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
Viviane LaPointe Liberal Sudbury, ON
Thank you, Chair.
My first question will go to Professor Detomasi.
The Indo-Pacific region as a whole is becoming a bigger player in the global economy. In your opinion, how can Canada leverage the TMX pipeline to become a significant player in the Indo-Pacific's economic development, and what industries beyond oil and gas might benefit from this infrastructure?
Professor, Queen's University, As an Individual
There are a couple of things that are critical about that question.
You're absolutely right. The bulk of the world's chunk of economic growth and energy growth is going to come from that region, and that's going to be true for the next several decades. There is a strong case for why we should be getting Canadian oil and gas to tidewater. It's a shorter route, and it's cheaper from that, and it's less expensive to liquefy the natural gas. There are all kinds of reasons, economically speaking.
Geopolitically speaking, I think it'd be better to widen their supplier base. What I'm noticing right now in the case of Russia is their economy is actually rebounding very strongly, even after all the sanctions western countries have put on them because of the Ukraine war. They're doing that primarily by selling oil and gas to the Indo-Pacific region, roughly from India all the way to China. That is collecting, in them, an infrastructure network that binds them ever more closer to Russia. Geopolitically, that's a mistake.
You can view oil and gas and resource development as a bridge to a new region. Canadians have always been known for resource development, and that's always what we've been thought of as. We've been working very hard for decades to say that we do other things too, but nobody ever quite believes us. One of the things we should perhaps do as we develop more advanced technology in oil and gas is sell it to that region. The technologies we develop will be our linchpin for the higher value-added stuff, and hopefully our green technologies can then be used so that their oil and gas and use can be sold and developed in a way that's cognizant of Canadian values.
Liberal
Viviane LaPointe Liberal Sudbury, ON
Thank you.
My next question is for Dr. Tombe.
How does the TMX pipeline strengthen Canada's position as a global energy player? How important is this in the context of evolving geopolitical dynamics, particularly with regard to energy security?
Professor of Economics, University of Calgary, As an Individual
That's a great question.
We should keep in mind that prior to the Trans Mountain pipeline expansion, the overwhelming majority of oil production in Canada was shipped to the United States. Largely, we're effectively the supplier to just one market.
This expanded pipeline, which is the first new pipeline to the west coast in over 70 years, allows for a much broader set of potential markets and buyers for Canadian oil. With this project, and potentially others in the future, expanding the number of potential buyers beyond the United States strengthens Canada's economic position. It also dampens the risk that we face, given the potential for policy changes in the United States. Diversifying the set of markets means that we have a much more secure set of options for our industry here.
Liberal
Viviane LaPointe Liberal Sudbury, ON
What are the economic implications of the TMX pipeline for Canadian provinces in ensuring stable access to energy resources?
How might this affect domestic energy pricing and availability?
Professor of Economics, University of Calgary, As an Individual
The main economic implication of this pipeline expansion and export infrastructure in general is to shrink the gap between prices received by oil producers here and world prices abroad. It's projects like this that shrink that differential, which increases the amount received per barrel by producers here.
This flows through to benefit Canada's economy through several channels. First, to the extent that it facilitates more investment and production in the sector, it's going to mean greater input purchases of goods and services supplied to the sector by businesses located all throughout Canada. There are large interprovincial trade implications. There's also government revenue that is earned federally, primarily through higher corporate income taxes in Alberta through both income taxes and also royalty revenues and personal income taxes paid with the higher earnings of both owners and workers within the sector.
There's various research on how different provinces benefit from oil prices. Of course, provinces like Alberta, Saskatchewan, Newfoundland and Labrador benefit more, as these are larger sectors as a share of their economy, but nearly all provinces benefit from higher oil prices. There is the notable exception of New Brunswick, just because of the much higher share of refining activity that occurs there. It's purchasing oil as an input, but that's kind of unique. Other provinces, including Ontario, Quebec, Manitoba and British Columbia benefit when oil prices are higher.
Liberal
Bloc
Mario Simard Bloc Jonquière, QC
Thank you, Mr. Chair.
Mr. Tombe, I'd like to ask you a question, and bear with me, because I'm not an economist. In fact, my friend Jean‑Denis Garon, who is an economist, finds that I make dubious arguments when I talk about economics.
I read the 2022 report of the Parliamentary Budget Officer, which stated that at $21.4 billion, the Trans Mountain pipeline is not profitable. Now you're telling us that it can be profitable even if the investment is $34 billion. Did I understand correctly?
Professor of Economics, University of Calgary, As an Individual
These are all based on future projections of revenues of the pipeline, anticipated costs and debt service implications.
I note that the PBO's analysis that I believe you are referring to was completed prior to the latest financial projections filed with the Canada Energy Regulator by the Trans Mountain pipeline corporation earlier this year. My comments were based on those filings, which themselves are based on the interim toll rate—that we now know but didn't before—and much more precise projections around revenues, interest costs and operating expenditures of the project itself.
Bloc
Mario Simard Bloc Jonquière, QC
Okay, I appreciate that. In any case, I believe the Parliamentary Budget Officer will soon table a new, more up-to-date report that will mention the $34 billion cost of the pipeline.
However, I would like to come back to something. As I told you, I don't have a background in economics, but something is bothering me. It seems to me that in economics, there is a basic principle that when a project is considered, the risk is considered. When it comes to the Trans Mountain pipeline, it seems to me that no one was willing to take on the risk except the state. This makes it difficult for me, with my limited economics background, to understand how a project that no one wants to take a risk on can become profitable. Maybe you could explain it to me.
Professor of Economics, University of Calgary, As an Individual
That's a very good question.
There are two broad types of risks that we should keep in mind. One is the regulatory risks, the construction hurdles that the project proponent needs to overcome and the uncertainty around the regulatory environment. If we think back a few years ago, it was a fundamentally different type of risk that a private proponent faced prior to the completion of the project, which the government itself doesn't face in the sense that it is—again, to oversimply it—the source of a lot of that risk.
Now that the project is complete, all of that risk is no longer relevant. What's relevant is the risk to the pipeline's utilization rate in the future. What does oil production look like? How much of the pipeline is actually utilized, and over what future time horizon? That's much more of a risk, if you will.
Bloc
Mario Simard Bloc Jonquière, QC
To get an idea, I'm going to ask you a fairly simple question: Without the participation of the state, would a project like that be possible?
I just want to get a sense of it. My question is not meant to trap you.
Professor of Economics, University of Calgary, As an Individual
In a stable, predictable and sensible regulatory regime, a project like this put forward by private proponents is possible.
Bloc
Mario Simard Bloc Jonquière, QC
I like your answer. I don't want to put words in your mouth, but we could apply the same logic to clean energy. A stable regime is one that involves putting a price on carbon. If we want to develop clean technologies, carbon has to have a price.
Professor of Economics, University of Calgary, As an Individual
I think we could apply the same logic throughout the economy. A stable, predictable, sensible regulatory regime does provide an incentive for businesses to proceed with investments in large-scale projects.
Bloc
Mario Simard Bloc Jonquière, QC
Thank you.
Mr. Detomasi, you talked about energy security as well as the possibility of selling technologies that could be developed. I'm thinking of carbon capture and sequestration strategies.
That raises a question. The people at Suncor are withdrawing from research into these new technologies. Do you think there is sales potential for these technologies when the big companies now seem to be very cautious about them?
Professor, Queen's University, As an Individual
Does your question relate to the carbon world or the clean-tech world?.
Professor, Queen's University, As an Individual
I would have to look up exactly how much is being done.
My sense is that there is a fair amount of research being done in the clean-tech world, but a lot of it isn't commercialized yet. A lot of it exists very heavily.... In fact, if I were God and told you what to do, I would say that you need vesting in primary research at universities. Of course, that's where I work. It's probably the number one thing one can do to increase our ability to compete in the clean-tech space. Once we have better knowledge and skills, entrepreneurs will take it and run with it, just like they did in Silicon Valley, which led the tech revolution.
Liberal
The Chair Liberal George Chahal
Mr. Simard, we're over time. I didn't want to cut off Mr. Detomasi, so maybe we'll get to your question in the next round.
Thank you. We'll now proceed to welcome to committee, Mr. Boulerice.
It's great to have you. You have six minutes. The floor is yours.
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
Thank you, Mr. Chair.
In the opening remarks I would like to make to the committee, I would be remiss if I did not mention how shocking some of the comments and answers I heard from the witnesses were. It seems like wilful blindness or blatant ignorance of science. I get the feeling that some people have never heard of the meeting of the Conference of the Parties or the report from the Intergovernmental Panel on Climate Change. While the planet is burning and our children's future is at stake, people are saying that we're heading straight for a wall and we need to speed up.
I'm really a bit unsettled. There seems to be a lack of awareness of how serious climate change is and what the science is telling us year after year. This is, in fact, nothing new. Once again, this year will be the hottest year in history, with higher temperature increases and all the repercussions that has on our forests, droughts, floods and ocean acidification. Still, there are people who are happy to produce more oil and use more fossil fuels. It's quite shocking.
Mr. Gooderham, you laid some groundwork that is, quite frankly, the most reasonable here. To reach a net-zero plan by 2050, there must be a significant decline in fossil fuel production. You're saying there has to be a 50% reduction by 2030, which is six years from now, and 80% by 2050, if we're serious about this. Otherwise, we're not being serious, and good luck to our children and grandchildren.
However, how is this plan compatible with the purchase of a pipeline that will triple its capacity, increasing by 600,000 barrels a day?
Lawyer (Retired), As an Individual
I'm terribly sorry. I'm not getting the interpretation. Although I get the gist of the question, I'm not getting the interpretation.