International Trade Committee on May 7th, 2021

[Jocelyn Doucet]

Look at Europe, for example. They have commitments where they have to fill up some minimum recycled content in virgin products in the plastics industry. So these regulations are driving demand for technologies like ours to be able to provide low-carbon recycled plastic substitutes. This is what we see in these markets. This is what we see in some Asian markets as well, and that's why we thought that driving some policies in that sense would reinforce the position of Canadian clean technologies, especially in our sector.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Doucet.

We'll move on to Mr. Dhaliwal for five minutes, please.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Thank you, Madam Chair. I want to thank all the presenters.

My first two questions are for Mr. McMillan.

Mr. McMillan, I'm going to be very short in my speech, and you'll have all the time you need.

First, because your association invested over a billion dollars over the last year, I would like to see, particularly LNG play a key role. I would like to see how oil and gas can play a role in a green recovery.

Second, I was travelling to Taiwan and Asia before COVID, and I noticed that there's going to be a big demand for LNG. Could you also touch on those markets in Asia, and the environmental impacts?

Third, on the Burnaby outfit that you have with your associate member who is into the co-processing of low-carbon fuels, could you explain that?

[Tim McMillan]

Certainly.

I guess, on the LNG and the role it will play in the low-carbon future, British Columbia is uniquely positioned globally. If we just start with the raw product, natural gas, and the way it's produced in B.C. and northeast Alberta, it is extremely low carbon and low methane. Put on top of that the substantial reductions, the 45% reductions, that we're making in methane emissions by 2023. Nowhere else in the world is doing that.

The fact that we can electrify our upstream and have already started to do that.... Some of the major midstream infrastructure that's been built in British Columbia, in northeast B.C., in the last several years has been electrified. Hence, as opposed to using the natural gas to drive the turbines to compress the products and move them in the pipeline, they're using electricity. With the build out of the hydroelectric dams in British Columbia right now, those opportunities get even bigger.

The current LNG facility under construction isn't fully electrified, but it is using substantial amounts of electrification. More of that can be done, but at the end of all of these pieces, and with the close shipping distance from northwest B.C. to the major markets of India, Taiwan, China and Japan, again, it positions a lower-carbon product than any LNG in the world.

You can take that and compare it with any natural gas to coal-fired power plants in Asia, where there are several hundred coal-fired power plants under construction. We have to displace that. That is the simplest, easiest carbon reduction we can do globally. The biggest impact Canada can have is by enabling more Canadian natural gas to offset that coal-fired build out. This isn't a question of people who want to have bigger houses and two refrigerators. It's people who want their first small refrigerator. It's the first time they have the ability to turn a light on in the evening so that their kid can do their homework. These are very basic needs that are today being met far too often by coal.

To your second question, what does that market look like? It is great. The International Energy Agency predicts that the demand for both oil and gas will get back to record levels by 2023 and that natural gas will grow by, I believe, 30% between 2023 and 2040. There are a billion people who today don't have a light bulb, and we over the last decade have done the best job of pulling people out of poverty that we've ever done in history, and we're set up to do an even better job in the decades ahead, but that takes energy.

I think that the more of that energy that comes from Canada, the better environment we'll have globally. Clearing the barriers is going to be a huge benefit for us if we can achieve it.

I'm sorry, could you repeat your third question?

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

You have an associate member that processes biodiesel feedstocks such as canola oil and animal fat in Burnaby. Are you familiar with that? If not, it's okay.

[Tim McMillan]

Off the top of my head, no. We have associate members who are into ethanol and all sorts of products, as well as several members who are investing in other technologies. I don't know that one in particular. Sorry.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

That's no problem.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Dhaliwal.

We go now to Mrs. Gray for five minutes, please.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you, Madam Chair, and thank you to all of the witnesses for being here today.

I'd like to start off with some questions for Mr. Mell.

You had mentioned huge opportunities for Canadian cobalt resources in battery production and actually in the entire value chain. You mentioned that 80% of cobalt currently comes from China. Would you think that Canadian cobalt would be seen as a more desirable product due to our higher environmental and human rights standards?

[Trent Mell]

Absolutely. Thank you, that's a very good question.

Right now in the supply chain, cobalt comes out of essentially nickel and copper mines. From the nickel operations, whether they are here in Canada, Australia, Russia or Indonesia, a lot of that ends up in the alloy market. When you're looking at batteries—just the way it's processed—it comes out of the African copper belts. That's the DRC. Seventy percent of the world's cobalt comes out of Congo. Almost all of the world's batteries require Congo. I'd liken it to the new Saudi Arabia of the EV world.

Most of that, through the belt and road initiative and direct investment, has found its way from the DRC into China where it gets refined. That's sort of where we're competing. There's Umicore out of Finland. There's soon to be First Cobalt out of Canada, and then there's China.

This is not just a geopolitical statement. It's also just the diversification of a supply chain and it's ESG, which I mentioned earlier. There are a lot of reasons why people would love to see cobalt out of Canada. We do have some assets around our refinery that we have explored. We have even more advanced assets in Idaho, but all of that could be seen as potentially a vertically integrated supply chain here on the continent.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you very much.

That leads to my next question. It's all tied together and I think it was a little bit of where my colleague, MP Hoback, was going to go before he ran out of time.

We hear reports of China coming into countries and controlling various infrastructures and mineral extractions. One example you just mentioned is the cobalt resources in the Democratic Republic of Congo. How do we make sure that Canadian cobalt exporters are competitive in that type of environment?

[Trent Mell]

From an extraction perspective, first we have to find it in decent quantities. Although Ontario certainly has some prospects, as do the north and the territories, we're just not there yet. Coming out of the mining sector, we invest with the commodity cycle. When the cobalt price is high, we'll start drilling; when it goes down, we'll stop drilling.

There is a bit of an incentive program. We do have the Canadian flow-through share regime. It is a long process from discovery to ultimate extraction. For our company, my expectation would be that we'll be producing from Idaho well ahead of any opportunities here in Canada. That's a function of geology and some work that was done in the sixties and seventies by other companies.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you.

My next question is actually for a couple of witnesses. I'll just call on Mr. Mell first, and then I'll call on a couple of other people.

We know that clean tech is an emerging industry. There's a chance that it may not be fully accounted for in some of our trade agreements when it comes to regulatory co-operation and non-tariff barriers. Have you faced any regulatory hurdles or non-tariff barriers in exporting your products?

[Trent Mell]

We're not yet exporting, but that's very topical right now. In fact, just this morning we were looking at some of the tax rules to import the material into Canada and then to process it. The nature of the chemical conversion and whether it's exempt or not going into various markets is alive and well.

I don't have a straight answer for you, but it's something that obviously matters to us as we look to face the market.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you.

Mr. McMillan.

[Tim McMillan]

Yes, I would say that's very topical for us as well and it has been for quite some time.

Some of the most obvious non-tariff barriers would be the cancellation of pipelines, both by industry and by government. Our ability to be the supplier of choice hinges on our ability to get those commodities to those markets. The northern gateway, energy east, Keystone XL, and now for Canada to be paying attention to Line 5.... If we can't get Canadian products through Line 5 to the U.S. market and back to the Canadian market, we have a very challenging logistical situation. We may have a lot of Canadians who are in very difficult situations.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you.

I think we can squeeze in Mr. Doucet if he'd like to answer that as well.

[Jocelyn Doucet]

We have no issues exporting our technology, especially in areas where we have free trade agreements with Europe and some countries in Asia.

With respect to exporting some of our outputs—some of the products and chemicals that we make locally here in Montreal—we go through all the regulatory standards, like the REACH standards and stuff like that, and everything is okay. We don't face any issues going outside of Canada.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go on to Mr. Sarai, for five minutes, please.

We don't have Mr. Sarai there.

[Chandra Arya, Liberal, Nepean, ON]

Madam Chair, maybe I can take over.

[The Chair, Liberal, Judy Sgro]

Yes, Mr. Arya. Thank you.

[Chandra Arya, Liberal, Nepean, ON]

Mr. Mell, this gives me another chance to go at you. You mentioned the investments made by SK Innovation, General Motors and LG in battery manufacturing in the U.S.

At the last mile of battery manufacturing, there are four or five plants. Many people may not appreciate that today, in the U.S., there are about five or six battery manufacturing plants, each with investments of over $2 billion, are being implemented.

There is still a lot of potential for the supply chain, from the minerals in ground to the chemicals to processing, a vast amount of things. Most of the things that are required for battery manufacturing are still coming from China and other parts of the world.

Can you explain what are the various components of the supply chain that Canada, along with the U.S., can focus on investing in and become competitive?

[Trent Mell]

There is still room for more battery plants. Regarding those $2-billion investments, I'd like to see us get a couple of them here in Canada, and I think we can.

Just a little further upstream from that, it would be the cathode-active materials. The well-known household names would be BASF and Umicore. Those would be two great examples, and then there is precursor production as well.

At that end, just before you get it into a battery cell, you have to take all the chemicals that people like us are mining or refining and put them together into the cathode before you actually can start manufacturing the individual battery cells that go into the battery pack. That's the gap we're trying to fill. There is a bit of opportunity for us in North America, but that's where I see ourselves shipping to maybe Germany or Korea in the short term until we can fill that in.

[Chandra Arya, Liberal, Nepean, ON]

Mr. Mell, how do you see this joint action plan of the U.S and Canada, who have agreed on this critical mineral collaboration? With your participation in the U.S. Department of Commerce meeting of miners and battery manufacturers where you discussed how to boost Canadian production of EV materials, how do you see that going?

Do you think both governments, the federal government here and the one in U.S., are speaking in the same language? Do you see any issues there? Have they agreed upon very close, positive, proactive collaboration?

[Trent Mell]

There is some great information-sharing, which is good to see. There is good alignment, but let's face it, we're also competing for the same investments. In fact, we're probably jointly competing now with Europe, as well as Asia.

To me, there is alignment of interests. There has been a good exchange of views. Certainly behind closed doors, where I'm not present, our company has been raised as an example of how Canada can support the U.S. in its critical mineral needs. Beyond that, it's hard to say what happens, because of course, these are a lot of confidential discussions with bigger foreign investors that we're trying to attract.

As I said, I know NRCan has been working very hard. I can say the same about their counterparts in Quebec and Ontario. I'm not privy to where it's going to go, but I'm certainly rooting for everybody.