canadian Natural Resources and Syncrude. They're MAC members, and we've been engaging on their behalf, as well as on behalf of the rest of the mining sector, with the federal government in response to the pandemic.

With that, I'd just ask my colleague Brendan Marshall to deliver the rest of our remarks.

3:25 p.m.

Brendan Marshall Vice-President, Economic and Northern Affairs, Mining Association of Canada

Thanks, Pierre.

In 2018, mining contributed $97 billion to Canada’s GDP, employed nearly 630,000 workers and accounted for 20%, or $104.5 billion, of Canada’s total export value. Proportionally, mining is the largest private sector employer of indigenous peoples, and our oil sands members are among the top employers and partners of indigenous-owned businesses. The majority of the world’s public mining companies are listed on the TSX, and Canadian mining is broadly recognized internationally for excellence in sustainability, environmental stewardship and indigenous engagement.

Throughout this pandemic, our members’ top priority has remained the health and safety of their employees, contractors and the communities around which they operate. They are following the guidance of public health authorities, with employees working from home where possible, no non-essential travel, limited site access for non-essential personnel and the incorporation of testing protocols and distancing policies at the work site. The protocols our members have developed have resulted in virtually no cases of COVID in our sector. At the request of the Privy Council Office, our members were also pleased to share these practices to help enhance the safety of Canadians across all sectors. More detailed information on our members’ responses is available on MAC’s website, and we'd be happy to share with committee members a package of information if that would be of interest.

I’m also proud that MAC member companies have made contributions exceeding $40 million to food banks, women’s shelters, indigenous organizations and health authorities across Canada to help address the COVID crisis. These are in addition to the donation of tens of thousands of N95 masks, test kits and ventilators, amongst other materials, to address shortages of these critical supplies. In advance of our appearance before the committee today, we asked that a document be distributed that provides greater detail on these contributions, and I was made aware by the chair that this had been done.

The scale of disruption has been significant across many commodities, but most especially for our oil sands members. The week of March 9, which saw the launch of social distancing policies across Canada and the United States that triggered deep demand destruction for petroleum products, coincided with the decision of Saudi Arabia to flood global markets with oil.

Global demand for oil plummeted approximately 30% in a matter of months. At its lowest, oil traded on the West Texas Intermediate at negative $37.63 U.S. a barrel, while a barrel of Western Canadian Select sold cheaper than bottled water at $3.81 U.S. While prices have recovered since then, they remain low compared to recent averages, and are anticipated to remain low until social distancing measures are safely lifted and demand for these products returns.

Acknowledging this disruption, the Government of Canada has taken action to support the economy, including the Canada emergency wage subsidy. Originally announced to cover 10% of wages for small businesses, the program was expanded to businesses of all sizes and increased to cover 75% of the first $58,800 of an employee’s salary. MAC worked very closely with Finance Canada officials, supported by Natural Resources Canada, to ensure that member companies’ corporate and marketing structures were understood by decision-makers so that the program could deliver in the way it was intended. We can tell you that a number of our members have applied for this program.

On liquidity, the government announced the business credit availability program on March 16, and subsequently expanded it to provide $65 billion in support to small and medium-sized businesses. On May 11, the large employer emergency financing facility, or LEEFF, was announced to provide bridge financing to large businesses. A few of our members have applied to the BCAP. With respect to LEEFF, we're not aware of any member applications at this time, but admittedly only represent three producers out of hundreds of companies in the oil and gas sector.

Finally, the federal government has been balanced in providing relief to companies in the regulatory space by extending deadlines for corporate tax filings, compliance reporting such as for the output-based pricing system, as well as by temporarily postponing the development of all non-essential regulations. It is noteworthy that some regulations and laws, through their drafting and design, do not have release-valve mechanisms that enable ministerial discretion to address unprecedented events such as COVID-19. As a recommendation to this committee, MAC would encourage consideration of the inclusion of such measures in laws and regulations, both new and updated, going forward.

At a time when public health priorities rightly supersede all others, the federal government has taken a measured approach to address the social, economic and operational realities that COVID-19 has created for our industry.

In closing, I would like extend appreciation for the tremendous work of civil servants across the government, and most especially at Finance Canada and Natural Resources Canada, who have laboured tirelessly to develop, refine and implement the government's response to COVID-19. Much is owed by our country for their incredible service at this time.

Thank you very much, Mr. Chair. We look forward to answering any questions that members of the committee may have going forward.

3:30 p.m.


The Chair Liberal Wayne Easter

Thank you very much, Mr. Marshall and Mr. Gratton.

That chart you gave the committee on the donations around COVID-19 is quite remarkable in terms of the amount of money and material donated.

We are turning now to Morgan Construction and Environmental Ltd., with Peter Kiss, president and CEO.

I remember you from the spring, Peter. Go ahead.

3:30 p.m.

Peter Kiss President and Chief Executive Officer, Morgan Construction and Environmental Ltd.

Thank you, Mr. Chair.

Good afternoon. I wish to thank the finance committee for inviting me to comment on the federal government's response to COVID-19, particularly around the response to the energy sector.

My name is Peter Kiss. I'm the owner of Morgan Construction, a heavy civil contractor operating throughout western Canada with a focus on the oil sands. I was previously in front of you on February 6 during the pre-budget consultations when I discussed competitive tax rates; differing rules for resources, our resources, which must compete throughout the world; bills C-69 and C-48; indigenous opportunities; and the tech frontier. I spoke of the economic Armageddon that is happening in Alberta. Since then things have gotten worse.

Obviously, our world has changed. My company has laid off 80% of our staff and reduced wages, and our revenues are down 87%, and I consider us fortunate. I have peers and competitors whose revenues are down 100% and the staff is reduced to a skeleton management group. The difference now in the resources sector, and specifically in Alberta, is that COVID started the problem, and a Saudi-Russian coordinated predatory oil price war caused the price to crash, production cuts, and capital spending to cease.

I would like to compliment the federal and provincial governments on their efforts thus far in providing support to families and workers via the CERB and the multitude of other measures put in place. They are certainly helpful in the near term, but when it comes to supporting business and indirectly the workers, we need to re-evaluate.

Businesses need two things only: credit or liquidity and revenue. This should be the focus. This is how people are going to get back to work.

From what we have seen thus far, the Canada emergency benefit, this $2,000 per month grant, while helpful in the beginning, needs to end. Beyond the moral hazard of paying people not to work and creating a society that lives on handouts and subsidies, it is preventing people from going back to work. It is that simple. While the story is anecdotal, workers are choosing to make less and stay at home this summer.

The Canada emergency wage subsidy is a great program. It's putting liquidity into the hands of businesses and is certainly helpful. I don't feel that it's keeping additional people employed, as no business is going to pay employees to sit around and do nothing, even with the subsidy. The greater hazard with this program is that the government artificially reduces input costs, and over the long term in a free market economy, the selling price is reduced. We are seeing this already. Once competitive businesses know how long supports such as the CERB, tax deferral, WCB premium and lease reductions are going to last, the subsidy gets worked into the selling price and creates an artificially low selling price for goods and services. Selling prices are dropping because of subsidies.

While this wage subsidy should continue, it should be extended on a one-month or even less increment, and businesses should not be allowed to plan on receiving it. Therefore, it would get worked out of the price.

EDC and BDC support loans are liquidity measures that have the right intent; however, they are not accessible to those companies that need it. The program needs to be adjusted to increase access and the velocity of capital as the economy opens up. This is when businesses require working capital the most. Companies don't go bankrupt; they run out of cash.

On the large employer emergency financing facility, LEEFF, the entire Canadian energy sector across the prairies and in Newfoundland waited hours, days and then months for sector assistance to be announced. I believe that the LEEFF program is that support and all that is coming.

From what I can tell, industry can't access this capital because of the restrictions surrounding the funds, and it's like it was written by predatory lenders of last resort with the intent of taking over the business. The credit standards are too high. The interest is accelerated over time, which is punitive, and by creating convertible debt, the federal government is looking for a clear path to board seats on E and Ps. This is not what the energy sector or Canada needs.

If we want to recover in this country and pay for all the COVID-related expenses, we need a viable energy sector paying royalties. We need real support now with easily accessible liquidity.

Before the questions, I'll leave you with a couple of thoughts. Stop the handouts. We're over the hump now, and everyone needs to get back to work. Accelerate project approvals. There are enough projects in energy, mining and commercial waiting for federal approval to turn this economy around. Don't start paying sick leave. There are only two groups that are going to pay for this: taxpayers, since there's no such thing as government funding; and businesses. With 10 days of paid sick leave, 10 statutory holidays and two to six weeks of holidays, we are not-so-slowly turning into Europe, but without the historical charm. Layering on more costs for our nation's businesses and taxpayers is not helpful.

Finally, protect Canada's largest industry. Saudi Arabia and Russia started a price crash with predatory pricing and production. If this was steel, aluminum, automobiles, agriculture or aerospace, we would have immediate countervailing duties, but with regard to energy, we are left to twist in the wind. Liquidity problems in the resource sector are a direct result of foreign interference, and now they are buying our assets at a discount. If the federal government wants to help, it can start with protection. Again, we don't want handouts; we need a hand up.

In conclusion, I wish to thank the federal government for inviting me to present today. Please remember this: The social cost of not getting the energy sector and its 850,000 people back to work will be paid with—and I'm not trying to be an alarmist—the destruction of families, alcoholism and drug abuse, social welfare and suicide.

Thank you.

3:35 p.m.


The Chair Liberal Wayne Easter

Thank you very much, Mr. Kiss. You're always direct, and we appreciate that.

Before I turn to the last witness, I'll just give members the list of the first round of questioners: Ms. Stubbs, Ms. Koutrakis, Mr. Brunelle-Duceppe and then Mr. Julian.

We'll turn now to Michael Crothers, president and country chair, Shell Canada Limited.

Welcome, Mr. Crothers.

3:35 p.m.

Michael Crothers President and Country Chair, Shell Canada Limited

Good afternoon, Mr. Chair and committee members.

I appreciate the opportunity to speak with you today on behalf of Shell Canada, as a representative of our country’s most critical energy sector and as a proud Canadian who, like you, is extremely concerned about the impacts of a dual crisis, the likes of which we have never seen.

COVID-19 and the global market collapse are putting an extraordinary strain on Canada’s economy and specifically Canada’s energy sector. I am concerned, but I must tell you I’m also optimistic that, with the right motivation and constructive efforts, Canada will navigate these very tough days and one day emerge even stronger.

This period of crisis has deep implications for our sector and, of course, the entire Canadian economy. At Shell, our abiding priority is care for our employees and our customers, focusing first on business-critical activities that stretch from oil and gas production through to our chemical plants, refinery operations and distribution network, and right to our customer front line in retail. Our focus is on how we can keep people safe, how we ensure they practise physical distancing as they do their work and how we serve our customers through all of this.

A second key factor for us is business continuity and how we maintain those essential services we provide for Canadians. We’re dealing with what has been a huge destruction of demand. As an integrated business, Shell is managing to balance our operations around that new reality, while keeping people safe.

Our third priority is cash preservation, which is a common theme for our sector, as you're hearing today. The collapse of prices and demand has been dramatic. Like many others, we have been forced to cut back our capital programs and look at an immediate reduction in operating costs. We have cut our dividend by two-thirds and eliminated all bonuses in 2020, which is up to half of executive pay. We are looking at our supply chains and other costs in our business, and we’re doing everything we can in the near term to get those under control, while preserving jobs.

Shell is fortunate, as an integrated business, to be able to leverage other revenue sources. However, for small upstream mostly oil-producing players in our sector, the reality is grim. Liquidity is a key concern. How can they get enough credit to ride through this, maintain jobs and even be there for a recovery? What is needed now is more investment and more opportunity to help those smaller companies bridge. I have been in the industry for a long time, and it really is an ecosystem that thrives on small, nimble producers on the edge of innovation, and larger-scale companies, like Shell, that can de-risk and scale up technologies and support and build on those smaller companies’ developments. We need a healthy ecosystem from end to end, and that's something the current crisis is really threatening.

I am encouraged by the swift action of governments to deal with the crisis and provide immediate relief to displaced workers, to families and to the variety of sectors in society that have had to cope with these dramatic surges in unemployment. I see opportunity to think longer term as well, around how infrastructure and technology investments can support the sector, sustain our valuable resources, explore renewable energy in the mix and achieve our longer-term goals toward net-zero carbon emissions.

Indeed, there is significant and growing debate about the extent to which our economic recovery should be green. Let me say it would be a grave mistake to engage such an important conversation in an environment of polarization, partisanship and without sound evidence as the basis for Canada’s approach.

Shell is focused on our part of the energy and climate change challenge. We have made a huge commitment in terms of reducing our emissions to net-zero by 2050, and we have invested billions of dollars into what we call “new energies”, which include renewable fuels, renewable power and other technology, to help get us there. Heightened awareness of climate change for Shell is a good thing. At the same time, energy transition is a decades-long challenge that acknowledges we’ll need oil and gas in the medium term. We need it in Canada, and we need it globally. It is important that we keep driving down the carbon footprint of that production as we move forward.

Coming out of this, Canada must invest in innovation to help the energy sector accelerate our great track record of reducing emissions. At the same time, for Shell and across our portfolio, it is an opportune time to keep investing in clean energy infrastructure, helping to create the right conditions for more investment in biofuels, renewable power, hydrogen, carbon capture, nature-based solutions and other areas that Shell has dramatically stepped into.

Times like these reveal the true character and ingenuity of individuals and society. They demand a new level of unity, of meaningful co-operation and of care for each other. This moment has already shown us the best of Canadians, a real coming together that builds resilience. People feel that support. They feel it from governments, they feel it from friends and family, and it is clear they are not trying to play games for personal, corporate or political gain.

This is about working together as best we can—as companies, as people, as first nations, as communities, as governments—to do the right thing. If we focus on that level of collaboration, I'm convinced we can move far more quickly to make Canada stronger, more sustainable and more prosperous for all Canadians. It's an opportunity to not fall back, if you will, into the old ways, but rather to build on the momentum of co-operation that we'll need in the many challenging years ahead.

Thank you. I'd be pleased to take any questions

3:45 p.m.


The Chair Liberal Wayne Easter

Thank you very much, Mr. Crothers.

Thanks to all the witnesses for their presentations.

We will start the six-minute round with Ms. Stubbs.

Shannon, the floor is yours.

3:45 p.m.


Shannon Stubbs Conservative Lakeland, AB

Thanks so much, Chair.

Thanks to all of my colleagues for having me today. I'll say hello from my farm near Two Hills, in exactly the region that Adam Waterman described earlier.

In the spirit of co-operation, I might just give some unsolicited advice to my colleagues on this committee. After hearing the scale of the crisis and the outsized impact of the oil and gas sector on the Canadian economy, I do hope that this committee will do more than one meeting about this critical sector and all of the workers, families and communities it impacts.

ARC Financial says that after-tax income for explorers and producers will drop 96% between 2019 and 2020. In the last two months, active rigs dropped 92%, while thousands of oil and gas workers lost their jobs. They continue to face precarious futures. Of course, that adds to the nearly 200,000 people who have lost their jobs since 2015.

The bottom line is that programs can't help workers if businesses can't or won't actually get the support. You will know, I hope, that in the beginning of April, Conservatives called for the approval of projects already in the regulatory queue at the end of their stages, and also for emergency liquidity measures.

With that in mind, Tristan, I did notice your careful wording—we all do that, I know—about EPAC supporting the intention of the loans to oil and gas employers. Of course, the $750-million methane reduction fund and the small oil and gas business loans through BDC were announced 41 days ago. Just last week, the terms and conditions were announced for the large-employer financing program.

Tristan and then Adam, do either of you know a single company that has accessed those programs?

3:45 p.m.

President, Explorers and Producers Association of Canada

Tristan Goodman

The answer, at this point in time, is no. We continue to work with EDC and BDC and the producers and to have communications with financial institutions and the federal government. The intent of particularly the EDC and BDC programs is very positive to support workers, but the positive aspect of those programs does entail access to those programs. We are concerned that after about.... I think you indicated 41 days, which seems appropriate. It's certainly been many weeks. I know of at least 30 companies that are trying to access those programs and are as yet unable to access them.

We certainly hope that, first, access will be granted to those programs. We will lose significant jobs across this country, not just in your area or in areas where other development is occurring but also in the many jobs that rely on the energy business on a go-forward basis, if those programs cannot be accessed. It is about positive intent. It will be great to see the results.

I also hope the transparency on this is going to be important. We need to know if those programs are being accessed, given that they were put in place for workers.

Thank you.

3:45 p.m.


The Chair Liberal Wayne Easter

Mr. Waterman.