Thank you, Mr. Chairman and honourable members.
I am pleased to be speaking to you today on behalf of Pathways Alliance.
Pathways Alliance represents Canada's six largest oil sands producers: Canadian Natural, Cenovus, ConocoPhillips Canada, Imperial, MEG Energy and Suncor. Together, our six companies operate 95% of Canada's oil sands production. The oil sands sector accounts for about 3% of Canada's total GDP and supports 255,000 direct and indirect jobs. Last year, the sector contributed over $20 billion in taxes and royalties to all levels of government in Canada.
We are proud of our contribution to the Canadian economy, but we also acknowledge that we are significant greenhouse gas emitters. That's why, in 2021, our six companies came together to make a joint commitment to achieve net zero in our operations by 2050. Our industry has made significant progress in reducing emissions already. We reduced our emissions intensity, or emissions per barrel, by 23% between 2009 and 2022.
To go further in reducing emissions in order to achieve the kinds of ambitious reduction goals Canada has set for 2030 and the ultimate goal of net zero by 2050, we will need not simply incremental improvements but also step changes in new technology. That's why our six companies are not only committed to long-term emissions reduction but also collaborating on what would be one of the world's largest carbon capture and storage networks in northern Alberta. The Pathways project would involve installing carbon capture units on 14 different oil sands projects, building a 400-kilometre-long pipeline from Fort McMurray to south of Cold Lake, and storing the carbon dioxide from those 14 sites deep underground in saline aquifers.
Carbon capture is the only currently available technology to reduce emissions from oil sands operations in absolute terms between now and 2030. Other technologies, whether small modular reactors, increased use of solvents in oil sands extraction or use of hydrogen for steam generation, may be possible in the longer term, but they are not commercially available today.
Unfortunately, carbon capture is extremely expensive and is, frankly, not economical without partnerships between industry and the federal and provincial governments. That is why we are strong supporters of the concept of the investment tax credits for CCS and other clean technologies. We were pleased when the government first announced their intent to move forward with the ITCs in budget 2021 and have followed this proposal closely, until it was ultimately tabled as part of Bill C-59.
We would strongly urge the committee and the House to pass this legislation this spring and allow CCS projects to start not only in our sector but also in other sectors across Canada. However, we need to be clear that the proposed legislation still presents significant challenges.
We have proposed a number of important changes, which we have submitted both to Finance Canada and to this committee. I can't go into all of the issues now, but let me mention a few of the matters that we see as being most critical.
First, in our view, the rate reduction after 2030, effectively reducing the ITCs in half, is too steep and too fast. There are significant schedule risks in being able to get a 400-kilometre-long pipeline and 14 capture projects costing over $16 billion from the drawing board to in-service within six years. If there are delays for any reason—regulatory or legal challenges, labour shortages, supply chain challenges—companies may miss the 2030 deadline and therefore lose half of the available ITC. At a minimum, we think the projects that are under construction before 2030 should be able to receive the full ITC rate until the project is complete.
Second, Bill C-59 states that the ITCs would only become available when equipment is acquired, not when expenses are incurred. Again, given supply chain and other challenges, we think this is a difficult requirement. Companies cannot make hundreds of millions of dollars in expenditure decisions without knowing when those expenditures will be eligible for the ITC and whether they will get the full rate at that time.
Third, we are concerned about the provisions that allow ITCs to be clawed back if the ownership of carbon capture infrastructure changes hands, even if the infrastructure is still being used for its intended purposes. This could pose challenges if oil sands facilities change ownership, or even if we were to bring in indigenous partners as equity owners of CCS infrastructure. We think it should be clear that ITCs will not be clawed back as long as CCS infrastructure is still used for carbon capture.
There are a number of other important issues that we have raised, which are outlined more fully in our brief, such as the definition of “refurbishment expenses” versus “development expenses” and the role of the Minister of Natural Resources versus the Minister of National Revenue in looking at future clawbacks and several other important issues.
I want to make clear that we believe this legislation should still move forward, even if we can't address these issues right now. We believe that, for the ITCs to achieve their intended effect, we will have to deal with these questions, either now or in the future, before projects are able to achieve final investment decisions.
With that, I thank you for your time and look forward to hearing your questions.