Natural Resources Committee on March 22nd, 2021

[The Chair, Liberal, James Maloney]

I would like to call this meeting to order.

This is meeting 17 of the standing committee. We're here today to discuss the main estimates and supplementary estimates (C).

I'd like to welcome the minister and thank him for taking the time to join us.

Before we jump into things, there's something else I would like to say. It's fitting that the minister is here today. As I'm sure all of us in this call have seen over this last week, our colleague, Mr. Lefebvre, has decided he will not be seeking re-election, whenever that date happens. It's probably two or three years from now, but nonetheless, he has made that decision now. It also means he is no longer serving as parliamentary secretary to this minister and to this committee.

I just want to take this opportunity to thank him and to express my appreciation, and to express appreciation on behalf of not only everybody on this committee but also everybody else who has worked with him. I've been working with him since 2015, and it's been a pleasure. I am very grateful for everything he's done.

On that note, Minister, again, thank you very much. I'm very grateful, as are all the members, that you are generously providing us with your time today. That goes for your departmental officials as well, whom we'll have for the second hour.

Rather than consume any more time in this first hour, when time is so precious, I will spare us all my usual speech on the rules. Everybody here knows them very well.

Minister, I will now give the floor to you.

[Seamus O'Regan, Liberal, Minister of Natural Resources]

Thank you, Mr. Chair.

Hi everyone. I'm joining you from the island of Newfoundland—the ancestral homeland of the Mi'kmaq and Beothuk peoples.

It's a little over three months since I last appeared before this committee. The future looks brighter today. Analysts predict a buoyant year for most commodities. And vaccine roll-outs are accelerating. We are getting out of this together.

Workers in our natural resources sector are leading Canada's economic recovery, with four consecutive months of growth in mining, oil and gas, including 6.1% growth last quarter. Oil prices are rising sharply. Crude oil exports are at pre-pandemic volumes. Lumber is at prices never seen before—the highest they've ever been, at $1,035.

The future must not leave any energy worker or any energy-producing province—like mine—behind. It must have indigenous peoples as full participants and partners in the development of Canada's natural resources, including the critical minerals that are vital to a low emissions future. Canada is well positioned with our strengthened climate plan, with 64 new initiatives and $15 billion for everything from renewable energy and smart grids to retrofits, EVs and hydrogen. Canada's proud energy workers will help us get there, thanks to their ingenuity, their expertise in complex engineering, and their huge clean-tech investments.

Of course, there are challenges. First, we remain unhappy with President Biden's decision to revoke Keystone XL's permit. We made that clear during our recent Canada-U.S. summit, directly and clearly. Second, we are working tirelessly on Line 5. I'll say to this committee what I said to the Canada-U.S. special committee: The operation of Line 5 is non-negotiable. People will not be left in the cold.

However, the relationship with our biggest client—the United States—is far greater than any one project or one piece of energy infrastructure.

You will not find any two energy sectors—or economies, for that matter—as highly integrated as ours, with shared supply chains, 70 pipelines and nearly three dozen transmission lines crossing the border. Our American partners understand this simple fact: The U.S. needs Canada. They need our oil and gas. They need our critical minerals. For that reason, the President and the Prime Minister agreed to a road map that recognizes the need to protect our highly integrated supply chains and energy infrastructure.

President Biden wants to work with our Prime Minister to revive our economies, end this pandemic, and build back better as we lead the world in confronting the climate crisis. Canada is ahead of the curve in this regard, with measures such as pollution pricing, phasing out coal-fired electricity generation by 2030, and reducing reliance on diesel in remote indigenous communities.

Programs reflected in the main and supplementary estimates we're discussing today will help us get there.

The main estimates provide $2.2 billion in this fiscal year. That's an increase of $859 million. A big chunk of that—just under $570 million—goes to the emissions reduction fund. This is part of our COVID response plan, which included $750 million over seven years to reduce onshore and offshore methane emissions.

Another $84 million for this year and $309 million for 2021-22 will fund the home energy retrofit initiative, part of our $2.6-billion seven-year pledge to help homeowners lower monthly heating bills while doing their part to save the planet—saving money and lowering emissions.

We are also creating jobs in the forest industry as we deploy nature-based climate solutions, such as planting two billion trees over the next 10 years and protecting our forests from insect infestations and fires.

$83 million is earmarked in the 2020-21 budget to fund forestry programs to support innovation and the development of new products and processes, especially in the emerging bioeconomy, to increase market opportunities here and abroad, and to encourage the participation of indigenous communities and businesses in this sector.

Finally, I'll draw your attention to the $22 million in 2021-22 to fund programs aimed at tapping northern Canada's mining potential, especially in the area of critical minerals.

Mr. Chair, I'm optimistic. We have set a clear path to a low-emissions future, and actions like the ones I've outlined today will help us double down on our common mission: net-zero emissions by 2050, a national economy that continues to create good jobs, and a low-emissions future that leaves no one behind. I know that's a lot. It's ambitious, but we're Canada and that's what we do.

Thank you. I am ready to answer your questions.

[The Chair, Liberal, James Maloney]

Minister, thank you very much, particularly for staying right on time.

First up at the plate, I believe, is Mr. McLean, who is in the room, if I'm not mistaken.

You have six minutes, sir.

[Greg McLean, Conservative, Calgary Centre, AB]

That's correct. Thank you, Mr. Chair.

Thank you, Minister, for coming today and answering questions on the estimates.

I noticed in your testimony last week before the Canada-U.S. relations committee that you were speaking at length about issues facing the energy industry in the country, and where we are failing and continue to fail in advancing key infrastructure. Let me ask a pertinent question, because you referred to it in your speech. It was about saving the planet and lowering emissions.

I'll refer back to your speech and the testimony you gave last week, in which you noted that Canada is a capitalist country. You said, “We drive investment. We provide the parameters and the certainty in order to drive investment. It will be the marketplace that makes sure this is a sustainable change to a lower emission future.”

Last week, Chevron Canada decided that its investment in Kitimat LNG, on which it has spent $3 billion over the past seven years, cannot find a bidder. That project alone would reduce carbon emissions around the world by about 40 megatonnes per year—almost 5% of Canada's emissions alone. The company is withdrawing because it does not see an actual future in Canada in which it has transparency on outcome.

When a company like Chevron, in defiance of what you said at the committee last week, is actually saying it doesn't see a pathway here and nobody else can take its piece off, how can you actually move towards saving the planet by getting these emissions-reducing projects built?

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Mr. McLean, given recent developments, I have to ask a question, because it's important. Everything I'm talking about and everything I'm doing is pertinent to the question that I'm going to ask you, which is, do you believe that climate change is real?

[Greg McLean, Conservative, Calgary Centre, AB]

I'm sorry, Minister. I think I asked you a question first, but my answer is, yes, I believe climate change is real.

Thank you.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Good, because that's not altogether clear after this week.

[Greg McLean, Conservative, Calgary Centre, AB]

I've been very clear on that, Minister. I think you know that.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Yes, Mr. McLean. I agree. You have been very clear. It's just that with recent developments, it's a pertinent question because it undermines—

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

On a point of order, Mr. Chair, it's not up to the witnesses—even though, with respect, they are ministers—to ask questions of members of our committee. I'd just ask that you restore some order here.

Thank you, Mr. Chair.

[The Chair, Liberal, James Maloney]

Thank you for that. I think he was just trying to get clarity on the question.

Carry on, Mr. McLean.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

I don't think it's a question anybody should be frightened of.

[Greg McLean, Conservative, Calgary Centre, AB]

I'm sorry. Is the question mine? The minister hasn't answered the question I posed to him yet.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Mr. McLean, what I would say is this. Market certainty is absolutely the only way we're going to achieve our climate goals, so where we can provide that certainty, where we can provide that institutional certainty, that's how we will draw investment. I'm convinced of that. It's the only way to go. It's the reason we agreed to a price on pollution. It's the reason we have been transparent about the clean fuel standard. It's the reason we've been above board on all of these things.

Most importantly, when your number one product is going 98% to one customer and that customer has changed demonstrably its demands for that product, you have to move with it. You don't look at them and say they'd have to be brain-dead in order to think the way they think or to—

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Minister. The question is not being answered. I'm asking if you can create the business confidence to have companies like Chevron or their replacements actually invest in emission-lowering projects in Canada. If there is no transparency, they're not going to put their money here. Money has left Canada. Two hundred billion dollars has left Canada under your government's tenure here, for good reason. Can you explain that, please?

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

First of all, Mr. Chair, I think the member is being selective, perhaps, in the investments he is looking at, and what he's choosing. As I've stated to the member on several occasions, I am proud of the fact that we have achieved so much in such a short amount of time. With TMX, we approved it and we're building it. Seven thousand jobs have been created so far for Line 3. We approved it and another 7,000 jobs were created. We approved GTL in 2021, and there are thousands of jobs being created there.

Things are being built. Investments are coming in, LNG Canada among them. We will continue down this path because it's working.

[Greg McLean, Conservative, Calgary Centre, AB]

Let's go over those. Minister, I'm glad you raised those, because TMX was approved before your government came into power. You had to reapprove it because you broke it. You broke it; you bought it. Okay. Seven thousand jobs were actually being undertaken with the previous proponent of that project, which was a private-sector proponent who left Canada. Your government had to pay them to leave Canada because you were going to face a NAFTA challenge. Therefore, I challenge that you actually have those jobs. I challenge that there's actually investment coming into this country. It's government investment as opposed to private-sector investment, which is negative at this point in time.

In the case of Keystone XL, that's billions of dollars and thousands of jobs that have left Canada. As for Teck Frontier, again, Minister, I don't know how that failed, but your cabinet didn't seem to cross the line. I need you to start advocating more for this.

My colleagues and I will do anything to help you, Minister. This is a minority government. We'd like you to get these projects over the line to build jobs in Canada and bring investment to Canada. Tell us how we can help you get these projects over the line with your cabinet colleagues, who don't seem to see things the same way you do when you speak.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

I would not agree with that. My cabinet colleagues and I are as one, as we should be. We are very clear that what we want to do, what we need to do and what the marketplace is demanding that we do is find ways to lower emissions.

I have to contest your analysis on TMX. You guys, when you were in government, could not get it built. One of the things we have been able to do is to embrace jurisprudence and, I would say, the world as it is and not as we wish it to be. It's a world in which climate change is a reality, a world in which the courts time and time again have said, about TMX, “You are not building it the right way, and we're vetoing it at every step.”

If you want to provide the market with certainty, you embrace the world as it is, because people deal with facts, and the fact was that the courts time and time again were saying we were not doing it the right way. Goodness knows, we tried on a couple of occasions and finally landed in the right place by making sure that we sat down with respect with indigenous governments, first nations, Métis and Inuit, in order to make sure good projects get built. They get built only if we do that in a good way.

[The Chair, Liberal, James Maloney]

Thank you, Minister.

Thank you, Mr. McLean.

Mr. Weiler, we now go over to you for six minutes.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, Mr. Chair.

Thank you, Minister, for coming to join our committee again today to look at the estimates.

Minister, the International Energy Agency's “Oil 2021” report notes that the pandemic has caused a dramatic downward shift in expectations for oil demand over the next six years, and that the downturn has been so sharp in advanced economies with traditionally high vehicle ownership and oil use per capita that it is not expected to return to pre-crisis levels. This is also coming from an agency that has been very conservative and has greatly underestimated the rate at which the energy transformation is taking place.

Minister, what will the new normal look like for the Canadian energy sector, and what is our government doing to prepare for it?

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

I spend an awful lot of time with the International Energy Agency's executive director, Fatih Birol, and sit on a special commission that he and I helped set up, the global commission on a people-centred recovery. It basically comes down to something I've said before at this committee is a priority of mine: inclusion—the inclusion of energy-producing provinces like mine here in Newfoundland and Labrador, and of the workers who work in the oil industry here in this province, as well as in Alberta and Saskatchewan.

The pandemic has fundamentally changed things. There are shifts happening here in Canada, around the world and in the markets that point to very clear signs. The normal of the past won't be the normal of the future. Lowering emissions, low-emitting energy—that's the ball game. The IEA, in its “Oil 2021” outlook, forecasts a dramatic downward shift in expectations for oil demand over the next six years. Oil production capacity will slow. Today, we're seeing investment in expansion plans being scaled back around the world.

One of the few areas where demand will grow will be Asia, which is great news for our investment in TMX. Oil will continue to be part of the mix, but it will be a declining part of the mix. The world is moving in a new direction. Not leaving any energy worker behind means that Canada has to be at the forefront of that effort in investing in new technologies, in the fuels of the future and in carbon capture, hydrogen, biofuels, SMRs and renewables. Like the late Walter Gretzky said, you “skate to where the puck is going”.

That's how we double down on our common mission. That's how we get to net-zero emissions by 2050. That's how we keep growing the economy and keep a prosperous economy creating good jobs and a low-emissions future that leaves no one behind. I emphasize that last point emphatically.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

To touch on one of the topics you brought up, there have been several important developments with respect to hydrogen since you last appeared at our committee. We announced our hydrogen strategy. We signed a deal with Germany recently on clean energy. We announced $1.5 billion for the low-carbon and zero-emissions fuel fund. That's just to name a few.

I know that locally, in my riding, Carbon Engineering received a large NSERC grant to study water electrolysis, and a company from my riding is pursuing an offshore wind project—a large one that would produce hydrogen through this means as well.

Minister, given the investments happening around the world in this space, are we prepared to compete internationally and take advantage of the assets, geography and talent that we have in this country?

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

That's the essential bit, to be honest with you. I come from a province where we have one of the greatest migrations internally in this country. At a time when flights are decreasing, we are actually increasing the number of flights and putting back into place direct flights to Toronto—mainly from Deer Lake—because of the number of workers we have in rural Newfoundland in particular who are flying back and forth every day of every week to work in Alberta and Saskatchewan, sometimes B.C., as rotational workers in the energy industry, but who are making sure they come back here because they want to raise their families in Newfoundland.

It is a lot of going back and forth, and we lose some of these workers. We don't just lose them within Canada; I can take that, obviously, but it's around the world. We're losing really high-calibre, international-grade talent in our energy industry. We can't have that. We have to make sure, where we can, that the government steps in to make sure we bridge it until the marketplace takes over in a meaningful way, and it will, in areas like hydrogen.

The hydrogen strategy for Canada lays the foundation for a huge opportunity and to build back better from the COVID-19 pandemic. It relies on Canadian expertise throughout the entire value chain to build new hydrogen supply, distribution and end uses. Those in turn will support a low-carbon energy ecosystem with benefits that could begin right now, strengthening our economic competitiveness to grow export potential, attract investment, create good, sustainable jobs across the country, and drive down emissions in sectors like resource extraction and processing in freight, transportation, power generation and manufacturing. There are also big opportunities in the production of steel and cement, where electrification may not be the best choice.

Low-carbon, zero-emission hydrogen has the potential to reduce our annual greenhouse gas emissions by up to 45 million metric tons a year in 2030. That's a huge potential.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Maybe I'll ask a last question here. In the fall economic statement, there was an announcement of $2.7 billion over seven years for a home energy retrofit program. As buildings are becoming more efficient, we're likely to have a major boom in this space. I'm wondering what we are doing as a government to ensure we have the skilled labour force that's going to be necessary to meet the increased demand for energy efficiency and for green building going forward.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

There is a reason we are particularly keen on retrofits. As I think I told the committee before, when I initially took this portfolio, they were not top of mind for me, but after a couple of briefings I became a convert. If we get home and commercial retrofits right, we will go about one-quarter to one-third of the way towards our Paris targets, which is phenomenal.

What I like about retrofits especially, having grown up in a small town in Labrador, as Ms. Jones knows.... Back in my day, whenever a federal government came out with a program, it was always something that didn't necessarily affect me, whereas retrofits affect the home you live in and the building in which you work. They are inherently local.

I think we have $84.45 million in supplementary estimates (C) funding and $308.6 million in the main estimates. Part of the—