Natural Resources Committee on Nov. 27th, 2024

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

With about a minute left, I'm going to go back to the supplementary estimates (B).

NRCan is requesting funds under three voted appropriations worth over $5 million. The minister talked about the $13.3 million for grants and contributions funding to support the indigenous advisory and monitoring committee. Can you expand on the other two? One is the $15 million for grants and contributions for the smart renewables and electrification pathways program. If you have time, can you also talk about the $7.5 million for the polar continental shelf program?

[Michael Vandergrift]

I'll invite my colleague, Rinaldo Jeanty, to speak to the polar continental shelf program, since he lives that program every day.

[Rinaldo Jeanty, Assistant Deputy Minister, Lands and Minerals Sector, Department of Natural Resources]

The polar continental shelf program receives $7.5 million. The program itself supports logistics and provides logistics support to a number of folks, especially in the research community, to our colleagues from DND and to academia.

That $7.5 million goes towards providing the logistical support that is needed for aircraft, as an example, and to acquire some of the goods that are needed.

[Majid Jowhari, Liberal, Richmond Hill, ON]

I've run out of time. Thank you very much.

[The Chair, Liberal, George Chahal]

Thank you.

We'll now go to Monsieur Simard.

Monsieur Simard, you have six minutes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

I recall that the hydrogen strategy that you tabled four years ago identified a potential market of $11,000 billion. I touched on this with the minister earlier. However, in April, Natural Resources Canada changed its mind and said that the potential was actually $2,000 billion. When you're establishing a broad industrial strategy, I suppose that seeing that potential reduced by 80% changes many things.

You and I both know that there were meant to be tax credits for hydrogen production. You may also have kept track of the development of Bill C‑49 and everything that ensued.

These days, I get the impression that the hydrogen bubble is deflating. I wonder whether the department has reviewed the strategy and the financial support that this sector should receive.

[Erin O'Brien, Assistant Deputy Minister, Fuels Sector, Department of Natural Resources]

You're right. Back in 2020, the government did publish an initial hydrogen strategy for the country. As you can appreciate, this is a new industry that is developing globally, and its development is certainly not linear.

Just a few months ago, we published a progress report. You're right that the forecasts in that report have been revised significantly, partially in response to market developments, but also there were changes in terms of the methodology used.

In terms of the potential for hydrogen, we see continued potential as a low-carbon pathway as part of the energy transition. There's significant potential, for instance, for hydrogen to help decarbonize hard-to-abate sectors, notably heavy transport, for instance.

Our forecasts would indicate there are projects in development that are worth up to $100 billion across the country. The potential of hydrogen, I think, is also supported by the IEA's most recent WEO study, which also indicates that it will be an important pathway to the energy transition.

[Mario Simard, Bloc, Jonquière, QC]

Even McKinsey, a firm that I don't particularly like, thinks that the hydrogen sector's potential is 70% lower than originally estimated.

Yet a number of people have sounded the alarm. I spoke with people from the Institut de l'énergie Trottier. They were already telling us, in 2021 or 2022, that hydrogen was a bubble and that there wouldn't be any market for this fuel. It cost too much to produce and the market development seemed shaky.

The federal government now has a whole hydrogen strategy and is spending money on it. Yet when I look at the current literature on hydrogen, I can see that the market doesn't exist.

Are you planning to reassess your strategies? I don't think that it would be wise to let developers believe that they can count on funding to develop hydrogen projects. We know full well that these projects will never come to fruition given the non‑existent market and excessive productions costs.

Does the department have a strategy for reviewing the mechanisms and directions for government financial support given that the hydrogen bubble is slowly deflating?

[Erin O'Brien]

Thank you for the follow-up.

There are a number of different aspects, I think, involved in terms of the development of the hydrogen sector and different ways or methods in terms of creating low-carbon hydrogen.

You're right, to the extent that we're developing supply chains globally, particularly to address what the market typically calls “green hydrogen”. We have a number of projects that are under development on Canada's Atlantic coast that would, or that are preparing to, supply markets in Europe, notably with Germany. We're currently negotiating a co-financing window with Germany.

That continues to advance apace, although, as I said, there's complexity in terms of the supply chains and making sure we're ready to ship the hydrogen from our shores and Germany, for instance, is ready to receive. There are a number of moving parts, but there is a real commitment on behalf of government and industry to make that happen.

On Canada's west coast, we're looking at developing hydrogen from natural gas stocks. The economics of that market are very different. We feel that Canada can be very competitive in that market and in fact are looking to pursue export opportunities in Asia, notably Japan and South Korea, which—

[Mario Simard, Bloc, Jonquière, QC]

Thank you.

[The Chair, Liberal, George Chahal]

Thank you. The time is up.

We'll now go to Mr. Angus.

Mr. Angus, you have six minutes.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you.

It has been two years since the finance minister announced the investment tax credits in order to kick-start a clean energy economy. Which tax credits are available, and which ones are still waiting to launch?

[Michael Vandergrift]

The carbon capture, utilization and storage tax credit is available. The clean hydrogen tax credit is available. The clean technology tax credit is available. The clean electricity income tax credit is expected this fall.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Okay. What about the critical minerals investment tax credit?

[Michael Vandergrift]

Yes, that is available. Well, the clean manufacturing income tax credit is the one that's—

[Charlie Angus, NDP, Timmins—James Bay, ON]

Is that what it's going to be?

[Michael Vandergrift]

It's clean manufacturing, yes.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Okay.

Again, I'll say my frustration.... When it comes to whatever big oil wants, on carbon capture they were all pronouncing for clean energy. We're still waiting, but that's not your responsibility. That's for the elected officials.

I'm concerned about the critical minerals tax credit, because what I've been told by people in the industry is that you need a 90%. That's the threshold. Ore bodies don't exist in isolation. Critical minerals are usually found in base metal deposits. You're going to have copper. You're going to have zinc. You're going to have a whole variety of ore that you're going to go to.

The benefit of all of that is that some of those ores are going to pay your freight to make your mine operable. At a 90% threshold, many of our critical mineral deposits are not going to be eligible for the tax credit.

[Michael Vandergrift]

We're very aware of that issue. That has been brought to our awareness by stakeholders and the Department of Finance. Our understanding of that issue is that it's going to be addressed through amendments.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Do you have a sense of where you'd put that threshold for eligibility?

[Rinaldo Jeanty]

It would be at 50%.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you.

One of the other things that were raised—and God forgive me for ever saying that some big companies should get government money when they should be paying for it themselves—is that we have many projects that will take years to go through permitting, but we have other projects that are on sites, in traditional mining areas, where we have the ore bodies. Getting environmental licences in first nations is going to be pretty straightforward, but the costs are going to be in the development mining, shaft sinking and drift mining. That's expensive, and that is something I think companies should pay for themselves. However, in order to get us into the game, has there been discussion about a window of tax credits to kick-start things in certain areas? For example, in Thompson, Manitoba, there are deposits that would run that community for another 40 years. It would be a benefit that would pay back. Have you looked at whether or not to give a two-, three- or four-year window for companies to access that, so that we're getting these minerals to put into the economy now?

[Michael Vandergrift]

The Department of Finance, obviously, is responsible for tax policy, so we certainly have discussions with them all the time about opportunities that we see, where there can be additional benefits and opportunities for growth in the mining sector. Like you, we hear where there are areas of opportunity. We do talk to the Department of Finance about that, and, ultimately, it's their decision in terms of tax policy and rules.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Yes, I get that. I think it's just that, in actually knowing the industry—because it's a very particular industry in terms of what we could get—we could bring up copper production dramatically if we had certain tools. That may not be something that Finance pays attention to, so I am trusting you to do this job for us.

I want to ask a bit about the 2 billion trees. There have been a lot of questions about it, but a tree is not a tree is not a tree, and planting 2 billion trees may make a little difference or not much, unless it's done strategically. For example, the industry loves its conifers. It makes money on them but, also, they burn. Deciduous trees are climate-friendly, but they don't have an economic value in the same way that a pine forest does. Have you planned out with foresters the kinds of trees, the mixes of trees and where those trees are going to be planted, or is it just about trying to hit those numbers so that you can get a press release out?

[Michael Vandergrift]

This is very much part of planning and making sure that the right tree is planted in the right place.

Glenn, why don't I ask you to elaborate on that?