Finance Committee on May 28th, 2020

[Adam S. Waterman]

Thank you, Chair.

with respect to the methane reduction financing, no, more broadly, to all three programs. I'm not aware of a single company that has accessed the financing from methane reduction. Right now our priority is survival rather than what our normal guiding principle would be.

We can't meet ESG commitments if we're not around. I don't believe there would be an appetite for any financing taken on to worsen our balance sheet that does not have a direct impact on our cash position.

With regard to the small BDC loans, no, I'm not aware. I am aware of one local producer, Cardinal Energy, that only this week had to push out the refinancing of a short-term revolving facility. We await the details of this loan, because it will obviously have a material impact on the debt market within the oil and gas space. Cardinal, as well as its employees, pays about three and a half million dollars a year in local tax at the municipal level. Its employees are hoping it doesn't turn out like Delphi Energy, which just a few weeks ago went into insolvency because of a lending issue and a lack of liquidity.

[Shannon Stubbs, Conservative, Lakeland, AB]

Thank you.

In the interest of time, I'll throw out a couple of questions to each of you. I invite you to comment on the methane reduction fund.

I noticed, Tristan, you talked about the importance of grants instead of loans. You can expand on that, if you'd like, for the benefit of committee members. Also, if either of you would be willing to address what might be specific barriers in the larger employer financing related to the rates offered, as well as required stock provisions.

[The Chair, Liberal, Wayne Easter]

Mrs. Stubbs.

[Tristan Goodman]

If it's okay with Mr. Waterman, I have a couple of comments, and then perhaps he can add.

Specifically, we appreciate the federal government's commitment to assist the industry on a go-forward basis in a collaborative way around methane reduction. It is key, it is important—we recognize that—from several different perspectives. First, it is important from an investment perspective and investors are increasingly paying attention to this. Second, it's very important around Canadian expectations and global expectations. Third, it's important just from a purely practical standpoint. We need to move forward with developing a resource Canadians are still relying on, but yet do so in a truly responsible manner. That program does benefit.

The issue we have with the program, as I think Mr. Waterman indicated, is that at this point the loan component of that program is unlikely to be accessed, given the current state of the industry. Any situation that can convert that into a grant program will have two benefits immediately. It will help Canadian workers as industry accesses that program and puts those people to work, and it will reduce GHG emissions within the Canadian context, thus contributing to the global concern and problem we have there.

[The Chair, Liberal, Wayne Easter]

Okay. We will have to end it there and go to Ms. Koutrakis.

If others want in when a question has been answered, wave your hand and I'll try to let you in. I might see you or I might not because I only have so much room on my screen.

Ms. Koutrakis.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you, Mr. Chair.

Thank you to everyone who presented today.

My question is to Mr. Crothers, and it will be a continuation or expansion of some of the testimony we heard just over a week ago from Ed Greenspon, who noted that the use of fossil fuels for energy production will not end any time soon, and it is in Canada's best interest to pursue clean and ethical sources of energy.

One of Mr. Greenspon's suggestions is to invest heavily in the decarbonization of Canada's oil patch. We should regain the lead once we have a handle on carbon capture utilization and storage.

Can you briefly offer some details on Shell's Quest carbon capture and storage facility. What is this project, and how has it been successful in reducing carbon emissions from crude oil production?

[Michael Crothers]

Yes, this is a project that has actually become a world leader in carbon sequestration technology, right here in Canada. It started up in 2015. It has now just exceeded its five-million-tonne mark of sequestering carbon dioxide in a deep aquifer underlying....

Most of Alberta actually has this access. The technology has proven itself brilliantly. It has been able to run at very high reliability. This is Canadian technology developed partly in Quebec that we've applied here.

With this proven technology platform, Shell believes this is something that we can now really build on across the country in many places where there are such strong capabilities to match emissions with the ability to sequester carbon safely in these deep formations.

Shell has made the technology open to everyone. As the weeks have gone by in this crisis, we've had people at the site from all over the world coming to see how it worked and learning from that.

As an opportunity for Canada, we think it's the really fundamental one to help us bridge and be part of this transition so that the emissions from existing facilities can be captured, be they petrochemical, oil and gas production or other emitters, or cement or other production. While we bridge to new energy sources, we're managing those emissions in real time, and this technology can be deployed quickly.

[Annie Koutrakis, Liberal, Vimy, QC]

Right. Has it been beneficial to job creation and to the surrounding communities?

[Michael Crothers]

Absolutely. It's set up at our Scotford facility, which is a large complex of plants near Edmonton.

The construction was over 600 jobs. It has an ongoing support requirement of roughly 30 jobs. The opportunity to spin that off and to scale it is enormous for a country such as Canada.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you.

Mr. Chair, do I have time for one more question, to Équiterre?

[The Chair, Liberal, Wayne Easter]

You have three minutes yet. Go ahead.

[Annie Koutrakis, Liberal, Vimy, QC]

Okay.

My next question is for the representatives from Équiterre.

How do you envision the job market evolving after the COVID-19 pandemic, in particular in the oil and gas sector? What can the federal government do to ensure there is a just transition for employees who may be changing career paths after the pandemic?

[Marc-André Viau]

Thank you for the question. I congratulate you again on the quality of your French.

It's hard to predict post-pandemic trends, since this situation is a new one, with no instructions for how to emerge, recover and rebuild.

That said, at the beginning of my speech I said that we've been seeing a downward trend in jobs since 2014. This downward trend seems to be structural. After 2014, the number of jobs did not get back to the number it was before 2014. There were drops and collapses during that period. There's no guarantee that jobs in the sector will return, and some of that will be due to technological changes and automation.

We pointed out that the government's announcement on investments to clean up orphan wells is consistent with a just transition. In our opinion, this is the direction in which we see a more sustainable future for jobs in certain resource regions. That said, we realize that a large number of jobs in the sector have needs right now and that the jobs and workers in the sector also need help.

[The Chair, Liberal, Wayne Easter]

Thank you.

Annie, do you have a very quick question?

[Annie Koutrakis, Liberal, Vimy, QC]

How can the federal government support this transition, while still ensuring that the Canadians who rely on the fossil fuel industry do not fall through the cracks?

[Caroline Brouillette]

Thank you for your question.

In 2019, consultations were held concerning workers and communities that rely on coal-fired electricity generation. I'm sure you heard about a consultative group that toured the country and included the most affected members of communities. This group made recommendations on how to transition out of the coal sector.

Équiterre recommends allocating funds for the implementation of these recommendations and also that they apply to the entire oil and gas sector, which is also experiencing difficulties at this time, as we know.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

We will turn to Mr. Brunelle-Duceppe, who will be followed by Mr. Julian.

Alexis.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

Thank you, Mr. Chair.

I would like to thank all witnesses for their remarks and for participating this afternoon.

First, I would like to ask Mr. Crothers if the Shell representatives believe that fossil fuel projects should obtain social licence from the people affected by having a public and transparent process.

[Michael Crothers]

I believe there is the potential for social acceptance of these types of projects because it depends on the standards that these companies are applying as they're doing their work. The sector has a remarkable track record of driving down emissions in response to the needs of society.

At Shell, we're totally committed to the Paris accord. We have made a net-zero emissions commitment for 2050, and that means a complete transformation of our portfolio to actually change the products we make and also to work with customers to move them off fossil fuels.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

Excuse me for interrupting Mr. Crothers, but I do not want to spend too much time on this issue. I just want to know if you believe that it is important to obtain social licence by having a public and transparent process.

I will ask Mr. Goodman, of the Explorers and Producers Association of Canada, the same question.

[Tristan Goodman]

Yes, the reality is that you are going to need to make sure that you have transparent processes in place and that through those transparent processes...and a commitment to what Canadians are interested in—and that is quite diverse and broad. That is one of the key future development pieces that are going to be seen in successive, continued development of oil and gas.

[The Chair, Liberal, Wayne Easter]

Alexis.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

Your point of view is interesting, Mr. Goodman.

I will now turn to Équiterre's representatives. I would really like to know if the current COVID-19 pandemic has resulted in changes to the consultations on oil drilling, as I suppose that it must be very difficult holding consultations these days.

[Marc-André Viau]

Thank you for the question.

Yes, indeed. In the spirit of Bill C-69, we have called for as much public participation as possible. We believe that's important. Given the current state of affairs, we do not have the conditions to ensure the broadest participation possible. Deadlines have been extended, but they will have to continue to be extended until we return to the state of affairs that existed before the emergency health response.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

At present the process leading to the assessment has somewhat broken down. Am I right?