Finance Committee on Dec. 10th, 2020

[The Chair, Liberal, Wayne Easter]

I will call the meeting to order.

Welcome to meeting 12 of the House of Commons Standing Committee on Finance.

Pursuant to the Order of Reference of November 19, the committee is meeting on its study of the pre-budget consultations in advance of the 2021 budget.

Today’s meeting is taking place in a hybrid format, pursuant to the House order of September 23. The proceedings will be made available via the House of Commons website. Just so that you are aware, the webcast will always show the person speaking, rather than the entire committee.

I would caution witnesses and members, when you're not speaking, to put your system on mute. It makes it a lot clearer for those doing the translation services.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

On a point of order, I'm just curious about something. My apologies.

[The Chair, Liberal, Wayne Easter]

Go ahead.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

Even though we've started so late, is it going to be possible to do the entire meeting?

[The Chair, Liberal, Wayne Easter]

Yes. Ms. Jansen, we have to stop at about 6:30 my time, or 7:30 in Ottawa. We will have roughly an hour with each panel.

Did the ones who were missing show up yet, Madam Clerk?

[The Clerk of the Committee, Ms. Evelyn Lukyniuk]

No, I do not see them. I'll send the email again.

[The Chair, Liberal, Wayne Easter]

To give committee members a heads up while we're waiting, in the first round of questions, it will be Mr. Kelly first for the Conservatives, then Mr. McLeod for the six-minute rounds, then Mr. Ste-Marie and Mr. Julian.

Because we are tight on time, we'd better start.

All the witnesses today, I believe, have sent briefs. I'm pretty sure I've seen briefs from all of the witnesses. There might be one who has not.

We will start with the Canadian Association of Oilwell Drilling Contractors, with Mr. Scholz, president and CEO.

[Mark Scholz, President and Chief Executive Officer, Canadian Association of Oilwell Drilling Contractors]

Thank you, Mr. Chair, for the opportunity to address the committee today.

The world is changing so quickly that it's hard to keep track. Innovations in drilling and fracking have taken the world from a potential oil and gas shortage a generation ago to more oil and gas than we can use. We have gone from the federal government subsidizing the oil sands a little over 20 years ago to incentivizing the reduction of oil consumption and to limit the expansion of the oil sands.

Because of the impacts of climate change, the new world goal is net-zero carbon emissions by 2050, but we also need to ensure that energy is still affordable and available and that we keep Canadians working through this energy transition. The only way these twin goals can be achieved is the responsible production of Canadian oil and natural gas, along with technological advances like carbon capture utilization and storage, hydrogen production, geothermal and other technologies that lower Canada's emissions while keeping energy affordable and workers on the job.

In other words, if this is really a transition, we say, “Bring it on.” We've been evolving, changing and transitioning for over 70 years. Just set some fair rules, be consistent, put us on a level playing field and we'll do the rest. We also have children and grandchildren, and we want to make the world and their world a better place for them as well.

As Canadians bundle up and prepare for the coming winter months, hardworking Canadian rig crews keep our homes warm and make that hot chocolate possible this holiday season. Canadians are proud of their natural resource industries and support responsible development. With our world-class standards, Canada has an opportunity to play a significant role in shaping the world's energy future. It's our people, equipment, technology and processes that will pave the way to a cleaner, lower-carbon energy future.

Although renewables such as wind and solar will increase significantly over time, they will not replace fossil fuels in many energy-intensive applications. Therefore, as we move toward cleaner solutions, natural gas will continue to grow and eventually dominate the world's energy supply. Canada's abundant natural gas reserves, combined with our technology and geographic location to develop and deliver it at the world's lowest carbon profile, are a huge competitive advantage for our country.

Hydrogen and geothermal will also play an important role in our energy future. We have seen several drilling rigs complete geothermal wells in Saskatchewan and Alberta to produce clean and renewable electricity. The possibilities for these new industries are encouraging and exciting for the entire country. It's our people and businesses within the oil and gas services industry that will help move these new energy opportunities forward.

However, I'm afraid many Canadian drilling and service contractors are struggling to survive right now, and without the Canadian energy services sector, Canada's ambitious carbon reduction targets cannot and will not be achieved.

After a promising start, 2020 activity levels came to a crashing halt at the end of Q1, along with the global economy, due to COVID-19. The industry faced historic lows in drilling activity, with as few as six drilling rigs working in June in all of Canada. Not only was 2020 the worst year on record, it was also an extension of the prolonged downturn in Canada's oil and gas industry. This should alarm policy-makers in our country.

If we sincerely want to address climate change and embrace new energy sources such as hydrogen, geothermal and carbon capture utilization and storage, if Canadian drilling and service contractors are not available, Canada's ambitious and realistic climate objectives are not feasible.

Post-COVID, an opportunity for Canadian energy will present itself once again. We have the world's premier energy brand, the most ethically sourced, responsibly produced, cleanest hydrocarbon-based energy available in a world that will need our products for decades to come.

Thank you for the committee's time. I look forward to answering questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Scholz. There was a lot of information packed into that four-minute presentation.

From the City of Yellowknife, we have Ms. Alty, the mayor.

[Rebecca Alty, Mayor, City of Yellowknife]

Thank you very much.

On behalf of the City of Yellowknife, thank you for giving me the opportunity to speak to you today.

My name is Rebecca Alty, and I am the mayor of Yellowknife. In our August 2020 brief, we included five recommendations, but since then, we have added two more.

Our recommendations are the following.

First, we recommend that essential municipal services and the municipal role in recovery be protected by proactively working with provinces, territories and municipalities on successor arrangements to the safe restart agreement, which must include funding support for municipal operations through 2021.

Second, we recommend a doubling of the gas tax funding allocation for the next three years through a new investment, the municipal economic recovery fund, to rapidly deliver infrastructure stimulus funding and job growth for Canadians. Beyond restarting the Canadian economy as it recovers from the COVID-19 pandemic, this funding will also address the crumbling essential infrastructure in communities.

Third, we recommend the implementation of the Truth and Reconciliation Commission’s call to action 21, by providing “sustainable funding for existing and new Aboriginal healing centres to address the physical, mental, emotional, and spiritual harms caused by residential schools, and to ensure that the funding of healing centres in Nunavut and the Northwest Territories is a priority.”

Fourth, we recommend a quick scaling up of the rapid housing initiative—RHI—by allocating $7 billion for no less than 24,000 additional supportive and deeply affordable housing units over the national strategy's seven remaining years. With 3,000 units committed through the existing RHI, this is a path to achieving the goal of ending chronic homelessness currently experienced by at least 27,000 Canadians. The key to success will be maintaining the RHI's efficient delivery model, including a direct allocation to cities, and supporting stick-built construction, as well as acquisition and modular housing opportunities.

Fifth, we recommend that the backlog of land claim and self-government negotiations with indigenous governments be addressed by increasing the staffing levels of federal negotiators.

Sixth, we recommend funding to implement of Canada's Arctic and northern policy framework.

Seventh, and last but not least, we recommend making the investments necessary to significantly reduce the northern infrastructure gap to address the transportation, connectivity, energy and climate-based challenges northerners face.

Our brief contains further details about our recommendations, and I will be happy to provide you with specifics after this meeting.

I would now like to address recommendations 1 and 2, which deal with support for municipal administrations, as well as recommendation 4, which covers housing.

As we all know, 2020 has been a year like no other. I would like to thank you all for your hard work and support this year. In particular, the city is incredibly grateful for financial support through the increased Reaching Home funding and safe restart funding.

This past Monday, our council passed our 2021 budget. Due to COVID and the necessary health protocols that we need to have in place, we are facing rising costs against falling revenues, and we have no ability to run deficits. Unlike the federal government, we need to pass a balanced budget while still providing core services such as clean drinking water, proper sewage and waste disposal, fire and ambulance and many more vital services in the midst of a pandemic. To do this while not causing a massive spike in taxes requires support from the federal government. The pandemic is not over, and the financial impact on municipal services will continue in 2021.

To ensure residents continue to receive vital services without causing them undue hardship, we recommend that the upcoming federal budget include funding for successor arrangements to the safe restart program, again, including support for municipal operations. We also recommend an increase in gas tax funding to communities. As the Government of Canada noted in its last budget, investing in communities can deliver good, middle-class jobs today, while setting the stage for economic, social and environmental returns for years to come. We encourage you to keep this in mind while drafting, reviewing and approving the upcoming budget.

As mentioned, we appreciate the federal government's Reaching Home funding, and our fingers are crossed that we'll also receive some rapid housing funding in Yellowknife, but this funding is not even addressing the tip of the iceberg. In Yellowknife and across the north, we have many adults, families and youth who are homeless or at risk of being homeless. Whether it's COVID, or temperatures that dip to minus 30 and below for many months of the year, housing isn't a nice thing to have: it's essential and a human right. We urge the federal government to increase its investments for both programs, and work with communities to overcome federal policy obstacles that prevent us all from reaching our desired outcome, which is ensuring all residents have a safe place to call home.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Madam Mayor, and thank you for your brief.

From Electric Mobility Canada we have Daniel Breton, president and CEO.

Mr. Breton.

[Daniel Breton, President and Chief Executive Officer, Electric Mobility Canada]

Thank you, Mr. Chair.

Good afternoon. My name is Daniel Breton, and I am president and CEO of Electric Mobility Canada. I'd like to thank the members of the Standing Committee on Finance for inviting us to appear.

Created in 2006, EMC is one of the very first organizations dedicated to electric mobility in the world, representing more than 220 corporate members. They include vehicle manufacturers, electricity providers, charging infrastructure manufacturers, technology companies, mining companies, charging system providers, fleet managers, unions, cities, universities, NGOs and more.

As we will see an exponential growth of light and heavy-duty electric vehicles on the road in Canada and everywhere in the world, and as the Canadian government is working on a green recovery plan, there is one very important question that needs to be addressed: Will Canada show leadership in the fight against climate change and air pollution to create jobs in the high-tech sector of electric mobility, or will Canadians end up simply importing electric vehicles, batteries and technologies and therefore miss the boat on high-quality jobs?

That's why EMC is making 10 key recommendations for the 2021 budget. Here are some of these recommendations.

You should support Canada's zero emission vehicle manufacturing by supporting consumers purchases of EVs for all vehicle classes from cars to buses, from school buses to trucks.

For passenger vehicles, we recommend maintaining the current $5,000 federal rebate and getting more Canadians into zero emission vehicles by increasing the base MSRP cut-off for pickup trucks, SUVs and minivans since they have a higher MSRP than smaller vehicles, whether they're gas or electric. This will help increase regional equity and access for people who need larger vehicles.

For low-speed, off-road and microelectric vehicles, we recommend a rebate of up to $2,000, especially since some of these vehicles are built in Canada.

You should offer a cash for clunkers incentive focused on EV transition by getting people from used gas vehicles to EVs.

You should implement a GST and HST exemption for both new and used zero-emission vehicles to increase access to the benefits of driving electric.

You should incentivize all Canadians to buy electric vehicles with a used zero-emission vehicle incentive of up to $2,000.

We also recommend a federal ZEV standard in line with Canada's ZEV targets and aligned with California, B.C., Quebec and other jurisdictions around the world. We also recommend a ZEV standard for heavy-duty vehicles inspired by the new California regulation to help achieve Canada's drive to zero pledge.

We recommend expanding targets for the zero emission vehicle infrastructure program and the electric vehicle infrastructure deployment initiative, including in rural and remote areas, by setting and funding higher one- and five-year targets for charging station deployment.

We recommend setting zero emission vehicle targets of 100% for new government fleet vehicle purchases starting in the 2023 financial year, wherever feasible, and ensuring that Crown corporations are eligible for the same programs as private companies to support those purchases and the deployment of charging stations.

We recommend that you pre-order or bulk buy heavy-duty electric transit and school buses to take advantage of economies of scale and create manufacturing jobs in Canada.

We recommend expanding the funding for ZEV training programs for consumers, but especially for workers who are looking to work in a company with positive prospects for the future. Many Canadian companies are looking for workers in electric mobility.

As a Canadian NGO dedicated to electrifying transport, Electric Mobility Canada can use government support to help its mission. In return, we will provide our expertise and our experience to help the Canadian government carry out its green recovery plan.

We are currently part of an industrial coalition looking to establish a solid supply chain for the zero emission vehicle industry, from British Columbia to the Maritimes. We therefore want to ensure that Canada positions itself in the global transition to zero emission vehicles.

This initiative seeks to bring together the country's main stakeholders, from mining to mobility, from research and development to marketing, and from assembly to infrastructure. We are anxious to share our work with you.

We must remind the committee that light- and heavy-duty vehicles contribute to climate change and air pollution. Air pollution causes 14,600 deaths per year, which is 7.5 times the number of deaths caused by vehicle accidents. According to Health Canada, the economic consequences of air pollution represent $114 billion per year. Electric vehicles have a major, positive impact on reducing greenhouse gas emissions and air pollution.

You will find more information on all of our recommendations in our full brief.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Breton, and for your submission earlier.

The last witness on this panel is Mr. Goodman, president of the Explorers and Producers Association of Canada.

Mr. Goodman.

[Tristan Goodman, President, Explorers and Producers Association of Canada]

Thank you very much, Mr. Chair.

Good afternoon. My name is Tristan Goodman, president of the Explorers and Producers Association of Canada, or EPAC.

Thank you for the chance to speak to the committee members today, and I hope you are all safe during this difficult period.

EPAC represents over 100 owned natural gas and oil producing companies focused on drilling, rather than mining, Canada's energy resources. Our members employ tens of thousands of Canadians across the country, and represent over a hundred billion dollars in market assets here in Canada.

We recognize Canadians' expectations of our industry to continue to make progress on reducing GHG emissions; ensuring that we support our indigenous partners through contributing to economic reconciliation; and responsibly underpinning Canada's future economic prosperity, all during a time of changes in global energy use.

Although important changes have been made and continue to be needed, we believe that a cleaner oil and gas sector can aid in driving the country's economic recovery.

We are a large contributor to the Canadian economy, as well as producing some of Canada's most valuable exports that ensure a responsible balance of trade for our nation. Petroleum products remain our country's number one export, representing close to 15% of Canada's total exports.

The current global health pandemic has created challenges for all industries, and especially so for Canada's oil and gas sector as prices for our products are far lower than demand dictates under regular world economic conditions. While prices have started to recover, we continue to face challenges that will have ramifications well beyond our industry, as the economy moves to repatriate manufacturing of such items as PPE, create the materials used to make electric vehicles, as well as long-term production of made-in- Canada solutions to lithium, helium, hydrogen, LNG and other elements in a changing economy.

Canadian oil and gas producers are world leaders in the evolving ESG space, and have demonstrated our commitment to contribute to economic reconciliation with our indigenous partners, and more broadly with indigenous nations. We acknowledge that our industry has made mistakes, not evolved quickly enough at times, and needs to do more.

Being Canadian means that we are here for the long term. We commit to continually improving our performance while ensuring that the essential need in Canada for oil and gas comes from this country rather than poorly regulated foreign entities.

We would like to thank the federal government, the official opposition, and the provincial governments for their support.

Key areas of success to date include projects such as the Keystone and TMX pipelines, the LNG Canada development in British Columbia, worker support programs through EDC-BDC liquidity actions, the emissions reduction fund, and job creation activities to remediate worksites.

EPAC and its members have the technology and innovation expertise to add remarkable value during a period of great transformation. We want to work with all levels of government as they rebuild Canada's economy while implementing the federal government's UNDRIP legislation, climate change policies, and resolving issues around market access.

There are many opportunities that can be discussed and implemented including a number that I have detailed in my written submission.

In particular, I would like to draw your attention to the following top-line recommendations: supporting the deployment of carbon capturing utilization and storage, ensuring financial liquidity, seizing the opportunity of liquefied natural gas, expanding the orphan well program, getting the clean fuel standards right, and continued support for market access and development.

Thank you again for letting me have the opportunity to address you as you continue your important work.

I look forward to your questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Goodman.

You said you were expanding a well program, but I didn't catch that word you used. Could you repeat it for me?

[Tristan Goodman]

I apologize, Mr. Chair, it was expanding the orphan well program.

[The Chair, Liberal, Wayne Easter]

Orphan well program. Okay, that's what it was. Thank you very much.

We'll go to our first round of six minutes, starting with Mr. Kelly, followed by Mr. McLeod.

Mr. Kelly.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you, Mr. Chair, and to all of our presenters.

Mr. Scholz, six is a staggeringly low well count for a month. Can you put that in perspective and tell us how that June well count compares with long-term averages, or even over the last year, or any other comparison you might give us for perspective?

[Mark Scholz]

Certainly. I remember quite vividly sitting in my office in the middle of June and getting the daily rig report. It gives me a bit of a synopsis of where the rigs are working across western Canada as well as the offshore side of the business. It was quite scary. There were six rigs in all of western Canada—three in Alberta, none in Saskatchewan and a couple in British Columbia. To give you an idea of what it would be in a normal year, it would be in and around 100 rigs. Around June, we would be starting to ramp up for our summer programs and beginning to ramp up further into the fall. Out of those six, only two companies out of Canada's 24 drilling contractors were operating in June.

Even more startling is the fact that, even March to June, 75% of Canada's drilling rig contractors haven't spun a wheel since March. It's a very serious situation.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Yes. That's staggering.

How many rigs have left Canada for the United States since 2015?

[Mark Scholz]

The most important statistic to really highlight is how many of our “high-spec” drilling rigs have left. We estimate that about 28 of our most sophisticated drilling rigs have left Canada for destinations like the Permian, the Eagle Ford and other U.S. destinations.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Is it fair to say that the policies of this government have been entirely unfavourable to Canadian investment but have been advantageous to investments in oil and gas in other jurisdictions?

[Mark Scholz]

I would say that this is a global business. We try to incentivize capital to come into Canada from all across the world. Capital is going to go to destinations that have the greatest return for investment.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

So the investment opportunities since 2015 have been in oil-producing jurisdictions outside of Canada.

[Mark Scholz]

I would say that when you look around the world, the Canadian basin has not performed as well as the U.S. basin or other international basins. That would be correct.