Finance Committee on May 28th, 2020

[Caroline Brouillette]

In fact, Équiterre does not want to see Canada promote or provide fossil fuel subsidies, either during a crisis or in normal times. With respect to the use of the Canada Account, Mr. Viau mentioned in our speech that we are very concerned about how Export Development Canada is very opaque in its activities. It is truly essential that taxpayers be able to obtain the information about loans provided by Export Development Canada through the Canada Account.

[The Chair, Liberal, Wayne Easter]

Does anybody else want to respond to that question?

Is there anybody who can justify the pipeline?

[Tristan Goodman]

Yes, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Go ahead, Mr. Goodman.

[Tristan Goodman]

Thank you very much.

First, I certainly agree with both the member of Parliament and the witness about the need for transparency. I think that transparency is a fundamental piece in government in all cases.

With regard to the pipeline specifically, this is a national infrastructure project that has been done to standards that have not been seen yet across the globe. I think it was characterized as something that was not profitable, which would not be accurate. The reality is that the uncertainty within the Canadian context was the main factor for driving investors out of the country. I do think there are opportunities to make sure that it can be done, though, within the indigenous reconciliation agenda, as well as the GHG reduction agenda.

Thank you.

[The Chair, Liberal, Wayne Easter]

Peter, ask your last question.

[Brendan Marshall]

Mr. Chair, can I pipe into that question as well?

[The Chair, Liberal, Wayne Easter]

Yes

[Brendan Marshall]

I'll be very quick.

With respect to market access, there's an economic rationale that remains very relevant for existing production even outside the question of expanded production in the oil sands, and that is to alleviate the sale of Canadian petroleum products at a discount from market value.

At the end of the day, resources in this country belong to Canadians writ large. For too long, oil has been sold at a discount. The underlying economic rationale is to curtail that discount and actually get a fair market value for the energy resource that is developed, and bring that to market in a responsible way.

[The Chair, Liberal, Wayne Easter]

Okay, I will go to Peter.

Peter and I often have this discussion. I believe the Alberta discounts cost the country over $400 billion a year in lost revenue.

Go ahead, Peter. The floor is yours.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

I'll come back to Mr. Marshall on that point.

The companies that are integrated in Canada, that actually do upgrading and refining, don't suffer from the differential. Economists very clearly indicate that when we're talking about the differential, it applies to the export of raw product. Companies like Suncor and Husky actually benefit from it.

This is a long-standing debate that we'll have at the finance committee. I think we would all agree that we need to have a serious debate. Companies that are integrated and have the jobs in Canada do the upgrading here; they do the refining here. I'm a former refinery worker, so I know this full well. They benefit from the differential; they don't suffer from it.

That will be my final point, Mr. Chair. You've given me more time than I normally get.

[The Chair, Liberal, Wayne Easter]

You got quite a bit of time, but I intervened a fair bit as well.

We'll go to five-minute rounds with Mr. Cooper, Mr. Fraser, and then Mr. Cumming.

Mr. Cooper, the floor is yours.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Thank you, Mr. Chair.

Thank you to the witnesses.

I'm going to direct my questions to Mr. Waterman.

Mr. Waterman, with respect to the large employer loan program, are there specific barriers to companies participating, such as the high cost of borrowing? Would you care to comment?

[Adam S. Waterman]

Yes, I would. To echo Mr. Kiss's points, that it's posing as predatory lending or crafted by predatory lenders, I will say that that's certainly an accurate statement. Previously, I've described the program as a Faustian bargain masquerading as a payday loan with a smile.

The appointment of a board observer is a big red flag. When combined with the potential for the dilution of equity conversion, it could spell that the company is signing over the entirety of the operations to the Canadian government. I don't understand why they would ever want to be in that position, but evidently they've built the infrastructure and deal in such a fashion.

As for the net-zero by 2050, the level of scrutiny and monitoring that's required to participate in a loan is something over and above what the highest-rated ESG companies in Canada are already doing. We still haven't been able to quantify the administrative cost of it. Really, we are treating it as if we're not eligible for it.

The other large red flag is the eighty-twenty split between unsecured and secured. When you enter into a secured agreement, you allow everybody else in your secured lending syndicate to agree upon somebody else having a secured portion of it. This opens up our secured agreements at a time when oil volatility is at twice the historical averages. It's not really beneficial for anybody to enter into one of these agreements at the risk of having an additional 3% or 4% thrown on their senior lending. All of the senior lenders would have to agree unanimously to enter into this agreement, this additional LEEFF agreement.

Like I said, at a time when oil is trading at twice its normal volatility, it's not realistic that we would enter this program.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Thank you.

Just to clarify, Mr. Waterman, under the program, is it possible that the federal government could become the largest shareholder in participating oil and gas companies under the program?

[Adam S. Waterman]

Yes. It depends on the evaluation on the equity side of the business, but in a number of evaluation methods, they could list the depressed equity prices of Canadian oil and gas producers. They could realistically become the largest shareholder in the company.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Could you elaborate on what you're hearing from member companies? Are you hearing that the cost of the federal program is too high and that stock options make this prohibitively expensive? Are you hearing any of those things from your members?

[Adam S. Waterman]

I would defer to Mr. Tristan Goodman for that response.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Okay. Mr. Goodman, go ahead.

[Tristan Goodman]

Thank you very much.

The answer, generally, if you're referring to the LEEFF program, is yes. It does appear that access to the LEEFF program, at this point in time, will be cost-prohibitive as well as prohibitive on the terms and conditions.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

I'm going to turn to Mr. Egan.

You spoke about many shovel-ready projects and their importance as we look toward a post-COVID recovery. Can you speak, in that regard, to the need to streamline the regulatory approval process?

Also, I would note that there are some projects in the queue that have been approved by the Canada Energy Regulator and that are currently being held up by cabinet. Could you speak to that as well?

[Timothy Egan]

Thank you for the question, Mr. Cooper.

In the submission I made, we listed a number of projects, totalling in the order of $8 billion, that we consider to be shovel-ready and that do not require any federal assistance whatsoever. The biggest challenge is on the regulatory side. That challenge is, in some instances, sitting with cabinet. For instance, approval of the NGTL project has been postponed for five months because of challenges with the consultation process. This is the largest single one we identified. Those kinds of challenges exist with others as well.

There are a series of regulatory processes that, particularly in the time of COVID, need to be reviewed with an eye to putting projects in place sooner rather than later. The changes that are required do not undermine the fundamental environmental priorities of the government and would, in fact, move investment very quickly to projects that provide both direct and indirect employment. More importantly, they would continue to guarantee the availability of affordable energy that's so important for so many other businesses that need to restart post-COVID, which is a point that I would just like to underline with respect to many of the previous questions and comments.

The fundamental value proposition of the Canadian hydrocarbon sector is the affordable energy it's delivering to Canadians right across the country, and that energy, that affordable energy, is essential for our long-term economic recovery.

[The Chair, Liberal, Wayne Easter]

We will have to end that round there. I'm sorry, Mr. Cooper.

We're turning to Mr. Fraser, and then on to Mr. Cumming.

Sean.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you so much, Mr. Chair.

I'll start with a question for Mr. Crothers. I hope to ask two or three questions if possible, if time allows.

I'll go back to Mr. Julian's question around the Trans Mountain pipeline and your comment that you could see that our colleague Ms. Stubbs disagreed. I don't think we should be afraid of disagreement. I think it's terrific. Maybe that's the former litigator in me coming out, but our democracy is built upon it.

One of the words you threw out during your testimony, Mr. Crothers, was not “disagreement” but “polarization”, and your hesitancy towards any kind of pivot to a green recovery before we exit this period of polarization.

One thing I'm deeply concerned about on this issue of polarization is that we sometimes can't see the forest for the trees. Oftentimes, a project becomes a lightning rod for controversy, because the advocates for a cleaner environment don't have faith that the big picture is taken care of, so they feel the need to defend the environment against a specific project. On the other side of the equation, I hear advocates of the energy sector sticking their neck out, sometimes at risk to reputation, saying that this single project isn't going to tip the balance, so we can't let that get in the way.

I find we are unable to find common ground, whereas I think most people I have spoken to in my life, I daresay, would agree that we want to find a way to protect our environment, meet our climate change goals and still develop the economy.

I'm wondering what you think can be done to leave polarization behind so that we can enter a period where we're actually advancing environmental protections. To me, that means meeting our Paris Agreement targets specifically. I'll be the first to say that we've done a lot and we should do more, but what do you think we can do that would give Canadians faith that not every project must be stopped, as long as we're pursuing the bigger picture of compliance with our Paris Agreement targets and other environmental protections?

[Michael Crothers]

Yes, thanks for the thoughtful question. I think it really is about looking at the big picture and seeing how committed we are to long-range, continuous reduction of emissions as an industry. Combined with that is the understanding of how excellent Canadian production is in terms of environmental performance, and how low a carbon intensity that emission actually has, compared to other sources of oil and gas in the world.

If Canadians look at that bigger picture and see the continuous improvement and the commitment to that continuous improvement, along with the high standards, I believe we should be able to find this accommodation that you mentioned around the ability to continue to grow our energy sector and transition it over the next 20 to 30 years to a different set, a different mix of energy for Canadians, while also providing that prosperity we can uniquely still retain in the country.