Natural Resources Committee on June 21st, 2021

[Bertrand Masselot]

There are two or three reasons for that. First of all, when we are looking at the technology provider, it's the company Cummins—ex-Hydrogenics—based in Mississauga, where Aire Liquide has 19% of shareholding. It's Canadian technology and a Canadian project in terms of investment.

For sure, the abundance of relatively non-intermittent green energy through Hydro-Québec is helpful. The price of megawatt is helping, as well as subsidies that we had from the Minister of Finance of Quebec as well.

The location is very well positioned for the northeast corridor, and why not, later on, the Canada highway to Windsor, Toronto and more.

Last but not least, and important for us, it's the location where we have strong technical capabilities linked with the Université du Québec à Trois-Rivières. We have a Ph.D. working for us in this location. We have skills and we already had utilities in these locations.

We are already producing and liquefying, so we are back to the notion of basins, scale-up and making sure we have encore customers making this project viable and alive.

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

Thank you.

I'd like to ask Mr. Thomson the next question.

In your opening, you had two main recommendations. In your second recommendation, when you're looking at the life-cycle emissions, you were talking about how you want to make sure that in Canada we're going to be consistent with some of the North American standards.

I was hoping you could expand a little bit on that point.

[Ian Thomson]

Thank you, Mr. Weiler.

It's really very simple. Of the 100% of emissions coming out of a car, 75% of those come from the crude oil. You pull it out of the ground, process it and burn it. There's nothing you can do to take that fact away.

You could reduce the carbon intensity of the way you manufacture those fuels, but you could never take them to zero that way.

In it's comparable regulation, the renewable energy directive, the European Union said to obligated parties that they can do pretty much anything they want, but the credit they generate and the actions they take need to be proportionate to the life cycle. If we're going to fundamentally take all of the carbon—or most of the carbon—out of transportation, we can't focus just on the 25. We have to work on the 75. This might come as advanced biofuels, hydrogen, low-carbon hydrogen, renewable natural gas and electric. All of those things have to be part of it.

The Europeans quite literally said that they have to deliver their credits in proportion to those proportions. In Canada, its 75-25.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Weiler.

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

Thank you.

[The Chair, Liberal, James Maloney]

Mr. Simard, it's over to you for two and a half minutes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

I would like to ask Professor McKitrick a question.

Earlier, you were talking about a price on pollution and on carbon. In your presentation, you talked about a study on ethanol that you conducted from 2008 to 2012.

I don't know whether you have the figures, but having quickly looked at the issue, we came to the conclusion that the oil and gas industry had received federal government financial support of about $24 billion in the period from 2017 to 2020. As we studied the very recent allocations in the Department of Natural Resources, we see that, for the 2021-2022 year, an additional amount of $560 million has been set aside for reducing greenhouse gas emissions.

Knowing that the oil and gas sector is hugely supported by the federal government, do you not believe that there should be a change in strategy if we want to reduce greenhouse gases?

[Dr. Ross R. McKitrick]

I've done a study more recently on the definitions used for subsidies for calculating the kinds of numbers that you refer to. I would need to see more detail. The input-output tables use one type of definition, but other times people group in ordinary tax writeoffs and things like that.

As a general matter though, I don't support subsidies for oil and gas. I know the federal government put a lot of money into subsidizing the Hibernia oil platform, and I believe it continues to plan to support that platform. What you want is a neutral playing field for all the energy sectors.

The costs of reducing greenhouse gas emissions, we don't calculate them by looking at subsidies to sectors. They are calculated using economic modelling strategies that look at who bears the cost throughout society, including the increased price of energy that propagates throughout the entire economy.

[The Chair, Liberal, James Maloney]

I have to stop you there, Mr. Simard.

It's over to you, Mr. Cannings.

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

Thank you.

Mr. Lewis, I'm going to continue with where we left off.

You mentioned this new plant in Long Beach, California. I guess 25,000 barrels per day is the target for that plant. In terms of the scale-up, I know there are a lot of french fries produced every day in North America, but what is the capacity there for a feedstock to produce biodiesel from these sources in relation to the overall diesel market in North America? Is that possible, or where does that lie? I can see that you could have one plant in California. What does that scale-up look like? Is it truly [Technical difficulty—Editor]?

[Scott Lewis]

It's actually quite amazing.

We're seeing right now a significant expansion in the number of new facilities that are being built. The majority of them are being built by oil and gas companies that are pursuing more and more becoming producers of renewable fuels as well. Whether it's Marathon or Philips 66, Valero, they all have their own renewable diesel facilities. We are actually an independent, a merchant refinery, if you will. But it is becoming more and more a part of the integrated supply chain that gets blended with petroleum diesel and with biodiesel as well.

Right now, the places where these products are going are to the jurisdictions that are looking to have policies to reduce carbon the most. It really is about a carbon reduction that is carrying the weight and driving the investment. That market will be created.

In terms of the greatest interest, we know there are several majors that are looking to become net-zero emission petroleum companies or energy companies by 2040 and 2050. We've seen a significant drive around the globe to build more and more of these facilities. Neste is a Finnish oil company that is the largest producer of renewable diesel around the world. This is really about Canada carving out that the supply should be built here by ensuring that the demand is going to be here through policy.

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

Can I just interrupt? Sorry, I just want to get—

[The Chair, Liberal, James Maloney]

Mr. Cannings, you have about five seconds left.

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

I just want to make sure that the feedstock, the cooking oils or whatever, will be there to match the overall need for diesel that we have today.

Can that be 100%, yes or no?

[Scott Lewis]

No, it will not be 100%, but it's a feathering-in of a variety of different solutions to overall mitigate the amount of carbon that's being emitted through our existing infrastructure today.

[The Chair, Liberal, James Maloney]

Thank you.

We'll go over to Mr. Lloyd for five minutes.

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

Thank you, Mr. Chair, and thank you to the witnesses for being here.

My first line of questioning will be for our renewable fuels folks, maybe Mr. Lewis or whoever feels competent to answer the question.

I'm reading with a great deal of concern about buy America provisions and more protectionism from our biggest trading partner in the area of canola, which we know is a major feedstock for biofuels.

I wonder if you could give this committee the lay of the land. What is going on with the industry in regard to protectionism? What is the threat to our industry, and how is this going to impact the development of biofuels in Canada?

[Malcolm West]

Scott, do you want to take that?

[Scott Lewis]

Sure.

Right now, these products are moving quite freely throughout the different jurisdictions. The only thing that's really happening with these protectionist policies is that you're changing trade flows. It is the same amount of product that is going in to the various sectors, but it is being displaced. Trade flows are being moved, but so far, we haven't seen that as being detrimental to our industry.

Certainly, as we come out of COVID, we're seeing excessive demands for certain feedstocks. It's not being driven so much by biofuels as by overall demand from other sectors, including food and other things like that. It's amazing how the agricultural and waste industries are also expanding to meet those demands.

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

If you're forecasting into the future with the best information you have at hand, do you think Canada will continue to have fairly easy access in terms of developing an integrated biofuel supply chain with the United States, or do you think that's an area of some risk? What are the risks, and what can the Canadian government do to ensure that stays open?

[Scott Lewis]

Primarily, we have to rely on this as an evolving and adaptive industry in itself. We need clear policy to denote what the industry needs to do, and therefore, new feedstocks, whether it's cover crops, algae or a variety of other types of solutions, can come on board because we know that the demand is going to be there.

Therefore, we are very active in pursuing a variety of new feedstocks. We do not see that market as static. We see that it has the ability to increase and to meet the needs of the policies that are put in, but we need clear direction from government on policy to let us know that these are safe places in which to invest.

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

In terms of my next question, you know that Canada is quite a cold country. We have very volatile weather and some people have brought up the concern about cloud point. If you're raising the biofuel requirements, how is this going to impact the cloud point? To address that issue, are there any changes we need to make in terms of how our engines are made?

[Scott Lewis]

No. We certainly see with renewable diesel that it doesn't have any cloud point issues. Ours is able to be blended with petroleum or to be used as a straight renewable diesel 100 in diesel engines and we are able to meet the cloud points as required.

When we make sustainable aviation fuel, we have that all the way down to a cloud point of -55°. When you have renewable diesel, it's just different cuts that you can put. You can make boutique blends for boutique regions.

[Malcolm West]

There are no cloud point issues associated with ethanol.

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

That's excellent.

Mr. Chair, how much time do I have left?