Natural Resources Committee on April 13th, 2017

[Germain Belzile]

I would say that research that's been done, in maybe the last 40 years, in economics has shown pretty convincingly that industrial policy is not a good thing. In fact, the government is not better at picking winners than I am or anyone here is. In fact, the market is a process to find, as Hayek has said, what's right and what works. It's impossible to replace the market with government policy.

As just one example outside the oil and energy sector, when the airline industry was deregulated in the 1970s and 1980s in the United States, no one had imagined that airline companies would invent hubs. You don't fly direct now. You have a stopover somewhere. That makes flights much more efficient. The percentage of people in the flights is higher. The market discovered that. Regulators did not discover that. It's very easy to find many examples of people in different countries doing things in a certain way—we deregulate and we find somehow, very quickly, that there are better ways of doing things.

I should say that I agree with you that the government very often stifles companies. I didn't say it this way, but I would almost say to the government, get out of the way and things may be better if you do that. It does not mean, don't do anything. Create a regulatory environment—

[Shannon Stubbs, Conservative, Lakeland, AB]

The government should just set the rules.

[Mark Scholz]

We have an amazing story to share as a country. We have an amazing story to share about the way that we develop our natural resources. One of the things that's always good in a debate is really sticking to facts and reality, and in any sort of indication in terms of where our energy mix is going.... The IAA came out with a statistic that showed that by 2040 we're going to consume 35% more energy, and 75% of that's going to come from fossil fuels.

One of the things that I would really implore this committee to think about is where does the world want to be getting its resources from? Canada is a leader on so many fronts, in terms of our responsible stewardship with the environment. I go out to rigs as much as I can, in the most remote locations in western Canada. The level of detail and care that's taken in ensuring that those operations are done efficiently, environmentally responsibly.... There isn't even a single garbage bag that is left on site when our contractors and our operations leave. It is left in the most pristine circumstances, ultimately until the end of life for that well, when it's remediated to the point where you have that natural landscape again.

One of the things that I think is an opportunity as a nation-building exercise.... I wrote an op-ed a couple months ago about—

[The Chair, Liberal, James Maloney]

Mr. Scholz, I'm going to have to stop you.

[Mark Scholz]

Okay. I'll send you that op-ed.

[The Chair, Liberal, James Maloney]

You might be given a chance to go back to that in a moment.

Mr. McLeod, it's over to you.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you to the witnesses.

I was hoping to hear more about clean tech today. We don't seem to be hearing a lot of examples of what your organizations could do or should do, besides the government staying out of the way and things of that nature.

I come from the Northwest Territories. We don't produce a lot of greenhouse gas emissions. We're downstream from Alberta, so we live in constant concern of effects coming downstream in our waters and our different bodies that are out there. I attended meetings with people in northern Alberta, and they're concerned about what's happening on their lands too.

We do have communities in the north that have a lot of waste that they're producing, and no way to really get rid of it. We can bury it, but because of the permafrost it doesn't deteriorate. I really think that what you're doing at Enerkem could maybe be processes that we could look at in the north. In fact, maybe our committee could come and see what you're doing at your sites in Quebec and in Edmonton.

I'm curious at what scale your biorefinery process currently operates. Could you give us an idea of the volume of waste we're talking about, being produced at those two sites, and the amount of fuel and chemicals that are being produced at the same facilities?

[Marie-Hélène Labrie]

A standard Enerkem system like this one, which is the one in Edmonton, takes 100,000 dry metric tonnes of garbage and produces over 40 million litres of ethanol. This is its annual capacity. The volume in the wet basis, because usually the garbage is mixed with wet materials, is more like 200,000.

It can be a mix of urban residues, forest residues, or agricultural residues. The facility can take mixed garbage as well, not only one stream. The municipal solid waste is already heterogeneous, it's already mixed, but it can also use forest residues. Those two streams can come together in the system and convert into those chemicals.

[Michael McLeod, Liberal, Northwest Territories, NT]

I guess it's safe to say that the lifespan of the landfills are extended.

[Marie-Hélène Labrie]

Totally. In the case of Edmonton, today, with recycling and composting, they are achieving a waste diversion rate from landfills of about 55%. That's very high.

With our facility, this rate will increase to 90%, so with only 10% still going to landfills.

[Michael McLeod, Liberal, Northwest Territories, NT]

Could you maybe expand on some of the suggestions you made to help create a better environment for clean technology in the area that you're in, and that the federal government could assist in?

[Marie-Hélène Labrie]

Yes, I can be very quick. The first one was on growth capital support. They were very good at putting money in R and D. The thing is that if we only focus on helping R and D, and we don't look at it from a holistic approach, we create these companies that remain small. They don't create jobs, they don't create wealth, and then they get purchased by foreign companies. There is a risk that this IP will leave Canada if we don't look at the full chain of financing, from the R and D lab to pilot and demonstration to full commercial scale.

I'm not talking about subsidies. I'm talking about all kinds of supports. They can be regulatory, fiscal, or—when I talk about growth capital, when those companies are post-demonstration and are ready to really expand—in the form of loans, loan guarantees, or equity. At BDC that's what they do—equity investments—but sometimes they get focused on the first rounds, which are less risky, and then those companies stall. They cannot grow, and then they get purchased by Chinese investors or investors here in Canada.

Sustainable Development Technology Canada, SDTC, has really been a vehicle to grow those companies. They are helping our natural sectors. They work a lot with COSIA and others. We're building great companies, but we don't take them to their full potential, where they can create jobs. That is the main issue.

On market access and market demand, in the fuel sector the renewable fuel standard is really a key regulation to provide market access to biofuels in the fuel space. To date the federal mandate is at 5% for ethanol, but we're already over-compliant, and governments around the world are increasing mandates because we need a green liquid support. We're not going to switch to electric cars all of a sudden. We have millions of cars that are running on liquid fuel. Our infrastructure is liquid, our customers are the refiners, and they buy our products. It's also an oxygenate for fuel, so it replaced MTBE. It really has a use.

The last one was on the eco-fiscal side—

[The Chair, Liberal, James Maloney]

I'm going to have to stop you there, unfortunately.

Thank you.

Mr. Strahl, we'll go back to you.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Thank you, Mr. Chair.

I just have to quickly address the comments by Mr. McLeod. Obviously he doesn't like what he's hearing from some of the witnesses today. He mentioned there is not much in the way of GHG emissions in the Northwest Territories. In fact, the latest information from the Government of the Northwest Territories shows that the average per capita GHG emission for the Northwest Territories is 50% higher than the national average, as it obviously would be, given the very cold and remote nature of those communities. It's simply not true that GHG emissions are low in the Northwest Territories, so I don't really know where that came from.

Mark, I wanted to give you an opportunity. You were going to talk to us about the post you had written—

[A voice]

You're talking about me.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Sorry, Mr. McLeod, I do have the floor.

Mark, I was going to ask if you could continue with your answer to Ms. Stubbs. You got cut off there by the time, so could you just expand on some of your answer?

[Mark Scholz]

I'll be brief. I just wanted to articulate that I think it's a real opportunity for us as a country to look at a nation-building opportunity. You go back to the way our country was built in the late 1800s and early 1900s when this country really came together to build what was effectively a project that many people thought wasn't possible. That was the national railroad. It linked eastern Canada to western Canada in a way that really put the two sides of our country together economically, socially, and politically.

We can do that same exercise with what we would consider, in today's age, the modern transportation corridor, that being the pipelines. One of the things that I think we have to understand as a country is that 41% of Canadian oil was imported. We spent hundreds of billions of dollars layering the pockets of oligarchs, autocrats, and countries that have no recognition of human rights or environmental standards, and as Canadians we should be so proud to ensure not only that we can produce it responsibly but consume it responsibly here in Canada.

It's not to say that we want subsidies; we want the producing regions of our country to be given an opportunity to get to market. If we can get our resources to market, into Montreal refineries and across into eastern Canada, we can get it offshore and into other countries. That really is our opportunity. One in eight jobs in Ontario is the result of the oil sands. Hundreds of jobs and businesses are dependent on the oil sands and the oil and gas industry in the province of Quebec.

One of the most alarming statistics is that 90% of Quebec's oil is imported, and 37% of those imports are coming from some of the lowest environmental regimes when it comes to their oil and gas environmental record. We can do a much better job. We have a huge opportunity as a country. It's a win-win opportunity right across the board. Not only that, it will help us ensure that, as we transfer to greener technologies, we're not losing sight of the reality that our economies continue to grow over the next decades, if not centuries, on fossil fuels as we continue transition to greener types of energy.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

The University of Ottawa's Institute of Fiscal Studies of Democracy calculated that there were 147 different programs with interchangeable names intended to foster innovation, and we see more in the latest budget. Do you not agree with their take-away that, if more government programs and more government money was the answer, perhaps this would have been the greatest success story in Canadian history? Instead we continue, under every stripe of government, under every budget, to try to foster innovation, and obviously more money in more programs hasn't gotten the job done so far.

[Germain Belzile]

I agree. In fact, I think that the biggest problem we have right now is a fiscal problem, especially in light of what's probably going to happen in the United States in the next few months. The Republicans have promised to reduce marginal tax rates for personal marginal but also marginal tax rates on profits, and we, as Mark has said, have seen a lot of money going to the United States. Innovation is not accelerating in Canada because of that, because we're putting less money than we could in research and development. I think that the big problem we have is a fiscal problem right now. It's not enough money, in fact, through subsidies given to companies or all the rest. I think the biggest problem we have right now is that we are in fact creating an incentive not to invest with high tax rates.

[The Chair, Liberal, James Maloney]

Thank you.

Mr. Tan, I believe we're going to go back to you for five minutes.

[Geng Tan, Liberal, Don Valley North, ON]

Thank you.

Ms. Labrie, you mentioned that you can use your technology to use the residue from the pulp and paper industry to produce biofuels—I guess mostly from pulp in the pulp process. I worked in pulp and paper for a few years, so I know in that the pulp mill the people burn that residue—they call it black liquor, actually—in the recovery boiler to produce steam to drive a turbine and generate electricity. The amount of electricity generated in that way is always sufficient, and more than sufficient, to meet the demand for the whole pulp mill. But with your technology, the residue is gone. The pulp mill will find a way to get enough electricity to drive their plant, and probably even drive your plant as well, on site. I'm trying to get the big picture of the costs between these two approaches, and the carbon footprint when you compare these two approaches.

[Marie-Hélène Labrie]

I think you're talking about electricity production or heat and power. Is that what you're referring to?

[Geng Tan, Liberal, Don Valley North, ON]

Yes.

[Marie-Hélène Labrie]

We're in the chemical business, so it's a little bit different. We produce liquid fuels. Those are two different things. We don't produce electricity. That's the main—

[Geng Tan, Liberal, Don Valley North, ON]

That's my question. Before your technology, the pulp mill had enough of the residue to burn to produce electricity, but once they apply your technology, all the residue is gone, so there's no source of energy, no source of electricity. Where do they get the electricity from? When you compare your approach and their way, probably they have to buy electricity from a coal plant or even a gas plant. They produce CO₂ in that way. How do you compare these two approaches?