Natural Resources Committee on April 6th, 2022

[The Chair, Liberal, John Aldag]

Good afternoon, everyone. I call the meeting to order.

Welcome to meeting number 16 of the House of Commons Standing Committee on Natural Resources.

I'm going to run through these opening comments as quickly as I can. Pursuant to Standing Order 108(2), the committee is continuing its study of a greenhouse gas emissions cap for the oil and gas sector. Today is the final meeting with witnesses for this study.

This is taking place in a hybrid format today. Now that we have started, taking screenshots or photos while we're under way is not permitted. The proceedings will be available on the House of Commons website and are being televised via the House of Commons website.

For anyone attending the meeting in person, we ask you to wear a mask, except for members who are at their seats during the proceedings.

I have a couple of quick comments. Please wait until I recognize you by name before speaking. Interpretation is available. I don't think we have anyone joining by Zoom today, so we'll skip over that. All comments should be addressed through the chair. For members in the room, just raise your hand, and we will get into the speaking order.

I would like to welcome Madame Michaud, Madame Pauzé, Mr. Long and Mr. Morrice today.

Now to our witnesses, I would like to welcome the Minister of Natural Resources, the Honourable Jonathan Wilkinson, along with officials from Natural Resources. As well, I would like to welcome the Minister of Environment and Climate Change, the Honourable Steven Guilbeault, along with officials.

We are going to try to keep the ministers for as long as we can, given that we had a slight delay. We will introduce the departmental officials as we get to them. There have been some technology challenges. Otherwise, Mr. Hargrove may have to shoulder a lot of the backup here today.

Let's jump right into the opening statements. We'll hear five minutes from each of the ministers and then we'll jump right into our rounds of questions.

Minister Guilbault, would you like to start?

[Steven Guilbeault, Liberal, Minister of Environment and Climate Change]

Thank you, Mr. Chair, for the introduction and for inviting me to appear before the committee.

Good evening, members. First, I would like to recognize that we are meeting on the traditional territory of the Algonquin Anishinabe people.

The Standing Committee on Natural Resources is important, and the topic at hand is of vital national importance. I appreciate the opportunity to speak with you and with my colleague and friend, Minister Wilkinson.

I know I speak for both of us when I commend you for bringing so many expert witnesses to this committee. I hope our contribution builds on your excellent work. The questions being asked here underscore your breadth of experience on energy issues.

Mr. Chair, I'd like to frame my remarks with two global realities.

One reality is the Russian aggression and the European conflict it has sparked. This conflict is rearranging global energy supply chains in real time.

The other reality is the climate crisis and global competition. We must make sure that we aren't left behind in a carbon‑constrained world.

In the heat of the moment, these realities may seem at odds, even working at cross‑purposes.

Both of these realities speak of change, the end of business as usual, and ultimately they point in the same direction.

As the Prime Minister said last week, European leaders are clear. They don't just want to end their dependence on Russian oil and gas. They want to accelerate the energy transformation to clean and green power.

Last week, we tabled our government's 2030 emissions reduction plan. I encourage you all to study it. It's a very detailed plan. It reflects thoughtful contributions from every corner of Canada, including from indigenous peoples. They must be full partners, given that they have been stewards of our environment since time immemorial.

It's a plan for every region and every sector, a road map that identifies pathways for Canada to reach its emissions reduction target of 40% to 45% below 2005 levels by 2030 and of net-zero emissions by 2050.

Above all, this plan aims to be both ambitious and achievable.

I'll now come back to our two realities.

We all recognize that there will continue to be a global need for oil and gas in the years to come.

However, we simply cannot ignore the fact that the oil and gas sector is Canada's biggest emitter. Between 1990 and 2019, the sector's total greenhouse gas emissions grew by 87%. Today the oil and gas sector accounts for 26% of Canada's emissions.

Competing in a carbon‑constrained future means not only diversifying our energy mix but offering lower carbon oil and gas to the world.

Canada's biggest oil and gas producers recognize this reality and have committed to achieving net‑zero emissions by 2050. They see that reaching a net‑zero global economy represents a massive economic opportunity for businesses, workers and communities. Energy producers look for policy stability and certainty to invest wisely.

If any oil and gas sector in the world can do this, Canada's can. We have the skilled workers, the engineers and the energy innovators to make it happen.

The cap that we've committed to implementing on emissions from the oil and gas sector will be a vital step, both in our work to meet our 2030 emissions goals and to stay on track to reach net‑zero emissions by 2050.

We haven't made any firm decisions on the design and scope of the oil and gas emissions cap. All this will be established in the coming months.

Its design will need to take into account the complex character of the industry. It will need to ensure that emissions decline at a pace and scale needed to achieve net zero by 2050.

Mr. Chair, last week my department published a discussion paper and launched consultations with provinces, territories, indigenous leaders, stakeholders and the public on options for regulating Canada's commitment to reduce oil and gas methane by 75% by 2030.

During these discussions, we'll explore how this commitment relates to carbon capping.

Minister Wilkinson will elaborate on the consultation process regarding the design of the cap. We'll be happy to answer your questions.

This committee's study is important to that conversation. We all want a healthier, more resilient and more equitable Canada. We're all here to be part of the solution.

Thank you.

[The Chair, Liberal, John Aldag]

Thank you.

We'll jump now to you, Minister Wilkinson, and we'll give you your five minutes.

Just so that everybody knows, we'll use a quick timekeeping trick, with a yellow card for 30 seconds left and the red card for “time is up”. Don't stop in mid-sentence, but wrap it up as quickly as you can, and then we'll get on to the next set of conversations. I'll get that red card ready.

It's over to you, Minister Wilkinson.

[Jonathan Wilkinson, Liberal, Minister of Natural Resources]

Good afternoon, Mr. Chair and committee members.

Thank you for your invitation to speak to the committee.

I want to begin by condemning the ongoing brutality that we are seeing from the Russian regime in Ukraine. The images we saw over the weekend were clearly awful and unspeakable, and Canada stands in steadfast support of the people of Ukraine and of our European allies.

Since this illegal invasion, issues relating to energy security have come to the fore. Amid spiking energy prices, we have seen an urgent desire on the part of European countries to replace Russian oil and gas in the short term while they concurrently work to shift as rapidly as possible to renewables and to clean hydrogen in order to end their reliance on Russian oil and gas altogether.

This is happening at a time when the IPCC is telling the world that with respect to climate change we are at a crossroads. The decisions we make now can secure a livable future.

Canada must be capable of walking and chewing gum at the same time. We can help our European partners in the short term while continuing to take bold action to meet our ambitious climate goals. That is what our government is doing: supporting global energy markets while taking aggressive and ambitious action to lower emissions.

I want to echo Minister Guilbeault. Reducing carbon pollution isn't just necessary to save our planet; it will also create good jobs and opportunities in every region of this country. Companies like Suncor are planning to invest significantly in hydrogen; companies like Amazon are investing hundreds of millions of dollars in renewable energy in Alberta; and 13 of the world's top 100 clean-tech companies are Canadian.

However, even beyond a significant move towards renewables and hydrogen in a net-zero transition, there will be a continuing and important role for hydrocarbon fuels in non-combustion related applications, including hydrogen. Prior to the Russian invasion, oil demand was projected to be relatively constant through 2030 before we start to see declines associated with the broad deployment of zero-emission vehicle technology. Those fuels that are produced in an ultra-low-carbon fashion will have significant and increasing value in a world that is transitioning to lower carbon, which brings us to today's topic: the design and implementation of a cap on emissions from Canada's oil and gas sector.

By capping emissions from oil and gas, we are ensuring that Canada will meet its climate targets while helping Canada's oil and gas sector compete in a world in which ultra-low-carbon products have financial value. Canada's oil and gas industry is already very much alive to the value that these products will hold, and that is why they themselves committed to net zero in 2050 via the Oil Sands Pathways alliance, with whom I spoke just this week, and indeed, with whom I speak regularly.

In proposing a descending cap on emissions from Canada's oil and gas sector, our government is taking them up on their offer. We are designing a regulatory framework to help industry and government achieve our shared objectives. To get us there, we have been engaging with Canadians. We're consulting with industry, indigenous communities, academics, non-governmental organizations, groups like the Net-Zero Advisory Body, the clean-tech industry and, of course, the oil and gas sector. We are also working actively with provincial governments.

Officials both in my department and those in Minister Guilbeault's are considering all of these contributions. Any Canadian who wants to offer written submissions can do so, and we certainly look forward to hearing from this committee in that regard. We plan to conclude the engagement's formal process by this fall, and we'll be poised to move forward by late 2022 or early 2023.

It is only by working together—by collaborating with partners across the country—that we will be able to both reduce emissions and generate economic growth. This is good for our country's future: It's how we leave a healthier economy and a healthy environment for our children.

I look forward to reviewing the final report of this committee and your recommendations, as it will play an important part in the development of this emissions reduction initiative.

With that, I would be happy—and I'm sure Minister Guilbeault would be happy—to answer any questions.

[The Chair, Liberal, John Aldag]

That's perfect. Thank you.

Our first round of questions will be six minutes for each of the four parties. I do tend to give a fair bit of latitude, but I will remind everybody that we are here to study a greenhouse gas emissions cap for the oil and gas sector.

We will turn it over to Mr. McLean for his first six minutes.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Mr. Chair. We thank both ministers for showing up today and giving us an hour of their time combined. It's much appreciated.

First of all, Minister Wilkinson, I heard your comments here, which echo what I have heard several times from you and your colleague here at the table and your Prime Minister: that we can have this and we can have that too. I think it's fair to say, if you look at a portfolio of solutions, that we can have some of this and we can have some of that, but we can't have all of both. Let's get towards reality here about what our future looks like. I would like you to put that on the table here first of all.

I'm going to ask you, because you were at the IEA meetings, as was I, a couple of weeks ago, and we heard quite clearly that the world is demanding more energy from Canada as it tries to ween itself off Russian energy. That has been a course they've taken that is the wrong course, and now they're seeing the results of that course. You committed to an additional 300,000 barrels a day of Canadian energy by the end of the year, and that would be a stretch. I think we've talked about that. However, the question is, how do you give 300,000 barrels a day—4% of Canada's current energy production—and think that makes a drop in the bucket for Europe's security?

[Jonathan Wilkinson, Liberal, North Vancouver, BC]

Thank you.

Yes, I certainly enjoyed the conversations we had at the International Energy Agency. I would say that there was a second part to the conversation at the IEA. They want more energy from countries like Canada to help displace Russian oil and gas, but they are also focused very much on accelerating the transition to renewables and hydrogen. That was an issue on which all of the European countries were absolutely unanimous. Certainly Canada is not claiming that it's going to solve all of the issues that Europe has with respect to displacing Russian oil and gas. We are part of a group that have come collectively to try to do that. That included additional oil and gas from the United States. It included releases from the strategic reserves, and it included Brazil stepping up with 300,000 barrels of oil.

[Greg McLean, Conservative, Calgary Centre, AB]

I'm not sure that answered the full question, Mr. Minister, and I will say that your recollection of what happened at that meeting and mine are two different things, because there is definitely not even unanimity among IEA members about what we need to focus on at this point in time. As a matter of fact, I think the Czech Republic actually said it is time for us to put aside the current emergency for what is their emergency in Europe right now, which is their very existence. Now, I know we have to balance these things in perspective, but this perspective has to be looked at going forward, and we have to balance what we do for the world here, because the world has continued to grow its energy consumption and we've been on the sidelines. Committing to the equivalent of 300,000 barrels a day over the next year potentially is a pittance, first of all, and we can't even get that oil to tidewater because we don't have the infrastructure. I'm going to say right here that this represents a failure by this government and by our country, and we're still importing over one million barrels a day, whose production we don't carbon-cost. These are flaws in your approach.

I'm going to ask you this. When you look at the actual production of oil around the world and the representation Canada has in that, we rank pretty high—up with Norway as far as our transparency and our ESG characteristics with respect to oil production go. Are you suggesting that we displace that Canadian oil with offshore oil both in Canada and in the growing markets around the world, particularly in the world's poorest markets?

[Jonathan Wilkinson, Liberal, North Vancouver, BC]

First, with respect to the energy transition, I would just direct you to the communiqués that come out of the IEA, which actually do focus on the energy transition and on accelerating that to ensure they are actually gaining domestic energy security through the work to transition to hydrogen and renewables. What I would say is that countries within the IEA thanked Canada significantly for stepping up with 300,000 barrels of oil. That included all of the European countries and the United States. Certainly they are interested in a conversation with us about how we can help them both bridge and transition. The European Union and Canada have established a working group to focus on both LNG and hydrogen and what we can do to actually address them. We have a similar working group that is ongoing with Germany. Certainly the relationship between Canada and European countries with respect to energy—and energy is not just oil and gas, but also renewables, hydrogen and a whole range of different forms of energy—is extremely close and working very productively right now to try to address both short-term and long-term issues.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Minister.

When you talk about renewables here, we talked about hydrogens over in Europe as well. Of course, green hydrogen is not viable at this point in time from either an “energy return over energy invested” perspective or a cost perspective. We have to balance all of these things. I think you're suggesting that we continue to ramp up inflation on energy around the world, not just in Canada, and to make energy a much larger piece of the cost of everything, including food, around the world. There was a time when I listened to your government talk about a carbon tax being the most efficient form of taxing carbon, putting a price on carbon. That seems to have been misplaced by several regulatory jumps now, including the clean fuel standard and now this cap. Is it no longer your position that it is the most efficient way of cutting back carbon?

[Jonathan Wilkinson, Liberal, North Vancouver, BC]

I think if you ask 100 economists, 99.5% of them will tell you it is the most efficient and effective way that incents innovation. I would note that it's something that the Conservative Party of Canada campaigned on in the last election. Certainly it is a critical part of our plan to reduce emissions and to incent innovation and build a clean growth economy.

We've been very clear about that through three different elections, and it's something that Canadians endorsed in the last campaign.

[Greg McLean, Conservative, Calgary Centre, AB]

Yes, Minister, and I would say that you're trying to have your cake here and eat it too, if you're going to have a tax and a whole bunch of regulatory burdens on top of this.

As far as the emissions reduction cap goes, I'm going to quote the NDP Premier of Alberta who was last in power, who called your emissions reduction plan “a fantasy”.

Could I have a comment, please?

[Jonathan Wilkinson, Liberal, North Vancouver, BC]

I spent both last weekend and Monday in Calgary with the industry, and I would tell you that the industry's message to the government is, “We want to collaborate. We want to work hard.”

Yes, it's ambitious. It's ambitious in every sector of the emissions reduction plan, but we want to work together to try to find a way to get there.

That was true across the piece. I think you would see it if you actually looked at the statement on the emissions reduction plan that was put out by the Pathways alliance, and also by the Canadian Association of Petroleum Producers.

[The Chair, Liberal, John Aldag]

We're out of our six minutes.

We will go right now over to Mr. Chahal for his first six minutes.

[George Chahal, Liberal, Calgary Skyview, AB]

Thank you, Chair.

Thank you, Minister Guilbeault and Minister Wilkinson, for joining us today on this important study.

Emissions from the oil and gas sector make up 26% of our national emissions overall. We must reduce that, and based on testimony we have received over the last several weeks, industry agrees.

Could the ministers please speak to the ways in which the government will be working with industry partners to establish a cap.

[Steven Guilbeault, Liberal, Laurier—Sainte-Marie, QC]

Thank you, Member Chahal.

We must reduce emissions, and everyone has a role to play. I've been pleased to hear that industry partners share that view, and I have spoken personally with many of them in the past few months. We've already begun informal engagement with industry to seek their views on the design of the emission cap, existing opportunities and policy and regulatory options.

We will be publishing a discussion paper this spring, and these conversations will continue throughout this year, as Minister Wilkinson pointed out, as we consider how best to design and implement the cap in ways that provide regulatory certainty to industry while also reaching our emissions reduction goals.

We are also gathering feedback from industry partners on how related measures that exist will work with a cap.

[Jonathan Wilkinson, Liberal, North Vancouver, BC]

I would just echo that in my meetings with the sector—and those included meetings this week—the message coming from the sector is that they want to collaborate. Certainly that is the message I try to give, that we want to collaborate with them. Government needs to be a partner in this conversation.

We certainly did that with the emissions reduction fund and the orphan wells funding during COVID, which was about addressing environmental liabilities during an economic crisis and a health crisis.

We are now doing that with investments in technology development, including carbon capture and sequestration. We are committed to working in collaboration with the industry to both reduce emissions in a thoughtful way and also to ensure that we are growing a clean growth economy that's going to provide jobs and economic opportunity for our children.

[George Chahal, Liberal, Calgary Skyview, AB]

Ministers, over the last several weeks, the committee has heard a lot about the importance of regulatory certainty during our study.

Could the ministers speak to the ways in which the federal government has and will continue to work with the provinces to ensure that everyone is playing their part while creating a more predictable and certain environment and investments?

[Steven Guilbeault, Liberal, Laurier—Sainte-Marie, QC]

As you know, our government has introduced a number of measures, in all regions, to reduce emissions, including the methane regulations and carbon pricing schedules.

We will be working closely with our counterparts to consider how a cap on emissions would work with those existing measures. The emissions reduction plan that was announced last Tuesday committed to exploring tools to make Canada's world-leading pollution pricing system durable and predictable, no matter who is in government.

These tools might include investment approaches like carbon contracts for differences, which enshrine future price levels in contracts between the government and low-carbon project investors, or exploring legislative approaches to support a durable price on pollution.

[Jonathan Wilkinson, Liberal, North Vancouver, BC]

Certainly it will take more on the provincial side. That coordination across all jurisdictions is going to be key in designing an effective cap on emissions from the oil and gas sector, but it's also going to be important in the context of working together to frame and to develop the economy of the future.

I met this week with Minister Savage, and I think what we do agree on is the need to reduce emissions significantly in the oil and gas sector to ensure that the sector remains competitive in an economy that will be going through a transition. I spoke with Minister Parsons, Minister Eyre and Minister Ralston in the other three provinces that are most significant in this context.

We need to continue to work together—I think they all agree on that—to ensure that we are moving forward in a thoughtful way, and certainly we intend to do that both with respect to emissions but also with respect to economic conversations that we intend to launch over the coming months.

[George Chahal, Liberal, Calgary Skyview, AB]

Could the ministers explain to the committee why they are targeting the oil and gas sector and not other sectors of the economy with a cap on emissions at this time?

[Steven Guilbeault, Liberal, Laurier—Sainte-Marie, QC]

Thank you for the question.

Although it is true that there is no formal cap for other sectors, if you were to look at the zero-emission vehicle mandate that we will be putting in place, basically mandating that 100% of light-duty vehicles be zero-emission vehicles by 2035, one could easily argue that this is a cap.

It's the same thing with the clean electricity grid, where we want to have a net-zero grid by 2035.

I think this capping and reducing emissions approach is actually one that we have embraced for many different sectors of our economy.

[Jonathan Wilkinson, Liberal, North Vancouver, BC]

Yes, I would just agree with Minister Guilbeault. We have looked at each sector in terms of the instruments most applicable to enable reductions but also to incent innovation.

The supply mandate for the auto sector is one. The net-zero building code will eventually be something in the building sector. The phase-out of coal was another tool we used in that context.

In the oil and gas sector, the methane regs are effectively a cap, because you're actually looking at specific reductions that are required in methane, and I would say that's been enormously successful.

Both Saskatchewan and Alberta are on track to meet—and in fact Saskatchewan is on track to exceed—the methane reductions. Both of them will tell you that out of that has come the development of technology that is going to allow them to export to other markets that are looking to do the same thing Canada did with respect to emissions reduction.

[George Chahal, Liberal, Calgary Skyview, AB]

Thank you for joining us today and supporting our study on this really important subject, and thank you for the ERP, the plan that was put forward last week.

[The Chair, Liberal, John Aldag]

Thank you.

Mr. Simard, you now have the floor for six minutes.