Evidence of meeting #107 for Natural Resources in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was tolls.
A video is available from Parliament.
Liberal
The Chair Liberal George Chahal
We are back.
Mr. Boulerice, I'll hold your time for a second.
If you could ask your question so that it goes to the interpreters, then we'll go from there.
NDP
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
After my opening remarks, Mr. Gooderham, I asked you the following question.
You presented us with a net-zero plan for 2050, which includes a significant drop in oil production of 50% by 2030 and 80% by 2050. Today, we are studying the consequences of the Trans Mountain pipeline purchase and expansion, which triples its capacity and adds 600,000 barrels a day to oil production.
In your opinion, how can the purchase of a pipeline to triple oil production be compatible not only with the Paris Agreement targets, but also with the plan you have laid out for us?
Lawyer (Retired), As an Individual
All right, I think that part of the answer is to link it to the broad question of your meeting.
A moment ago, I think that Mr. Tombe said that risks to pipeline utilization lie in the future, and one would be, in effect, I would suggest, the level of global oil demand. If we see a drop in global oil demand in line with the IEA 1.5°C scenario, or indeed the Canada Energy Regulator's global net-zero scenario, global demand will drop dramatically between 2030 and 2040. Exactly how that translates into the utilization of the TMX pipeline and the valuation of it, I'm not in a position to answer, but it would seem to me that it is an extraordinarily dramatic change in circumstances.
For that reason, when I began my submission, I commented that I did not think that the existing legal framework is adequate to address the extreme gravity of the challenges we face. I'm looking at two challenges. One is the climate challenge and the requirement for very dramatic action in the very short term, and the other challenge is the economic challenge, because, if we respond to that, it will have a dramatic effect on many, many aspects of the Canadian economy and the oil and gas industry. I don't discount the seriousness of those impacts, so I'm saying that we should have our eyes fully open to at least consider the possibility that the world will respond within time to the crushing impacts of climate change that are coming upon us.
To conclude my answer to you, the global carbon budget for 1.5°C is about 207 billion to 270 billion tonnes of carbon. That's all that's remaining to allow us to stay within 1.5°C, and that will be exhausted within the next seven years. After that, all emissions from global fossil fuel production will go into the atmosphere. I mean, it will go on after 2030 at some rate, some level, even declining. All of that's going into the atmosphere, and it will all be driving the temperature above 1.5°C, which means that, if we ever want to get back to a safe level of warming in the world, we will have to have massive capacity to remove carbon from the atmosphere. Essentially what we're doing at the moment is deferring the cost and possibilities of that to our children and grandchildren. After 2050, they will pay the cost if it's feasible.
It seems to me that a true economic analysis would take these two problems and look at them together to truly understand what it means if we keep producing more oil.
I hope that's answered your question.
NDP
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
Thank you. That was very clear and informative.
Going back to the purchase of the pipeline itself, which is costing Canadian taxpayers $34 billion, don't you think it's actually a huge direct and indirect subsidy to the oil industry in this country?
Lawyer (Retired), As an Individual
If you're addressing that to me, I do. In my view, it is because, in effect, the oil industry gets the benefits of what might be, say, another—I hope it's not—10 or 15 years of very high levels of oil production. The industry gets the economic benefit of that. Our children and grandchildren will pay for the true cost of that, which will be, if it's possible, carbon removal, which isn't conceivably going to begin until after about 2050, so we're basically shifting the economic benefit to the present generation and all of that benefit is going to come out of the pockets of the next generation.
Liberal
The Chair Liberal George Chahal
Thank you.
We'll now go to our next round of questioning. We'll begin with Mr. Falk.
You have five minutes.
Conservative
Ted Falk Conservative Provencher, MB
Thank you, Mr. Chair.
I want to thank all of the witnesses for coming here this morning.
Before I ask the witnesses any questions, I just want to make sure that the record registers what Mr. Simard and the Bloc's position is on clean tech. It's that the only way that clean-tech energy is affordable is if fossil fuel energy becomes unaffordable through a carbon tax. Let's have a carbon tax election and decide that right now.
Anyway, thank you for stating your position.
I would like to start with Mr. Tombe.
Mr. Tombe, thank you for your comments. You talked about tolls. Could you tell the committee what the tolls on the TMX were prior to 2019?
Professor of Economics, University of Calgary, As an Individual
Off the top of my head, I don't know, but I would say they were on the order of $3 to $4 per barrel, plus or minus a dollar here or there.
Conservative
Ted Falk Conservative Provencher, MB
They were three or four dollars, and you said they're currently at $11. Is that correct?
Professor of Economics, University of Calgary, As an Individual
Yes, for the incremental interim tolls. Those aren't the final tolls that will be determined later by the CER.
Conservative
Ted Falk Conservative Provencher, MB
Okay, and I know they've indicated in 2025 they're going to make their decision on what that final toll will be, and that will be based on, presumably, the final cost, which we really don't know. The latest figure we know is $34 billion, but we really don't know what the final cost will be at this point.
If it's $34 billion, what do you expect the tolls will have to be?
Professor of Economics, University of Calgary, As an Individual
That's not an answer I would like to speculate about. I suspect, though, that the interim tolls are informative about what the final tolls may end up being—something on that order of magnitude.
Conservative
Ted Falk Conservative Provencher, MB
Okay, thank you.
You had also talked about the significant cost overruns in the last five years by that project. How do we determine what those costs overruns are?
Professor of Economics, University of Calgary, As an Individual
That's something I would hope the future investigations will be able to shed a lot more detailed light on, with, for example, the Auditor General potentially taking a look at it.
Conservative
Ted Falk Conservative Provencher, MB
Do you think the Auditor General would be a good place to start for doing an investigation into cost overruns?
Professor of Economics, University of Calgary, As an Individual
Speaking personally, yes, I would value such a report.
Conservative
Ted Falk Conservative Provencher, MB
Okay, thank you.
Mr. Mason, I would like to shift a few questions over to you. Thank you for your comments.
You said your group would be prepared to buy the project at commercial value. What is commercial value?
Chief Executive Officer and Senior Managing Director, Project Reconciliation
That's a very good question, Mr. Falk. It will come down to what the tolls ultimately settle out at; that will then drive the determination of what the commercial value is. I just want to stress in my comments that this is not about looking at the government as a giveaway to indigenous Canadians.
Conservative
Ted Falk Conservative Provencher, MB
I understand that. I just wondered if you had already earmarked funds, because you said your financing is in place. To what level are you expecting to finance this project?
Chief Executive Officer and Senior Managing Director, Project Reconciliation
We are expecting to finance a 100% purchase based on what the tolls ultimately settle out at, which will then drive what the commercial value is.
Conservative
Ted Falk Conservative Provencher, MB
You're looking at the commercial value not on a construction cost basis but on an income valuation approach. Is that correct?
Chief Executive Officer and Senior Managing Director, Project Reconciliation
That's really what drives it. There were some acts of God that contributed to the cost overrun, like fires and floods and COVID.
Conservative
Ted Falk Conservative Provencher, MB
I understand that, Mr. Mason, but I want to back up to a comment you made. You said you were in discussions with Mr. Morneau to purchase the pipeline.
Chief Executive Officer and Senior Managing Director, Project Reconciliation
That would have been 51%.
Conservative
Ted Falk Conservative Provencher, MB
Okay. At 51%, you were obviously happy with the $4.5-billion price tag at that time and with the $5-billion projected cost to build the expansion.