Natural Resources Committee on May 9th, 2016

[Prof. Michal Moore]

That's fair. I would say that bringing the public in creates transparency in respect of what the decisions are and what's at stake. They should feel involved, but not afraid to call time out, not afraid to make a decision. They need to exert the unifying leadership that is the mark of a federation, as opposed to a lot of linked provinces that are operating independently of each other and the federal government in their energy decisions.

[The Chair, Liberal, James Maloney]

I assume you agree that this process should include all levels of government, the industry sector, the aboriginal community, and environmental groups. Would that be fair as well?

[Prof. Michal Moore]

That is absolutely fair.

[The Chair, Liberal, James Maloney]

Mr. Barlow, over to you.

[John Barlow, Conservative, Foothills, AB]

Thank you, Mr. Chair. I appreciate having the extra time. I'm going to start with Dr. Plourde first.

You said that one of the most important things we could be looking at here was to allow industry to play the key role and government to set policy. From what we've heard from speaking with many in the industry, I think they're not looking for handouts. They're just looking for a framework for them to work in. They will invest the money and take care of that.

What role do you see for us here, in this committee? What's the message that we could take forward to government and to the minister? What role do you see the government playing and what role do you see the private sector should have? Should we be getting out of the way and letting the private sector try to drive this innovation and the environmental policy, or not drive environmental policy but be more the leader than having government take that lead role?

[Dr. André Plourde]

I think governments should have ambitious public policy objectives, put it that way. I think that's the responsibility of government: to identify what the public policy objectives are and to make sure they're ambitious in any kind of measuring. We've got international agreements, for example, to adhere to. We've got all kinds of other things. Then I think the role of governments is basically to set the policy framework, as I tried to say before. After that, there is potentially a role for it in being a direct participant in R and D types of projects. There is, as has been highlighted before, a role for it in setting the regulatory framework and in exercising that regulatory framework.

I find it more difficult to find a role for government in setting the direction that industry should be moving in. Signals should come from governments; decisions should come from people who are close to the activities. In my view, the latter know better than somebody sitting in an office somewhere at a distance from all of this about what key decisions are to be made and what competitive advantages are to be exploited. That's my view.

[John Barlow, Conservative, Foothills, AB]

Just to follow up on my colleague's question, which you touched on it, one of the biggest impacts that we could have as Canadians on global GHGs is to sell our LNG to China. That would have a much more profound impact than worrying about our 2% that we are doing. I just wanted to put that out there, that it would have a much more profound impact on globally GHGs, if we get get our products to market.

You also talked about the importance of a long-term strategy 10 to 15 years up the road. We always hear about the impact that uncertainty has on the industry. As an Albertan I hear that every single day. Can you elaborate on that? What would that strategy or framework look like? Right now we have the approval process being modernized, but no one's said what the modernization is. We're going to do that months down the road, where we have two key projects waiting and ready to start to go through that process. What would that strategy look like, and how important do you feel it is for industry that once we make some decisions, we stick to that protocol so that industry knows the strategy and the structure they're dealing with?

[Dr. André Plourde]

I think there are two things I would say in response. First of all, industy has to live with a lot of uncertainty on the exchange rate side, and also on whether the contracts are going to be there for them to sell the product. A characteristic of the operating environment of the conventional energy industry is that there are these elements of uncertainty. It seems to me that policy should aim not to worsen the kind of uncertainty framework that industry has to deal with.

That said, I do think that it's important to give clear signals. I do think there is a role for public sector investment in research and development. I think all of us have said similar types of things. But I also would like to point out that Alberta has completely revamped its energy regulatory practices in the last decade. It has done so consultatively, but it has done so because the realities of the industry will change as we move along. Policy and regulation must keep up with those changes.

I'm making the point that if we're putting in place something that will not change for the next 15 years, it would be a bad idea. We need to make sure that we stay at the forefront of the needs of both consumers and producers, and Canadians more broadly. That will require some adjustment as we move along. I would say, look at Alberta as an example of where those types of changes have occurred over the last decade.

[John Barlow, Conservative, Foothills, AB]

Flexibility.

[Dr. André Plourde]

But, principled flexibility, not just waking up one morning and deciding you want to do something different now.

[John Barlow, Conservative, Foothills, AB]

Exactly.

[The Chair, Liberal, James Maloney]

Mr. Harvey, we'll move over to you.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

Dr. Moore, my question is centred around the innovation—primarily industry driven—that we've seen over the last number of years and will see going forward within the oil and gas sector to try to meet the oncoming needs to get social licence to continue. Do you feel that the industry could benefit more from a price on carbon, or cap and trade? Which system provides the greatest amount of flexibility and operability to the industry as it looks to innovate and grow further?

[Prof. Michal Moore]

The idea of a carbon tax provides a whole lot more certainty to industry. Even if it's projected to change, they can identify with what it tells them about the technologies or the procedures and processes they're using, whereas a cap and trade system—especially on something that contains methane or carbon dioxide, which is not at all localized once it gets into the atmosphere—allows a lot more flexibility in the changes from the legislative or the policy side, and adds to what Professor Plourde just referred to as the risk characteristic. Diminishing their perception of risk or the risk they have to face in the marketplace for funding or for continued operations is all to the good.

In that context, this type of problem, fixing on an appropriate, clear, and transparent carbon tax or carbon charge, based on what it takes to neutralize the bad elements of carbon dioxide or methane, is far preferable than a cap and trade system.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

Over the last number of months there's been a lot of talk about the federal government's lead on the climate change file and its effort to foster a collaborative approach with its provincial counterparts. I want to get your thoughts on that approach and how you feel it's going. Is the federal government's lead and encouragement of the provinces to come on board and to work collaboratively with it going to further our purpose in trying not only to meet our GHG emission requirements, but also to foster the type of environment that will allow projects like Energy East or the Pacific NorthWest LNG proposed pipeline project to go forward?

[Prof. Michal Moore]

As your chair pointed out, I've revealed my bias on where I think the centralizing and, let's say, the most persuasive leadership, ought to come from. Collectively as a nation, we have drifted a long way from the vision I projected in the national energy strategy document you have there. We will not move back overnight to a place where federal standards for environmental quality or even for leadership in trade opportunities will come to the fore.

However, I think you're on the right track. Having the federal government provide the incentives and to demonstrate what the possibilities are is, frankly, going to lead to a better outcome, one where the collective benefit for Canada far outweighs any individual province that might create a cap and trade program with a foreign country, or some other benefit that goes strictly to north-south relationships.

There will be a couple of opportunities to demonstrate collective benefits or the things you can reward provinces with: a pan-east to west, or west to east, electric wire system is probably out there in the future and it's going to provide tremendous collective benefits. It's the same with an energy system that provides data and analysis equally to all the provinces to better their own lot. That's all going to be driven by federal leadership and example.

[The Chair, Liberal, James Maloney]

Mr. Cannings, over to you.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I'll just ask this of Dr. Moore. We've heard a lot in this committee over the past few weeks about innovation and how we need to foster and incentivize that, especially in the oil sands—as Professor Elgie was saying—to help our environmental reputation as well as, hopefully, reducing costs. However, we heard from COSIA that the new innovations they were working on—some of which are very exciting—were only going to be played out in new oil sands projects. The ones that are already extant would not generally use them. Now we hear that the new oil sands projects are constrained by low oil prices around the world.

I'm just wondering if you have an opinion on what oil price would get these projects going again.

[Prof. Michal Moore]

Well, my opinion about what the oil price could be is certainly not what the oil price has been. I'm going to guess that we're not likely to get much above $60 in the future and that this is going to be a world price for oil that will reflect the cost of extraction and processing. That may not be sufficient to incent smaller and newer firms to participate. In fact, it probably leans back toward those well-established firms that can afford the investment.

Let me just give you one really short example. Years ago some of the Shell engineers were experimenting with using carbon dioxide as a medium to be able to move petroleum coke in a pipeline. In other words, they were trying to create a slurry using carbon dioxide at such pressure that it created a liquid, to be able to move both of those products to locations farther south, for instance, where they could be injected or neutralized. That didn't come from government incentives, but from their trying to creatively problem-solve how to deal with future constraints on carbon dioxide. I think that's likely to be sponsored very well only by the larger and pre-existing firms.

[The Chair, Liberal, James Maloney]

You have 30 seconds, if you want it.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Dr. Plourde, you have 30 seconds to comment .

[The Chair, Liberal, James Maloney]

You have 20 now.

[Dr. André Plourde]

I guess the future in oil sands, to my mind, remains with very large firms, because these projects, individually, are so costly that it's very hard to assemble the capital necessary to make them work. I feel that the future of the oil sands requires a lot of investment in the operations on the environmental side. I don't see this as a play where a lot of small players are going to be involved.

[The Chair, Liberal, James Maloney]

Great.

Thank you very much, and to Professor Elgie, too, who I understand had to leave.

That was very informative and helpful. I was going to say that it reminded me of being back in school, with the difference being that I actually paid attention and took lots of notes today, which is a compliment to both of you.

I don't think there's any other business for today. We'll see everybody on Wednesday at the same time, but I don't know where.