Foreign Affairs Committee on Nov. 14th, 2022

[The Chair, Liberal, Ali Ehsassi]

I call the meeting to order.

Welcome to meeting number 36 of the Standing Committee on Foreign Affairs and International Development.

Today’s meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Members are attending in person in the room and also, as you will note, remotely by using the Zoom application.

I would like to make a few comments for the benefit of the witness and members as well.

Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mike and please mute yourself when you are not speaking.

Interpretation for those on Zoom is at the bottom of your screen, and you have a choice of either floor, English or French. Those in the room can use the earpiece and select the desired channel. I'll remind you that all comments should be addressed through the chair.

In accordance with our routine motion, I am informing the committee that all witnesses have completed the required connection tests in advance of the meeting today.

Pursuant to Standing Order 108(2) and the motions adopted by the committee on Friday, July 15, 2022, and on Wednesday, September 21, 2022, the committee is resuming its study of the export of Russian Gazprom turbines.

It is now my pleasure to welcome, from the Canadian Gas Association, Timothy M. Egan, president and chief executive officer.

Mr. Egan, you will be provided five minutes for your remarks, after which we will invite the members to ask you questions. When you're 30 seconds away from your five minutes, I will raise this as a heads-up so that you're fully aware of that.

The same applies when members are asking you questions. There's a certain allotted time. When you're getting very close to it, I will raise this and then kindly try your best to wind things down with your response.

Mr. Egan, the floor is yours for five minutes.

[Timothy Egan, President and Chief Executive Officer, Canadian Gas Association]

Thank you, Mr. Chair.

Good afternoon, everyone.

My name is Timothy Egan and I'm president and CEO of the Canadian Gas Association. I'm going to speak quickly today for five minutes.

CGA is the voice of Canada's natural gas delivery industry, and our members are responsible for nearly 40% of our country's energy needs, which is almost twice that of the electricity industry. We serve eight provinces and one territory. Since before Confederation, Canadians have been using gas energy; over 20 million benefit from it today, and still more want it.

Canada is home to world-class companies in natural gas production, transmission and distribution, and ours is some of the lowest emission gas energy in the world. Gas is the largest single contributor to our residential, commercial and industrial energy needs in the country.

Ask users, and they will tell you a key reason. It's because they feel secure with our service. The affordability of our offering, the reliability of our delivery and the environmental performance of our sector all contribute to this sense of security.

What's more, we're working constantly to serve changing energy needs. Many are calling for energy with lower GHG emissions, and our member companies have been meeting the demand with new, innovative end-use technologies, new emission management systems or new fuels like hydrogen and renewable natural gas. The scale of these efforts is worth noting, Mr. Chair. In British Columbia alone, the RNG, or renewable natural gas, currently being produced is equal to the energy potential of the Site C dam, which is a 1,000-megawatt hydroelectric project, but all that RNG in British Columbia is being delivered over existing utility infrastructure without the need for new infrastructure.

Now, your hearings are on the international situation, and our focus at CGA is domestic, but the two are related. The well-being of our country turns on the security of gas energy delivery, so we understand the energy security threat that Europe is currently facing. We've been very active in the discussion on it and on Canada's potential role in supporting our allies.

Russia's invasion of Ukraine has fundamentally changed natural gas energy geopolitics. Russia was meeting roughly 40% of Europe's gas needs, and that supply is of a scale comparable to what Canada produces annually. In other words, a doubling of Canadian production would be required if Canada were to replace Europe's Russian supply. This would be an extraordinary feat, but it is technically possible. We have hundreds of years of supply, some of the best infrastructure in the world and the expertise to expand that infrastructure.

Europeans know this, and their diplomatic missions have been meeting with Canadian industry on it. CGA has met with a majority of EU members' missions here in Ottawa and with the EU's diplomatic office itself.

Canadian producers have been flowing more natural gas to U.S. markets, which is then liquefied and sent to Europe. This amount could increase in the near term, but system capacity constraints pose barriers to it rising significantly without major infrastructure expansions.

However, it is in the medium and the long term that Canada could help much more, and Europe wants that help. While we're modest LNG exporters now, we are set to change that with the LNG Canada project, which will produce 13 million tonnes per annum in its first two trains, and the site is designed to allow the addition of two more.

What more should we do?

First, Canadian industry should work with government to map out a strategy to move more energy offshore. Canadian companies are standing by prepared to discuss the opportunity, and we know that government has been in touch with various players to date.

Second, we need clear signals that government is prepared to support more gas energy exports. We note that Minister Freeland has been forthright on the topic, and we draw members' attention to her remarks at the Brookings Institution in October in Washington, where she said, and I quote:

The EU set a powerful example during the COVID pandemic when European vaccine makers honored their contracts with non-European allies. Canada remembers. Canada must and will show similar generosity in fast-tracking, for example, the energy and mining projects our allies need to heat their homes and manufacture electric vehicles.

She also said:

And crucially, we must then be prepared to spend some domestic political capital in the name of economic security for our democratic partners.

We need specific action, and this is my third request. Minister Freeland, in her call for fast-tracking, is absolutely correct. We need to streamline our regulatory framework to enable rapid project development and to foster investment confidence that we're serious about delivering.

With a low-emission product, unrivalled expertise in moving it to customers and some of the highest standards of corporate and environmental performance, Canada should be working to ensure that the companies in our industry from wellhead to burner tip are helping the world. If we do this, we'll have the credibility to lead the global conversation on opportunities like RNG, hydrogen and other fuels and technologies as they emerge.

As a final note, Canada will be hosting two important international conferences over the next two years: the international LNG conference in Vancouver next July and the international gas research conference in May 2024 in Banff. These events present platforms for Canada to showcase our leadership. The fact that we are hosting them points to the reality that Canada has a significant role to play in a dramatically shifting and unstable global energy marketplace.

Canada's gas industry has brought and continues to bring energy security to our country, and we can and should help bring it to our allies and the world at large. The German Chancellor said it best when I spoke to him when he was here in August. He told me, “Mr. Egan, we need your gas.”

Let's work to find ways to address that need.

Thank you kindly for allowing me to appear before you today.

[The Chair, Liberal, Ali Ehsassi]

Thank you very much, Mr. Egan.

We will open it up to questions from the members.

Our first member is MP Chong.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you, Mr. Chair.

Thank you, Mr. Egan, for coming to our committee.

Can you elaborate on what Chancellor Scholz said to you when you met with him last August when he came to Canada?

[Timothy Egan]

Yes. This was during the Chancellor's visit in August, and this was at a meeting he had with industry and public sector representatives in Toronto. He and the Prime Minister were both in attendance. They both made some remarks, and then there was a break afterwards, and I had a chance in the break to talk to the Chancellor.

It's not very often you get a chance to buttonhole a G7 leader, so I took advantage of the opportunity to do so. I thanked him for his remarks and I noted that his remarks were particularly friendly towards Canadian gas, and he said these are sensitive subjects. Then straight up he said, “Mr. Egan, we need your gas”, and I said, “Chancellor Scholz, I encourage you to say that as much as you can publicly.” I wasn't even going to repeat that he had said it, except he then said it on CBC news, so I felt it was fair for me to make reference to the remarks.

I think the Chancellor and his representatives here in Germany have been forthright, as have many of their European colleagues, and again, we've met with a majority of them. We've met with.... I can provide the committee with a list if you're interested. The Europeans have been amazed to learn the gas story in Canada, because frankly, even though we know it well, it's not advertised that well, and they've been quite overwhelmed by it. Their response is, “All right; what do we do to build a relationship?”

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you for that information. I think it's clear that Chancellor Scholz came away empty-handed. He didn't get the gas he was looking for. Subsequent to his visit to Canada, Germany signed contracts to get gas from Qatar, which is unfortunate for Canada.

During the visit, Mr. Trudeau said that there has never been a strong business case for natural gas projects in eastern Canada. You said, however, that there is an incredible business case if the regulatory framework is clear. Who's right about the business case?

[Timothy Egan]

I don't remember the precise words the Prime Minister used, but insofar as we need a good business case, he's correct: We do need a good business case for any gas project in the country.

My point is that the business case is determined by a variety of factors, one of which is the regulatory framework, so I pick up on the Deputy Prime Minister's remarks about fast-tracking it, because if you can create a tighter regulatory framework, investors are going to be much more interested in the opportunity to invest in projects here in Canada and develop projects in Canada.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

In the Deputy Prime Minister's speech at the Brookings Institution on October 11, I believe it was, she indicated that Canada wanted to fast-track energy projects to heat people's homes, which I interpreted that to mean natural gas projects. Have you seen any changes from the government in terms of expediting projects for the export of LNG? Have there been any discussions with the government about this, or was this simply stopped at that speech she gave in Washington on October 11?

[Timothy Egan]

There have certainly been discussions. I know that many of my member companies and others in the industry have been in conversation with various government representatives, and I think it's fair to say that the government has moved significantly from its positioning early in the calendar year to how it talks about LNG projects now.

I think early in the year the government itself was not convinced of the opportunity, and I think they're much more convinced now. I think in addition to Minister Freeland, Minister Wilkinson has been making positive statements, as has Minister Champagne.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

I agree with you. I think there's been a 180-degree turn by the government on LNG projects. I think they've realized their mistake and at least they're talking the talk about exporting LNG for our allies in Europe.

Just after the war began on February 24, with Russia invading Ukraine for a second time, Germany announced about a week or so later the construction of two new LNG terminals on the Baltic Sea, and they have since expanded that to five new projects on the Baltic Sea. Some of those projects are expected to be fully operational this winter; in other words, they were able to go from zero to 100—to completion—in less than 12 months. Why can't we do that?

[Timothy Egan]

I think Germany has, like Canada, an exceptional environmental regulatory framework. I think in the face of what is really an incredible crisis in Germany, they've looked at that framework and they've said we have to speed it up dramatically. Canada needs to do the same thing.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

I know we are the fifth-largest natural gas producers in the world. We sit on some of the largest reserves of natural gas in the world. We have the engineering expertise. We have the private sector capital. We have the private sector companies like Enbridge and TransCanada PipeLines and other major energy companies based in Canada. It's just astounding to me that in an emergency context, when the very security and defence of the NATO alliance is at risk because of Russia's brutal attack on Ukraine, we as a country aren't able to do what other allies, such as Germany, have done and expedite the construction of these plants that are so necessary to displace Russian gas in Europe and cut off the funding for Putin's war machine.

Maybe you could comment on why there doesn't seem to be a sense of urgency here on the part of the government to get these projects done.

[Timothy Egan]

I think it's incumbent upon us in the industry to make clear just how significant the opportunity is for Canada. I think we have all been somewhat complacent, because—let's face it—energy is abundant and very affordable in this country, and we are suddenly seeing the shock involved for societies when prices rise dramatically and supplies are constrained. I think it's changing the conversation in Canada, and I just hope it changes it more quickly.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

I have no further questions, Mr. Chair.

Thank you.

[The Chair, Liberal, Ali Ehsassi]

Thank you, Mr. Chong.

We now go to Ms. Bendayan. You have six minutes, Ms. Bendayan.

[Rachel Bendayan, Liberal, Outremont, QC]

Thank you, Mr. Chair.

Mr. Egan, thank you for being here.

I understand your point of view and I appreciate it. It's your job to advocate for fossil fuel extraction. I want to make it clear that the Standing Committee on Natural Resources has already conducted a comprehensive study on this issue.

I'd like to ask you a few questions about the importance of our climate change and environmental commitments.

It will come as no surprise to you that, since I'm a Quebec MP, our commitments to reach net-zero emissions by 2050 are very important to me, as well as the Quebeckers I represent. In fact, Canada now has legislation on the matter, the Canadian Net-Zero Emissions Accountability Act.

As you said in your opening remarks, our European allies are in a critical situation right now when it comes to energy in general, and natural gas in particular.

I'd like to know if Canada's commitments and the Canadian Net–Zero Emissions Accountability Act are compatible with what you're proposing, which is to increase Canadian natural gas and liquefied natural gas production.

[Timothy Egan]

I believe they're compatible.

First off, I should clarify that actually our association is not focused on the extraction of fuels but on the delivery of fuels, so our member companies are delivering gas energy right across the country. Overwhelmingly right now it's natural gas, but increasingly it's RNG, as it is increasingly in Quebec. Hydrogen, of course, is also an emerging opportunity.

The fundamental point here about what we do is that delivering gas energy has an enormous economic benefit and an enormous security benefit, and it's a benefit that the Europeans recognize.

To your specific point about how you reconcile a country like Canada, which is a natural resource-producing and resource-exporting country, increasing its exports in the face of targets we've set, I think the government has created an enormous challenge for itself with its emissions cap. I would say, however, that when you look at the performance record of Canadian companies across the value chain and you compare them to those of our global allies, we perform extraordinarily well. Our standards are as good as or better than virtually everyone else's in the world. If you think of Europe receiving resources from a place like Russia, where the standards are much lower and emissions are much higher, and you reflect on it in a global context, then you see that Canada could be contributing to lowering global emissions in a profound way. Are we making the perfect the enemy of the good by setting standards internally that prevent us from delivering much better benefits to the globe at large?

[Rachel Bendayan, Liberal, Outremont, QC]

Thank you for the response.

You've brought up the possibility of exporting gas several times. Do you think it's realistic to export gas from the east coast of Canada?

[Timothy Egan]

That comes back to the Prime Minister's question about a business case.

I think every project deserves to be evaluated on its merits. The biggest advantage of east coast gas exports is that the transport distance is dramatically less. The biggest disadvantage is that you don't have the same supplies readily available and you don't have the same infrastructure in place. You have to create a combination of factors for the business case in each application.

My view is to create a rules framework that indicates that we're supportive of exports and then let business projects come forward and evaluate them on their merits.

[Rachel Bendayan, Liberal, Outremont, QC]

Because you're in the industry, you come to us fully aware of the business case for doing what you're here to propose.

Is the infrastructure ready or almost ready? How much are we talking about in terms of investment, public or private?

[Timothy Egan]

I don't know the business cases on a case-by-case basis.

What's fascinating about this—and you can see this in the U.S. in particular—is that new project proposals are coming forward all of the time. Why are they coming forward? They're coming forward because entrepreneurs see a new technology that they combine with this piece of infrastructure over here and this over here and they can create a new project opportunity.

[Rachel Bendayan, Liberal, Outremont, QC]

How long would it take to carry out those projects?

[Timothy Egan]

That would depend on the regulatory framework. If you expedite that regulatory framework, to the point made earlier by another member, it's significantly less time.

I can't give you months or years, but I will say that right now it's taking years and years. The world needs it in a shorter period of time.

[Rachel Bendayan, Liberal, Outremont, QC]

Besides the regulatory framework that we require, how long will it take for the industry to be able to export, for us to have the infrastructure to move the material, as you say?

[Timothy Egan]

You would have to talk to a project proponent. If you want to give me a specific project, I'm happy to go away, talk to the proponents and try to give you a sense of timing, but I haven't the means to tell you that there are a dozen projects and this one will take 12 months and this one will take 24.

I can tell you that with certain conditions in place, you will have much more interest in project development.