Natural Resources Committee on May 9th, 2016

[Dr. André Plourde]

I guess the view that I would bring to this is that it's our environmental problems that need to be addressed. We've talked about externalities. If doing something creates costs that are not borne by anyone, I think it is incumbent upon the policy framework to make sure that it is addressed. That said, we also have a responsibility to make sure that if this is addressed, it's addressed in the lowest cost way possible, to deal exactly with the issues that you've raised. There's no point in imposing too large a cost to deal with a specific type of problem when there are cheaper ways of addressing the issues. What the policy framework that we put in place should do is to look for those cheap ways of addressing the problem.

[Prof. Stewart Elgie]

I have two quick points. Most CEOs in the oil and gas industry want a carbon price, and the U.S. does look at the upstream impacts of oil and gas infrastructure development already in its environmental assessment process.

[Candice Bergen, Conservative, Portage—Lisgar, MB]

But I—

[The Chair, Liberal, James Maloney]

Right on time.

[Candice Bergen, Conservative, Portage—Lisgar, MB]

All right...the next one.

[The Chair, Liberal, James Maloney]

Mr. Cannings.

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

I'll follow up on that last comment, because it was one of the questions I was going to ask you, Dr. Elgie.

You talked about Canada's environmental reputation and working on innovation to fix that. One of the concerns about pipeline projects, etc., is they will enable more expansion of the oil sands and more greenhouse gas emissions. I wanted you to comment on that, including any upstream impacts of projects such as that on our environmental impact system.

[Prof. Stewart Elgie]

That's an easy question, right?

In the big picture sense, I think that the challenge for oil and gas is not that different from other industries, which is that we have to move from seeing environmental performance as a threat to competitiveness to an opportunity for competitiveness. Whether we like it or not, the world is moving in this direction. Our choice is whether we try to move with it, or try to duck and hope that it goes away. Most farsighted CEOs realize that this a fundamental structural shift in the world's economy. Moving toward more sustainable environmental performance is good business. It's also true for oil and gas.

What does that mean for pipelines? In some ways, it's the most difficult political challenge facing the country right now, I think. I'll give you my view, and one that a growing number of people in the environmental movement in the oil industry would share, which is that the world will continue to use oil and gas for decades to come. There will be a market for it. There's no reason why Canada should be the only producer in the world saying that we're not going to take part in that market. Norway takes part in that market. We don't have to say that we shouldn't sell our product. The world will use it.

I think what we should do is to be able to say that we produce that product in an environmentally responsible way. Let's get rid of labels and just look at numbers. The per-barrel footprint of our oil and gas is higher than most of our competitors. Even the oil and gas industry acknowledges that. That's partly because of the nature of the deposits. It's the nature of getting that stuff out. The only way to solve that is to put themselves on a path to no longer being a high-carbon footprint producer. They know that. They understand that, and it's a key part of their business strategy.

Here's what I think the challenge is. The investments and policies we're putting in place today will put us on a path to probably getting there in 5 to 10 years. The challenge is that we need to make pipeline approval decisions today, before we've seen them bend that carbon cost curve.

My own view is that Alberta and the oil industry have now put in place a policy and innovation framework, and if it continues to get more stringent, that will put us on that path. They ought to be able to get their access to market for their products from doing that.

As long as we're producing the product in an environmentally responsible way, there's no reason why Canada shouldn't be able to get its product to market. The challenge is going to be, as we're building it, to show that the policy measures we're putting in place today are continuing to drive that improved innovation curve, because they're going to happen hand-in-hand.

It's a tough problem, but that's my view on it, for what it's worth.

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

I'll put my next question to Dr. Plourde.

We all seem to be in agreement—at least you three are—that carbon pricing is a necessary step to getting where we need to go. If we're talking about a carbon tax, I wonder if you could comment on whether it would be better to have that carbon tax put toward innovation strategies, or whether it should simply be made revenue neutral.

[Dr. André Plourde]

Thank you.

[An hon. member]

Another easy question.

[Some hon. members]

Oh, oh!

[Dr. André Plourde]

Yes, another easy question. Thank you for that.

There are, as you know, broadly two ways of addressing this issue or of thinking about this issue. One is the B.C. type of example, with the revenue-neutral approach. You raise some revenue and you return it in a way that's not correlated with how the emissions are generated, so you're not playing with the incentive system and your return. The other thing is to say that you'll use the money and then subsidize some form of investment in the area.

I guess I come at this by saying that I would argue at the outset that there is a need for the public sector, as we've all said, to invest, in some form or another, in the development of clean technologies as we go forward. I think that's a decision that is completely separate from what kind of carbon tax you want to put in place. For me, I would like to see a break between the two.

I would say, “You have to do this, fantastic, so sort out what your budget statement must look like in order to provide the kind of support that you do.” On the other hand, you have all kinds of different ways of raising revenue. You raise revenues the way you do, and if you want to target this in a different way and return the revenues to the public, then so be it.

I would not like to have an explicit tie between the two. It's too easy to manipulate if you do that. I don't deny the need for public investment, but on the other hand, I worry about the close connection between the two. I'd rather not see a connection.

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

Dr. Moore, I would like to hear you expand on the real national energy strategy that you talked about, on what that would look like and what are the really important parts. I think you mentioned a couple of them. I'll give you however much time we have left.

[The Chair, Liberal, James Maloney]

You have one minute.

[Prof. Michal Moore]

In one minute or less, let me say that in the documents I've submitted there's a link to the piece that I wrote and published three months ago on what the characteristics of a national energy strategy might be.

Basically, it says that a strategic intent is not a plan. It's a vision of how the nation and how the provinces will co-operate together, anticipate what markets are going to look like, anticipate how to deal with some of the upcoming forces, such as the ones that Professor Plourde just mentioned, and start to develop innovation, technology, and policies that help the nation move to that area.

It's a vision of the future, and the plan that I advance describes a process that you could use to get there most efficiently.

[The Chair, Liberal, James Maloney]

Mr. Serré, over to you.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you to our three guests for your presentations. I really appreciate the knowledge and the expertise that you've given us today. Personally, for me, this has been one of the best presentations we've had so far, because you're really looking at the oil industry and the environment together, and at how we move forward in utilizing innovation. That's pretty exciting.

The other part I wanted to comment on before I ask my question is the discussion around the collaboration with our partners, the U.S. and Mexico. We've also indicated the provinces and how they fit into all of this, as well as first nations environmental concerns.

I wanted to see if Dr. Elgie could expand a bit on the last few years. We know from the presentations that when we look at 2040, with the growth that is needed and even the demand for oil and energy in 2060 and beyond.... Why was there, in your opinion, that lack of consultation that has led to this failed approach over the last few years? What can we do better to make sure that we bring our resources to tidewater? Also, I'd like to hear comments about the five principles the government recently put in place.

[Prof. Stewart Elgie]

I would say that if you unpack the opposition to the pipelines, it's a mixture of local and regional site-specific concerns about the pipelines themselves and a concern about the environmental performance of the oil sands. It's very hard to unpack those two because, really, whether you're going east, west or south, those two factors are both at play. When you're going west you're looking at a mixture of first nations' concerns, bilge concerns, tanker concerns; to the east, you've got many of those things too; and to the south, you've got Donald Trump and Hillary Clinton and lots of other stuff, and Barack Obama. You're right.

Mixed with all those things, I think, if you took out the factor of the environmental reputation of the oil sands.... We've been building pipelines in this country for decades and none of them have generated the kind of controversy that these ones have. I think it's because the pipelines have become a proxy for the fight about the oil sands, which doesn't mean there won't still be regional and local issues about pipelines. There still will be and we've worked those things out as a country before and I think we'll work them out again.

I think the key to unpacking the opposition to the pipelines is unpacking the environmental challenges that are facing the oil sands industry. I think, as I said before, that we're on path to do that. I think we know how to deal with social licence around pipelines. We can do it better, but it's not something we've never figured out.

The only thing I would add—and this builds on the question to Professor Plourde—is that one of my biggest worries is that we need a pulse of investment, public investment, in the next five to 10 years to lay the foundation of the infrastructure and the technology that will largely determine our economy in 2050 to 2060. Really, the infrastructure and the technology choices we make in the next five years will be our carbon footprint, so we're going to need a significant public and private investment.

This is where I get a little more worried about the question of pricing, because I think we're going to need a significant role for the federal government and the provinces. A lot of this is of national interest, not just a local one, and I'm worried that it's great to do it on deficit financing, which can work in the short term, but in the long-run I think that both federal and provincial governments are going to need some income coming from carbon pricing as a way of investing in the economy of the future. I just think that the reality of it is that we're not going to continue to have the political will to make those investments unless there's a revenue stream that they can be seen to be going back against. That includes the federal government. I think there should be some form of revenue stream around carbon pricing that goes back out to provinces, but that helps to deal with issues of a national interest to complement all of the provincial stuff.

[Marc Serré, Liberal, Nickel Belt, ON]

I also have a question for Dr. Moore related to the energy labs that you spoke of earlier and also about our government's plan to invest in the innovation aspect of the natural resources. What more can we do as a government to support those initiatives? Could you expand upon what you already said.

[Prof. Michal Moore]

On the remark about the United States Department of Energy National Laboratories, they made an investment that started back in the 1950s to create energy research areas that could look at atomic energy, fossil fuels, and transportation systems. They made a tremendous investment in those laboratories. There are 11 of them across the nation and they are, frankly, a little underutilized today, so they're looking for clients.

I was suggesting that with the vast amount of talent they employ in that arena, we might be able to benefit from it without spending, as Professor Plourde pointed out, excessive sums of money to get the kind of product we need. This does not mean that the technology laboratories that we have here in Canada are deficient or insufficient, but it's to point out that we can enhance their value tremendously.

As I mentioned, I'm going down to Mexico next week. One of the things that we are offering to Mexico through our government here is to help them discover some of their own technological potential by using some of ours, by trading expertise, so it has some legs in that way as well.

I would say that being able to use some of the tools that we have to target incentives, investment, and innovation in our own industries, using ourselves as a living laboratory can foster and direct the kind of innovation we want to see without necessarily specifying it at the government level.

[The Chair, Liberal, James Maloney]

We're into the five-minute round and I'll turn it over to Mr. Barlow.

[John Barlow, Conservative, Foothills, AB]

Dr. Plourde, thank you for speaking about Fort McMurray. Being an Albertan, I find this a very difficult time right now. I'm from High River. We went through the flood in 2013 and now we're going through this, and it's a very difficult time not only for Fort McMurray but for all Albertans. For me, it feels like the flood all over again right now.

Dr. Elgie, I wish I could share your optimism that it's all about getting that environmental buy-in. I often question whether there is really anything more we could do that would get the Sierra Club, Leadnow, and these lobby groups to get on board. I really question whether there's anything we could do to change their minds. That's not to say that we shouldn't continue to work towards that, and I appreciate your comments.

You talked about our poor environmental reputation and whether it is warranted. Is there anything we can do? I think a lot of it is just a matter of changing the narrative. We have groups like yours, Smart Prosperity, COSIA, and Alberta's In Situ Oil Sands Alliance, which are starting to get the word out there. Maybe not just on the regulatory side, but is a lot of it simply a question of doing a much better job of putting together a better message, putting together a better public relations plan? That may be a bad way of putting it.

It just seems that we have a good story and strong environmental records, but no matter what we do, even when some of these private sector groups, such as COSIA, which is amazing, come together and pool their resources and their ideas and their innovation, we just don't do a very good job of telling people.

Is there anything we're not doing that we can do to try to change that perception?

[Prof. Stewart Elgie]

You're asking a lawyer and an economist about storytelling.

[John Barlow, Conservative, Foothills, AB]

I know it's in your inner child.