Natural Resources Committee on May 14th, 2019

[Chris Evans]

In the media it was reported that the Province of Alberta was looking at rail procurement for its provincial purposes. The federal government generally takes the view, I believe, that it's the market that determines what's the best supply-and-demand matching.... Although Alberta has made an approach, our department is not looking at anything in particular beyond that.

[Kent Hehr, Liberal, Calgary Centre, AB]

Okay. Thank you for that answer.

Given that 45 nations and 24 subnational governments have carbon pricing, that seems to be the move towards things being as they are. You mentioned earlier that you guys are working on things that lower the carbon usage or the carbon being emitted to the atmosphere in our oil production, not only in the oil sands but elsewhere. How are those projections going? What are you guys seeing? Are our oil companies and things taking this issue seriously?

[Frank Des Rosiers]

Mr. Chair, it's right to note that carbon pricing is seen widely by economists around the world as one of those powerful means to signal to the marketplace how to allocate resources and make investments, whether they're producers, consumers or heavy industries. When you're able to weave that into your everyday budget allocation, it certainly has a very powerful impact. It's not surprising that some of the world's super majors have actually been among the most vocal supporters for having a carbon-pricing regime, and I'm not trying to take a comment from an individual jurisdiction perspective, but just in terms of research and economics, that's a textbook case of using pricing signals to allocate resources.

To the question, most certainly companies are paying close attention. This is not going to be a surprise to committee members: many companies are having so-called shadow prices in terms of their research allocation, i.e., that whether a given jurisdiction has a carbon price or not, they tend to build in a price for the medium- to long-term decisions they're making. As you can appreciate, in the oil and gas sector it's not uncommon to make an investment on a 20-, 30- or 40-year horizon in order to recoup very large capital investments. Companies typically don't reveal those shadow prices, but they have a shadow price for their investment decisions across large jurisdictions or their global operations to take into account what they foresee to be the operating environment in years to come. In effect, many of the large companies that are succeeding are actually doing this already.

[Kent Hehr, Liberal, Calgary Centre, AB]

Fabulous.

You mentioned LNG Canada. Of course, that's a tremendous success story that we're very proud of and that can not only move our economy forward but help with world GHG emissions. In fact, if we do it right and get it to markets overseas, this will help reduce global GHGs and global warming and climate change. Is there capacity in terms of projections for Canada to have more production of LNG here? What would be our potential here to develop that? Do we have an ability to do that?

[Frank Des Rosiers]

Most certainly, there's potential to have other projects. These are large-scale projects that require careful consideration by the investors given the sheer scale and the impact in terms of infrastructure, but we do have multiple projects on both the west coast and the east coast that are at different stages of review and consideration.

I think it's fair to say that the LNG Canada investment was a major signal to the marketplace that Canada is a competitive nation when it comes to energy investments. Already we were aware of many projects on both coasts that were under consideration, but that really gave it a significant amount of profile and a boost in terms of Canada's credibility to make those things happen.

We're certainly tracking those discussions, which are confidential and involve many parties, but we're hopeful that in the coming years there will be more of those.

[Kent Hehr, Liberal, Calgary Centre, AB]

I have a quick question to follow up on Ms. Stubbs' line of questioning. It appears to me right now that what we were operating on before was the 2012 process for developing pipelines that put in place by the Conservatives and, at least from my view, if there has been a “no pipeline bill”, that would essentially be it, as it led to pipelines being in court, not in the ground.

In any event, I know that Bill C-69 has tried to deal with some of that and some of your work around that. Can you talk about early engagement? It seems like that was not as significantly involved in the earlier 2012 process. Is that incorporated in Bill C-69?

[Frank Des Rosiers]

I'm not sure I understand the question.

[Kent Hehr, Liberal, Calgary Centre, AB]

It's about the early engagement of indigenous peoples.

[Frank Des Rosiers]

That certainly is a prominent feature in our engagement. We're reminded by the courts, by the Federal Court of Appeal this year, of the importance of doing that, and doing that thoroughly. The government took that most seriously. As you've seen, we've devoted considerable efforts, with the help of former Supreme Court Justice Iacobucci, to making sure that we're doing this in the spirit of what the court was advising us to do. We're going through those motions at this very moment; absolutely.

[The Chair, Liberal, James Maloney]

Mr. Schmale, you have five minutes.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

I appreciate your coming and speaking with us today.

I'm wondering if you could tell this committee how many pipelines were approved and built under the previous Conservative government in the previous 10 years.

[Chris Evans]

I'm afraid I don't have the data on that. I apologize; we didn't bring that in our briefing book.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

No? Okay: How about the Kinder Morgan Anchor Loop, the Enbridge Line 9 reversal, the Enbridge Alberta Clipper and the TransCanada Keystone pipeline? We can even talk about others as well.

Maybe to go back to Mr. Hehr's question, in the top 10 oil-producing countries in the world, how many of those top 10 have a carbon tax?

[Frank Des Rosiers]

I feel I'm being asked to play trivia here.

[Some hon. members]

Oh, oh!

[Frank Des Rosiers]

I suspect that the committee member may have the answer.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

The answer is zero.

[The Chair, Liberal, James Maloney]

There's no prize, I might add.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

The answer is absolutely zero.

[Ted Falk, Conservative, Provencher, MB]

Oh, there's a big prize: October 21.

[Voices]

Oh, oh!

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

That's right, October 21.

Now, when my friend Mr. Hehr talked about how it was the Conservatives talking about Bill C-69, calling it the “no more pipelines bill”, it actually wasn't us. We picked it up from industry. They coined that term and we took it from them.

Maybe you can tell us a bit about competitiveness overall in Canada and how we are faring.

[Frank Des Rosiers]

I welcome the chance to cover this, because it is a key preoccupation right now across the country and the industry. We hear that loud and clear every time we engage with those players to make sure that Canada is a clean producer but also cost-competitive. I mentioned the extraordinary degree of innovation but also entrepreneurial spirit in the country.

As we've seen in history in so many ways, a crisis will kind of force humans to come up with extraordinary solutions. I think we've seen this happen again and again in Canada's oil and gas sector. Most recently, with the price downturn, we've seen those companies and individuals looking at all sorts of innovative ways to reduce their costs of operation. They're changing some of the technologies they use, looking at their use of the labour force, looking at reducing the input of productions in their activities, and trying to consolidate in some cases the industry players in their domains. All of this has led to very significant cost reductions, driven by those firms. We are in regular discussions with all the major oil and gas producers in Canada. It's truly impressive what they've managed to do to reduce their costs of operation at the firm level.

From a country's perspective, as I mentioned earlier, the government featured this prominently in the 2018 fiscal update. The principal announcement in that update was around competitiveness and bringing about measures in our tax system to accelerate the capital cost allowance of some of the large investments. This was seen also in the context of the competitive landscape, especially in North America, where south of the border some major corporate tax announcements were made and the government came up with fairly sizable corporate tax measures to the tune of $5 billion a year. It was certainly not trivial in terms of changing that landscape.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

How aggressive is the United States' oil and gas industry right now? You just talked a bit about it, but can you do a very quick comparison of the two countries and how they are different?

[Frank Des Rosiers]

On both sides of the border, this is an intensely competitive industry, not just Canada-U.S. but also globally. Canada has to constantly make sure that we're able to play at par.

I can certainly comment briefly in terms of our overall tax regime. Looking at the corporate tax rates, in terms of effective tax rates, Canada compares quite advantageously not just with the U.S. but also with global G7 competitors. I think we're in good stead in that regard.

In terms of skilled talent, Canada is doing remarkably well in terms of our engineering and technical talent. Again, as for entrepreneurial flair, our country's workforce is second to none in terms of expertise in that domain. We see this not just in Canada but around the world. Our engineers and our experts are consistently sought after to bring their expertise.

So there are many dimensions to competitiveness. I will not try, in my 30 seconds, to answer it fully. I would just reassure you—