Evidence of meeting #53 for Natural Resources in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was companies.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Mark Scholz  President, Canadian Association of Oilwell Drilling Contractors
Germain Belzile  Economist, Montreal Economic Institute
Marie-Hélène Labrie  première vice-présidente, Affaires gouvernementales et communications, Enerkem

1:20 p.m.

NDP

Richard Cannings NDP South Okanagan—West Kootenay, BC

Could you explain the tax exemption you talked about that you would like to see for biofuels? I'd like it to be clear in my mind which tax you were talking about, what's already exempt, and the money you would like with regard to that.

1:20 p.m.

première vice-présidente, Affaires gouvernementales et communications, Enerkem

Marie-Hélène Labrie

It's the 10¢ fuel excise tax. This exemption was used in the past to kick-start the first-generation ethanol industry. Then it was replaced by a producer credit program, which does not exist. We could not really benefit from it, because we were really the second wave of the biofuels sector. Today the natural gas sector and the propane sector benefit from that exemption when they use their resources as a transportation fuel. Liquefied natural gas is an example.

1:20 p.m.

NDP

Richard Cannings NDP South Okanagan—West Kootenay, BC

There's no excise tax paid on those...?

1:20 p.m.

première vice-présidente, Affaires gouvernementales et communications, Enerkem

Marie-Hélène Labrie

On their products, yes, exactly. We would like to see the same—

1:20 p.m.

NDP

Richard Cannings NDP South Okanagan—West Kootenay, BC

So you would like to see no excise tax, not—

1:20 p.m.

première vice-présidente, Affaires gouvernementales et communications, Enerkem

1:20 p.m.

NDP

Richard Cannings NDP South Okanagan—West Kootenay, BC

You wouldn't bump it down to 9% if it were just 10% biofuels, or...?

1:20 p.m.

première vice-présidente, Affaires gouvernementales et communications, Enerkem

Marie-Hélène Labrie

On the portion that is the biofuel, that 10% would be applied.

1:20 p.m.

NDP

Richard Cannings NDP South Okanagan—West Kootenay, BC

Okay. That's one thing I wanted to clarify.

Mr. Scholz, I've had representatives from the drilling industry come into my office and talk to me. I don't know if they were part of your group or some other group.

1:20 p.m.

President, Canadian Association of Oilwell Drilling Contractors

Mark Scholz

Take names. I want to find out who they are.

1:20 p.m.

Voices

Oh, oh!

1:20 p.m.

NDP

Richard Cannings NDP South Okanagan—West Kootenay, BC

I would have to look back in my book.

They brought up issues around orphaned and abandoned wells and the work that those contractors could get if the government really tackled that problem. The other thing they brought up was the possibility, which we've heard is out there, that we could use these abandoned wells for geothermal energy production. Your people would be keeping good jobs in that shift to a renewable economy.

I just want to know if those are issues that are on your radar.

1:25 p.m.

President, Canadian Association of Oilwell Drilling Contractors

Mark Scholz

On the geothermal bit, it is on our radar, but I don't have a lot of information or expertise on the process of converting an abandoned well into geothermal. I know the Alberta government has been doing some work with some companies on that, but I don't really have any details. Having said that, it's a great idea. We should absolutely be looking at all avenues within the oil and gas sector to look at pivoting, and to get opportunities like that to move toward geothermal or renewable energy. Our position would be that it's a good idea for jobs, and it's a good idea for my members. We're not going to stand in the way of that.

In terms of the orphan well perspective, this is a very difficult issue. This is a black eye on the industry and the Government of Alberta. I certainly saw, within the budget, that $30 million went toward the Alberta government to support efforts in remediating some of those abandoned wells. I don't have all the information, because it's a side of the business with which I'm not familiar. Certainly, when our customers come and ask to abandon wells, we send in that equipment to do that work. We would have to look at the regulations in terms of how we improve that record. I agree that it's something that absolutely needs to be improved.

When you look at, for example, North Dakota—and I don't have a 100% degree of expertise on this—the state abandoned two wells in the past 10 years, and North Dakota doesn't come close to the environmental regulations we have. Why is that the case in that particular area?

Let's not reinvent the wheel. Let's look at what the best practices are internationally of how we can do a better job on this file. We certainly have not done a very good job.

1:25 p.m.

NDP

Richard Cannings NDP South Okanagan—West Kootenay, BC

Thank you.

1:25 p.m.

Liberal

The Chair Liberal James Maloney

Mr. Tan.

1:25 p.m.

Liberal

Geng Tan Liberal Don Valley North, ON

Mr. Belzile, you mentioned something in your presentation about the risk and the de-risk in the adoption of new technology on the environmental side. I guess your idea can be extended to clean tech and other areas, as well.

You suggest the government should stay away from providing funding. For many start-up companies and for many innovative technology companies, they're just at the beginning, so without funding from the government—federal, provincial, or whatever—they cannot go anywhere. They cannot even survive.

I believe it is the obligation of the government to support new innovations or new technologies. At the same time, though, the government does not want to waste money, because it only wants to support or fund the projects that have potential, or will bring benefits to Canadians in the future. It doesn't want to waste money and, more importantly, it doesn't want to waste time, because a few years of time means a lot in maintaining our leading edge in global competition.

I asked a similar question before, but I did not get a good answer. I hope I can get a good answer from you, even though you think the government should stay away. If the government has to provide support or funding, in your opinion, where can the government get the expertise to evaluate or validate those proposals from industry to make sure it is doing the right thing?

1:30 p.m.

Economist, Montreal Economic Institute

Germain Belzile

I maintain what I said earlier, which is that the government does not have the expertise to pick winners. Neither do I, and neither does anyone here, because you would need to be able to predict the future.

There are many examples of governments making bad choices with an industrial policy. On the Minitel in France, for example, which was supposed to be better than the Internet, well, it's not, and it's not there anymore. What I think the government should do is create, through legislation, clear incentives for companies to do research and development, unless there are really particular problems in the financial industry that prevent companies that have good ideas from getting financing for these ideas. In that case, maybe direct help could be warranted, but I don't think it's the case. In fact, I think we have a lot of risk capital. That's not a problem, in fact. I think it's simply a bad idea for the government to decide which technologies we will be or should be using.

This being said, it does not mean that the government should not do anything. It should, I believe, simply create, through legislation, incentives for companies to do the research. They're already doing research through COSIA, for example. In fact, companies are sharing the results of the research they're doing. If I'm not mistaken, companies are even abandoning their patents, in fact, and the royalties they could get from their research, because they simply want to share. They know they're in the same boat.

The government certainly has a role, but I personally believe that in most cases the government creates risks for companies. In fact, it's not de-risking but increasing the risks. I gave a few examples, such as overly long environmental assessments of projects without any certainty. Eventually, if it's a political decision, a company can spend hundreds of millions of dollars in a project and have all the permits.... There's one example in Quebec, not a federal government one. A mining company in northern Quebec wanted to open a uranium mine not that long ago. They got the 22 needed permits to do it, but the government intervened finally and decided, “Well, let's put a moratorium on that.” In fact, they're in court right now.

That's a major risk. In fact, I personally believe that we will not be seeing any other investments of these types in Quebec for a while. I think the government can do many things, but the first thing a government should do is make sure that it's not preventing the implementation of better ways of doing things.

1:30 p.m.

Liberal

Geng Tan Liberal Don Valley North, ON

Thanks, but remember that the government is the policy-maker. They create the proper environment or atmosphere for free competition, for industry to take a role, but at the same time they have to give direction. That's the job of the government.

I want to ask Ms. Labrie a question. I only have one question. I will come back in the second round.

Your company has converted municipal solid waste into biofuels and the green chemicals. That reminds me a bit of a company called Responsible Energy. They used their technology, the plasma torch, at 5,000°C, basically to break down all the molecules of organics to make their biofuels. What is the similarity between your technology and theirs?

1:35 p.m.

première vice-présidente, Affaires gouvernementales et communications, Enerkem

Marie-Hélène Labrie

Enerkem is the only one that can produce ethanol and methanol using full solid waste. Our process is different from what you are referring to, in that you are referring to plasmafication, which operates at very high temperatures, more like 4,000°C or 5,000°C. We operate at low severity. We have our own process to crack this solid material and transform it into a synthesis gas.

Then, not only is our process producing that gas and burning it in an engine to produce electricity, it is converted into liquid products by interacting with catalysts. We produce methanol and then ethanol. Methanol is produced from natural gas. Our gas can interact with those catalysts that are today producing methanol from natural gas, and then we convert it later with other catalysts. In five minutes, the solid material—this garbage mix of diapers, old pairs of shoes, plastics that are non-recyclable, pizza containers, and whatever—is converted into methanol or ethanol.

It's different. Ours is integrated. I haven't seen any plasma gasification that can convert to liquid chemicals. It usually produces electricity.

1:35 p.m.

Liberal

Geng Tan Liberal Don Valley North, ON

I guess that's at lower temperatures.

1:35 p.m.

Liberal

The Chair Liberal James Maloney

Mr. Tan, I'm going to have to stop you here.

1:35 p.m.

première vice-présidente, Affaires gouvernementales et communications, Enerkem

Marie-Hélène Labrie

It's slower, but we also use catalysts to convert to liquid products, rather than a gas product.

1:35 p.m.

Liberal

The Chair Liberal James Maloney

I'll come back to you later in the agenda.

Go ahead, Ms. Stubbs.

1:35 p.m.

Conservative

Shannon Stubbs Conservative Lakeland, AB

Thank you, Mr. Chair.

I just want to take the opportunity to make clear that there is not a consensus around the table, among the members of Parliament here, that it is the role of the government to give direction to the private sector, given that we are not in a command-and-control economy. I think it's been clearly articulated, particularly in regard to the subject we are discussing, that it is the private sector that has to lead innovation. In many ways, government actually stifles the private sector and the combination of their policies and added costs can result in the very opposite thing that they say that they care about, by making these companies that already have a track record—in the case of 2016, a $2-billion investment in R and D across the Canadian energy sector with $1.45 billion of those private sector investments coming specifically from oil and gas and oil sands companies. It's very clear that if the government makes things more difficult for those companies, therefore, they will be less able to invest in innovation and R and D and continue to lead the world, as has been articulated effectively.

Just on that note, I would invite both Mark and Germain to make any comments you might want to make, specifically about the impact of a lack of clarity, for example, in Canada's case, regarding four major regulatory reviews that have not yet been completed. This is in addition to the bizarre spectacle of a government that seems to be driven by the social licence concept. On the one hand, they do things like talk about actively phasing out a world-leading energy sector while funding automotive and aerospace companies and on the other hand, they talk about increasing the costs by reducing expense allowances for oil and gas exploration in Canada.

1:35 p.m.

President, Canadian Association of Oilwell Drilling Contractors

Mark Scholz

Do you want to take a stab at that one first?