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
Thank you, Mr. Dreeshen.
We'll now go to Mr. Badawey.
Welcome to committee. You have five minutes.
Liberal
Vance Badawey Liberal Niagara Centre, ON
Thank you, Mr. Chairman.
I'll direct my questions to Mr. Tombe with respect to the economic side of this project.
Mr. Tombe, you've been asked many questions today about the capital costs, the financing of debt and how it will impact the operational side of the balance sheet. One thing you didn't speak about is the extended costs related to managing the asset between the life cycle, the repair and maintenance over time, and ultimately at the point in time when there will be replacement.
I would first like you to speak a bit about that, especially taking into consideration the escalating costs from the building side that we've experienced to date. As well, have you factored that into your overall costing of the project five, 10 and 15 years down the road?
Professor of Economics, University of Calgary, As an Individual
That's a good question.
My analysis is based on the financial filings from the Trans Mountain pipeline in February of this year to the Canada Energy Regulator, which does include the costs of operating the pipeline but also sustaining capital investments year by year, initially starting at around $50 million and rising to a little over $80 million by the 2040s. It's looking at that 20-year horizon and does include all of those other types of expenditures associated with the project itself.
Liberal
Vance Badawey Liberal Niagara Centre, ON
How would you evaluate the economic impact on Canada's oil sector and broader economy, taking into consideration the expected increase of exports and export capacity, market conditions, global demand for oil and its profitability? The flip side of it is the direction the country has taken with respect to the greening. Do you see some sustainability there? What is the longevity of it, and with that, of course, the profitability of it into the future?
Professor of Economics, University of Calgary, As an Individual
That's a great question.
I think it is important to keep in mind that the different ways in which the world might use less oil in the future have very different implications for Canadian oil production and the prices received here. If there is a reduction in the use of oil globally through supply-side policies that restrict production elsewhere, then that could be a world in which we have a lower use of oil globally but higher oil prices. That would tend to be associated in Canada with a trajectory of potentially rising oil production even if global oil demand is falling. In that kind of world, it would be where Canada is among the final producers of oil globally in the future.
Alternatively, if there's demand-side policies, then that might be a state of the world where prices are lower, associated with lower oil use. It's really hard to say which of these two scenarios we might be in.
In terms of the Canada Energy Regulator's more recent projections, even in a Canada net-zero world their baseline projection has oil production still rising in Canada out into the 2030s, and even as far out as 2050, producing still in Canada a little over four million barrels per day.
I'd say that climate policy and making progress on lowering emissions globally are not necessarily at odds with the viability, sustainability and financial returns that this project comes with.
Liberal
Vance Badawey Liberal Niagara Centre, ON
In terms of the project itself, how do you see it lending itself to transitioning?
Professor of Economics, University of Calgary, As an Individual
It produces revenue for governments, not just the provincial government in Alberta, but federally. The smaller differential translates into, potentially, on the order of about two billion additional dollars per year in corporate income tax revenues, for example. Governments can use these financial resources in different ways to, as you say, facilitate the transition. In Alberta we use a portion of revenues raised from the industry in support of clean-technology subsidies and research and development, for example.
The additional economic and financial returns that come with the pipelines give us flexibility and more options. That's true for economic growth in general. If we have a stronger economy, we just have a greater ability to tackle important future problems.
Liberal
The Chair Liberal George Chahal
Thank you, Mr. Badawey.
We'll now go to our next speaker. I believe Monsieur Simard has given his time to Mr. Morrice.
Mr. Morrice, you have two and a half minutes.
Green
Mike Morrice Green Kitchener Centre, ON
Thank you, Mr. Simard.
Dr. Tombe, we didn't have a chance to finish that exchange. I thought it would be reasonable to give you the opportunity to do that.
I guess going into this conversation, I have these words from the UN Secretary-General in mind: “Investing in new fossil fuels infrastructure is moral and economic madness.” You're telling us this is worth every penny. You were cut off earlier by time. Can you maybe finish your thought?
As well, would you be open to sending to this committee your analysis that includes the social cost of carbon that leads you to the conclusion you've shared publicly and at this committee?
Professor of Economics, University of Calgary, As an Individual
First, I would be very happy to share that analysis, no question. It's also based on the 2016 CER's energy future report at the time that thought about scenarios of pipeline capacity constraints and not.
I guess more directly to your initial question, I don't think about this as a binary choice. Emissions have environmental costs. That's the social cost of carbon. We should be willing to incur costs up to the social cost of carbon to avoid emissions. Lowering emissions by blocking new pipeline construction has higher economic costs than the social cost of carbon.
I think we need to think about, at the margin, cost versus benefit rather than everything just in terms of lowering emissions at all costs as appropriate policy.
Green
Mike Morrice Green Kitchener Centre, ON
Great. I think it would be helpful for this committee to see that analysis. If you're willing to share it, please feel free to do that. I think it would help inform us of the full costs and implications of this pipeline.
I have about a minute left, so I'll turn to you, Mr. Gooderham. You mentioned the downstream emissions. We don't often talk about the reality that while our emissions are around 700 megatonnes, the wildfires, as I mentioned earlier, were around 647 megatonnes last year. The emissions exported, the oil we send to other places through actually diluted bitumen, in the case of TMX, to other countries is about 954 million tonnes. I think you had started to get to that.
The other reality we have in this country is that if we want to have a chance of staying below 1.5°C, even a 50% chance, we need to leave 86% of our fossil fuel reserves unextracted. You're one of the few people willing to actually talk about the production of emissions as opposed to only emissions themselves.
I'm pretty much out of time, but perhaps you can briefly share the implications of conversations like these if we don't talk about production as well.
Lawyer (Retired), As an Individual
Yes.
Recently, on December 7, 2023, the government issued its public discussion paper on a new scheme to move to how we put a price on emissions in the industry. It talks about the reductions this will achieve in our total emissions in Canada from oil and gas production in Alberta. We can reduce the emissions by so much without interfering with the growth of oil production so we get a net reduction in the Canadian emissions.
Meanwhile, that increased production— 85% of the emissions occur overseas, coming out out as tailpipe emissions overseas—and those emissions warm the climate in Halifax and northern Alberta, just as if they were emitted in Canada. Quite frankly, it's a fake game to say that we're going to lower production emissions in Alberta, but we're going to increase them overseas. It will warm our climate more. So that's my answer.
Liberal
The Chair Liberal George Chahal
Thank you, Mr. Gooderham.
We'll now go for two and a half minutes to Mr. Boulerice.
The floor is yours, sir.
NDP
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
Thank you, Mr. Chair.
My first intervention is directed to Mr. Gooderham. It's not a question, but a request.
In August last year, you published a study titled “Driving Global Heating to 1.7°C and Above, The New Canada’s Energy Future 2023 Report and Canada’s Projected Oil Production to 2050”. Is it possible to submit that study to the committee for the benefit of the analysts and the future report?
Lawyer (Retired), As an Individual
Yes, I will submit you a copy.
I will just comment that earlier one of the witnesses mentioned the Canada net-zero scenario, but what's not being mentioned is that scenario will drive warming to 1.7° or 1.8°. That's not disputed.
I will submit that, yes.
NDP
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
Thank you.
Mr. Mason, in your opening remarks about Project Reconciliation, you said that you met with the then minister of finance Mr. Morneau and submitted a proposal to him. It's been a number of years now. Have you had more recent meetings with the current Minister of Finance or people from her office?
Chief Executive Officer and Senior Managing Director, Project Reconciliation
No, we haven't. As Minister Morneau said when we tabled that first offer to purchase in July 2019, we're just going to build it first. The federal government did open a consultation with 120 nations in a meeting in Vancouver a year ago in August, and we were asked not to attend. They just wanted each of the individual communities to be there. But we basically got back that there was no deal tabled. Until there is, we're waiting.
The key really goes back to my other comment: the tolls need to get settled. We went through the exercise. As I mentioned, I was in and out of New York a few times. We had a rating agency give us a rating on a series of bonds. The debt service coverage ratio was well within the line of 1.8 times. That made it financeable. Once we get the final tolls, we will come to the federal government and table a value that reflects the tolls, and the commercial value around those.
NDP
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
One of the concerns we have on our side, Mr. Mason, and I speak on behalf of the citizens of this country….
I'm sorry, I see that my time is up.
Liberal
Conservative
Shannon Stubbs Conservative Lakeland, AB
Thank you, Mr. Chair.
Thanks again to all of the witnesses here.
Thanks for all of your great explanations grounded in reality about the benefits of oil and gas development, in this crucial economic infrastructure, to all three levels of government, to every community in Canada, to every province and to every region, especially as an opportunity to move indigenous people from managing poverty to managing prosperity. Thank you for being here to tell the truth, too. The reality is that the majority of indigenous communities in Canada support, in some way or another, responsible oil and gas development, and resource extraction.
I'm also glad to hear some recognition of the reality that, of course, it's the oil and gas sector in Canada, far and away, beyond every other part of the private sector, that is putting the most investment in clean tech and innovation in the Canadian economy.
Thank you all for raising those points.
I would like to move my motion quickly. I'm hoping that our committee will move on it immediately, and then I'll cede the remaining time for more questions.
That motion, as colleagues will note I have distributed, says:
Given that the committee is hearing from prospective buyers of the TMX pipeline in this study, and given that one of the prospective buyers is being heard by the committee today—
for which we are grateful
—the committee invite representatives from Western Indigenous Pipeline Group, Natural Law, and Iron Coalition to provide their testimony at their earliest convenience.
I certainly do hope, if I'm missing any other possible proponents, that the analysts will insert that. I assume that all members will see the necessity of hearing from all prospective proponents on this topic. I would anticipate that we would all support this motion immediately so that we can go on for my colleague can continue questions.
Liberal
The Chair Liberal George Chahal
Thank you, Mrs. Stubbs.
We now have a motion on the floor.
I have Ms. Dabrusin next.
Go ahead, Ms. Dabrusin.
Liberal
Julie Dabrusin Liberal Toronto—Danforth, ON
Thank you.
I'm just a little surprised by the need to bring a motion to add witnesses to the list. As a committee, we add witnesses to the list all the time, and we have more meetings scheduled. It's not the type of thing where a motion would be required. We keep on adding witnesses, as do the other parties.
I have no problem with adding those witnesses to the list, so I'm not opposing the motion. I'm just not sure why a motion was required.
Liberal
The Chair Liberal George Chahal
Thank you, Ms. Dabrusin.
We will now go, through the speakers list, to Mr. Patzer.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
Thank you very much, Mr. Chair.
Very quickly, these are some fantastic witnesses, and I think we could make sure they come to committee. Again, if we could make sure that they come at their earliest convenience, I think they would have very valuable insight to add to what we are doing here with this particular study.
With that, I would move that we go to a vote so that we can get this addressed and can continue on with our witnesses here today.