Natural Resources Committee on Jan. 31st, 2022

[The Chair, Liberal, John Aldag]

Thank you. I appreciate your comments.

We are ready to go to our next individual, from the David Suzuki Foundation.

Mr. Green, we'll turn it over to you for your five-minute opening statement.

[Tom L. Green, Senior Climate Policy Advisor, David Suzuki Foundation]

Thank you for the opportunity to appear before the committee today.

The David Suzuki Foundation has long advocated for effective regulations to rapidly reduce methane emissions from the oil and gas sector. Because it is a short-acting greenhouse gas with a 20-year, climate-forcing effect 86 times that of CO2, less methane in the atmosphere leads to immediate climate benefits. The urgency of tackling the oil and gas sector's emissions is accentuated by field measurements that consistently show around double or more methane emissions than are recorded in Canada's national inventory report.

Unfortunately, existing methane regulations can actually incentivize the increase in flaring of gas that is rich in methane and volatile organic compounds. The flaring of methane and VOCs results in the formation of black carbon particulates, which are both toxic and a short-lived climate pollutant with a global warming potential that is many hundreds of times greater than carbon dioxide. Flaring is also a compliance pathway that is inconsistent with Canada's climate objectives and the commitment to zero routine flaring by 2030.

The federal government announced the emissions reduction fund in the early days of the pandemic, in a moment of economic uncertainty when governments were quickly rolling out a suite of measures to stabilize the economy. As my colleague, Dr. Pineau, mentioned, the prices of gas and oil were in a very low territory. We believe in the polluter pays principle, so the ERF providing financing to the oil and gas industry is not the approach we would have recommended. However, once the decision to establish the ERF was made, we sought to ensure that supported products achieved emissions reductions that went beyond regulatory requirements, with a focus on eliminating rather than reducing emissions.

In an April 2020 joint letter, we made recommendations to the minister. We believed that if the ERF were guided by such principles, the program would lead to emissions reductions beyond those that could be achieved by existing federal and provincial regulations. Further, the ERF would catalyze growth in Canada's nascent methane abatement industry.

When NRCan announced the net results from intakes one and two, we were pleased to see that 97% of the emissions reductions came from projects that eliminated intentional routine venting and flaring of methane. This abatement was achieved for less than $20 per tonne of CO2 equivalent. This is a notable achievement, demonstrating that Canada should immediately strengthen the existing regulations to end the intentional venting and flaring of methane-rich gas.

We were naturally concerned to learn some of the issues identified in the environmental commissioner's report. Expecting that NRCan would take corrective action, we wrote to Minister Wilkinson in December of last year to urge him to ensure that whatever course of action is taken, be it revising or cancelling the ERF in favour of other measures, the department aims to meet or exceed the proportionate outcomes of the first two intakes of the program over an equivalent period.

Last week, we were briefed by departmental officials on changes to the program for intake three. We are pleased that projects were required to surpass regulatory requirements to be verifiably incrementable, and that only capital infrastructure projects that eliminate sources of intentional routine venting will qualify under the program.

The ERF's achievement showed that tackling methane offers some of the lowest-cost mitigation on a dollar-per-tonne basis across the Canadian economy. We are committed to participating in the review of existing regulations and the development of enhanced regulations to achieve the 2030 target of requiring Canada's oil and gas sector to reduce its methane emissions by at least 75%. We are also cognizant that it takes time to develop those regulations. We prefer the regulatory approach and we believe that future efforts to mitigate emissions should be guided by the polluter pays principle, Canada's commitment to eliminate fossil fuel subsidies by 2023, and the commitment to phase out public financing of the fossil fuel sector.

Nonetheless, we recognize that the ERF, by focusing on elimination and exceeding regulations, has the potential to quickly deliver substantial reductions in emissions that put Canada in a better position to meet its climate goals on improving air quality and public health.

Thank you for listening. I'll be happy to answer your questions.

[The Chair, Liberal, John Aldag]

Thank you so much for those opening comments.

Everybody has been really good about keeping it under the time limit. I appreciate it.

Next we will hear from Edmonton Global.

Mr. Lakeman, it's over to you. You have five minutes.

[Brent Lakeman, Director, Hydrogen Initiative, Edmonton Global]

Good afternoon.

Good afternoon, members of the Standing Committee on Natural Resources.

I'd like to start off by acknowledging that I'm participating today on Treaty 6 territory, the traditional gathering place and centre for trade for many first nations, Métis and Inuit people.

Edmonton Global thanks the committee for the opportunity to appear before you today to discuss the hydrogen opportunity. The purpose of Edmonton Global is to radically transform and grow the economy of the Edmonton metropolitan region.

The energy transition, in particular the hydrogen opportunity, is an excellent example of the radical transformation that our region is seeking to make. We can’t do it alone. We recognize that the federal government is a critical partner in this transition. Global net-zero commitments being made by governments and industry are driving this transformation. It's estimated that this shift will see global investments of between $2.5 trillion and $11 trillion between now and 2050.

Hydrogen will play a key role in the energy transition across the world and could represent 20% of the future energy mix. In Canada, that number is even higher at approximately 30%. This is a huge economic opportunity for Canada. The Transition Accelerator, a Canadian think tank working to accelerate our energy transition, estimates that the hydrogen transition represents a $100-billion opportunity annually. It will create jobs. The federal government’s hydrogen strategy estimates 350,000 new jobs across Canada. A recently commissioned study on the energy transition saw similar results, with the shift to clean energy technologies resulting in a $61-billion impact on Alberta’s GDP and 170,000 jobs.

In 2020, the first hydrogen hub in Canada was launched in the Edmonton region, in recognition of the critical role the region will play as the epicentre of Canada’s hydrogen economy. The hub is led by the mayors and leaders of five municipalities within the region, as well as the chiefs of two of the region’s first nations.

The world is starting to pay attention to what is happening here. We’ve had a number of announcements of multi-billion dollar projects planned for the region, including the world’s first industrial scale net-zero hydrogen production facility. We’re expecting about $30 billion in new investments within the region by 2030.

Delivering on the economic opportunity will not occur on its own. It will require a commitment from all orders of government to work together in a timely and coordinated manner. We’ll need to invest in infrastructure. This is related to the transport and use of hydrogen within hydrogen hubs, as well as getting hydrogen to key export markets.

We must also invest in the workforce that will support the hydrogen economy. This is a great transition opportunity for the highly skilled workforce developed through our traditional energy sector.

Federal government programs will play a key role in supporting this industry’s growth. Programs like the clean fuels fund and the net-zero accelerator are a great start. Federal incentives such as a tax credit for CCUS deployment can play a critical role as well.

We need a strategic approach to federal government investments, focused on quickly building and scaling the infrastructure needed. This will help deliver the emission reductions that will be needed to achieve net zero. This means focusing on the parts of the country that can scale—and scale quickly—not only in the production, but in the use of it across key sectors.

We are seeing an international trend in the use of hydrogen hubs to catalyze the growth of the hydrogen economy. Countries like the U.K., the Netherlands, Germany and Korea are all establishing hydrogen hubs. Similarly, Canada should treat hubs as a strategic mechanism for advancing the energy transition. Hubs provide a tailored approach that recognizes regional opportunities across different parts of the country.

The Edmonton region hydrogen hub is providing a road map for the rapid development of western Canada’s hydrogen economy, which will require an integrated approach that includes support for things like hydrogen refuelling infrastructure, incentives for the acquisition of hydrogen fuel cell or dual-fuel vehicles, and the staged grow-out of pipeline infrastructure to connect key hydrogen demand clusters.

There is a global competition to establish leadership in the hydrogen economy, and Canada risks being shut out of key export markets if we don’t move quickly and aggressively. We need our federal and provincial governments working together to establish key hydrogen transportation infrastructure for getting our low-carbon, low-cost products to global markets like Japan and Korea.

One last area I would like to highlight is the importance of moving away from messaging that is focused on the colour coding of various methods of hydrogen production. The investment community needs certainty around the carbon intensity expectations, and we should be communicating scientifically credible measures of carbon intensity. There is a risk that some of the world’s most advanced and rigorous projects will be regarded as incompatible with some organizations' net-zero goals if we continue with the narrative that low-carbon hydrogen can come only from renewable energy sources. Edmonton Global applauds the efforts of the federal government and the Alberta government to pursue a rigorous, scientifically credible carbon intensity standard for future projects.

This concludes my opening remarks. I'm happy to respond to questions from the committee.

[The Chair, Liberal, John Aldag]

Perfect. Thanks very much. You hit it right on five minutes.

I will ask everybody presenting to not rush your sentences, though, so that our interpreters can keep up with you.

With that, we have our final introductory statements from Environmental Defence Canada. I believe Ms. Levin, the climate and energy program manager, is going to give those opening remarks.

If that's the case, Ms. Levin, we'll go over to you for five minutes.

[Julia Levin, Climate and Energy Program Manager, Environmental Defence Canada]

Thank you for the invitation to appear before the committee today. I would like to provide some context around the federal government's track record when it comes to providing oil and gas companies with subsidies, and the patterns that are exemplified by the emissions reduction fund.

The Government of Canada continues to provide huge amounts of subsidies and public supports to the fossil fuel companies despite a commitment to eliminate these subsidies. The emissions reduction fund was just one of many support programs created in 2020 to subsidize the oil and gas industry, part of $18 billion in subsidies and public financing promised to the sector that year alone. Over the past five years, governments in Canada have provided $100 billion to oil and gas companies.

We know that when it comes to the climate crisis we need an all-of-government approach. Fossil fuel subsidies undermine our ability to reach our climate commitments. That's why international leaders such as the head of the IEA and the UN Secretary General are urging countries to remove fossil fuel subsidies as a key step to tackling the climate crisis.

The ERF is just one of several new funding programs set up to provide fossil fuel subsidies under the guise of emissions reductions and job creation. Minister Wilkinson has claimed that these programs that are ostensibly about achieving environmental outcomes are not fossil fuel subsidies, but that simply isn't true, and it doesn't align with international definitions such as the World Trade Organization's.

Programs like the ERF lower the cost of production and doing business for oil and gas companies and result in increased profitability. They distort the market, even further benefiting fossils over solutions like renewables and the electrification of transport such as EVs. These programs socialize the costs of environmental cleanup by allowing oil and gas companies to reap enormous benefits from public resources. In fact, oil and gas profits are at an all-time high, estimated by the ARC Energy Research Institute to reach nearly $100 billion this year.

Not only do these programs pass environmental costs on to taxpayers, therefore violating the polluter-pays principles that are enshrined in Canadian laws, but none of these programs did what policy-makers claimed they wanted to achieve in terms of emissions reductions, environmental cleanup, or job creation or retention. In fact, the audit by the commissioner described the ERF as a fossil fuel subsidy and an inefficient use of taxpayer money. It revealed just how poorly designed this program was.

Though it is not practical to do an audit of every spending program, the trends illustrated by the commissioner are apparent in other government programs, such as the $1.7 billion that went to cleaning up oil and gas wells. Rather than leading to new remediation work, the end result was largely that profitable companies were able to pause their own spending and replace it with public funds. This pattern causes concerns about how even larger funding programs are being designed, such as the $8-billion net-zero accelerator.

As we know, the government has committed to eliminating fossil fuel subsidies by next year. This was in response to large amounts of public pressure. However, in order for the government's approach to be credible, it must use internationally recognized definitions. Failing to do so means breaking a promise made to Canadians.

The ERF exemplifies a second concerning pattern around the impact of industry lobbying. The best, most cost-effective way to tackle methane emissions is through regulations. This approach ensures that the public isn't cleaning up for industry and that every facility is undertaking emissions reduction activity.

We know that the oil and gas industry lobbied to have existing methane regulations delayed, weakened and made voluntary. The pattern here is of the oil and gas lobby weakening the regulatory approach in order to reduce their cost of doing business, and then convincing governments to take on some of those costs, in effect subsidizing regulatory compliance.

Canada needs to tackle its methane problem. Achieving reductions in methane emissions is critically important. It's actually inexpensive, and many measures are easy to implement. We must strengthen the current regulations aimed at reducing methane emissions by 2025 and ensure that the new regulations in the 2030 methane reductions are robust. However, there's no reason that the public should be bearing these costs instead of industry.

Furthermore, the best way to reduce methane emissions is to begin talking about the need to transition off oil and gas. We need to start actually planning for the transition away from fossil fuel production.

In closing, we know the scale of spending needed to tackle the climate crisis is significant. Given that governments don't have infinite spending capacity, we need to be strategic. Oil and gas companies have profited immensely for decades from public resources. Instead of continuing to subsidize the sector, the government must implement strong regulatory frameworks that ensure oil and gas companies are doing their fair share while investing in activities that put us on a climate-aligned pathway, including energy efficiency, renewable energy and electrification. Ongoing subsidies like the ERF divert spending from these climate solutions.

I will end there.

[The Chair, Liberal, John Aldag]

That's great. Thank you.

With that, thank you to each of our panellists for those opening statements.

We'll now have one round from each party, of six minutes each. We'll start with Mr. Melillo.

[Eric Melillo, Conservative, Kenora, ON]

I'd like to thank all of our witnesses for joining us today and providing their comments so far. I'm looking forward to hearing more about what they have to say when we get to questions.

One of the concerns we've heard about the offshore fund is that in certain areas, emissions actually increased when companies received the fund, which is obviously not ideal when you're looking to reduce emissions. There's something I want to note there in the sense that obviously, when companies in Canada are ramping up their production, they're doing so in ways that are much more environmentally friendly than many other jurisdictions and are actually displacing, whether it's oil and gas or LNG, production from other countries that have worse regulations.

I'd like to direct my question to Mr. Pineau.

I'm just curious to get your view, when looking at LNG in Quebec, for example, or looking at the oil and gas sector in Alberta. An opportunity that I had in the last Parliament was to travel to Fort McMurray to visit one of the sites and see some of the great work they're doing to lower their emissions. I'm wondering if you can comment on the positive impacts of increasing production in Canada to displace the emissions that are happening at the global level.

[Pierre-Olivier Pineau]

It's interesting to look at the question from that angle.

I've been to Fort McMurray. I've looked at many oil sands facilities and their emissions. The intensity of emissions is declining, and that's good. You're also right in saying that oil and gas production in Canada is actually better than in most places in the world. You referred to the LNG project in Quebec. From an energy perspective, I was in favour of this project. We see the kinds of geopolitical issues in Europe and Ukraine and Russia. If Canada could be a supplier of natural gas for Germany, for example, that would definitely be very helpful for the world overall.

Having said that, the fight against climate change should not focus on production but on consumption. We tend to forget that Canadians are among the world leaders in terms of energy consumption per capita. The focus we have on the industry, I think, is misplaced. Today we're here to discuss one program that subsidizes production in Canada. Clearly this program is wrong and should be cancelled as soon as possible.

The real fight should be on consumers. We should make Canadian consumers able to use less oil and gas by having better mobility systems and by having stricter norms in terms of building codes and heating for our homes. We should provide alternatives. The key problem is not, I would say, the oil and gas industry. The key problem is our consumption habits and how we have been trained to use too much oil and gas, and too much energy in general, even electricity. I'm from Quebec. We use too much electricity in Quebec.

[Eric Melillo, Conservative, Kenora, ON]

I appreciate those comments, and that actually leads to another question I have.

In your report, “The State of Energy in Quebec 2020”, you note that the number of vehicles per 1,000 persons in Quebec has continued to increase, while electric and plug-in hybrid vehicles, I believe, represent about 3% of new automobile sales in Quebec. I come from northern Ontario, Kenora, a region where there are very limited options in terms of electric vehicles. There are very few charging stations along the highways, and of course frigid temperatures, which make some of these changes in consumption, some of these changes of habits, quite difficult for people in my region.

I'm wondering, in your opinion, if Canada at this time does have the infrastructure necessary to facilitate a greater growth of electric and plug-in vehicles.

[Pierre-Olivier Pineau]

The quick answer is no; we don't have the infrastructure, but the problem is not EVs. The problem is not the lack of EVs. The problem is we have too many cars and too many big cars in Canada. The geography of Canada hasn't changed during the last 20 years, but the number of cars per 1,000 people has increased, as well as the size of these cars. We really have an oversized problem in terms of having too many cars and vehicles that are too big.

Before electrifying these vehicles, we should actually go back to smaller cars and promote car pooling and car sharing—options that don't require public transit. I'm a big supporter of public transit, and wherever we can we should, but truly the focus should be on smaller cars. It will be much easier to electrify smaller cars than to electrify the current fleet of SUVs. This is where we are really misaligned in our objectives.

[Eric Melillo, Conservative, Kenora, ON]

Mr. Marshall, I believe you had your hand raised. I want to see if you have any comments on either of those questions. We have limited time, so just keep that in mind.

[The Chair, Liberal, John Aldag]

We're pretty much at the end of the six minutes, but I missed your hand up, so I'll give you a second to add a sentence or two. Then we'll go to Mr. Chahal.

[Dale Marshall, Manager, National Climate Program, Environmental Defence Canada]

Just super quickly, I want to correct the record.

There is some peer-reviewed research on the GHG intensity, the carbon content, of different forms of oil from around the world. Canada's is one of the worst. Masnadi et al. found that it was fourth dirtiest in terms of carbon content compared with 50 other regions in the world.

To say, then, that Canada's oil is somehow clean and will displace others in a way that's beneficial to the climate is nonsense. Any additional oil from Canada means more climate change.

[The Chair, Liberal, John Aldag]

We're going to have to move over to Mr. Chahal.

Mr. Chahal, you have six minutes.

[George Chahal, Liberal, Calgary Skyview, AB]

Thank you so much for presenting today. It's great to have you all on the panel.

I'm glad that Dr. Pineau mentioned the three-dollar-per-barrel oil price. Actually, western Canadian select was negative, I believe. That's important to know. We had a significant energy crisis that impacted western Canada. I'm from Calgary. I'll give you some numbers. There's a 30% vacancy rate in our downtown core, with significant challenges to provincial and municipal budgets. Most importantly, there's the loss of thousands of jobs and the drastic impact on working Albertans and Calgarians.

As I see it, the purpose of the program is quite clearly outlined. The $750 million brought forward was part of Canada's COVID-19 economic response plan to help oil and gas companies maintain jobs. We were in crisis, and it was critical to maintain jobs while reducing methane emissions. I think that's the critical thing when we look at the first part of the intake program. Did we meet those objectives? That's critical to look at.

Mr. Lakeman, you talked about hydrogen and Edmonton Global and the great initiatives you're working on. Are there other ways that the Government of Canada could be supporting oil and gas companies in reducing their emissions while retaining jobs?

As a second part to that question, do you believe this program has shown new, promising research and development opportunities that have come out of the first intake part of the program and will help spur further reductions in methane gases?

[Brent Lakeman]

I'm not sure I can go into a whole lot of detail on the program in that our focus on hydrogen has been.... Probably this program specifically has been less focused, although I should say that when we talk about the hydrogen opportunity, part of that is managing the methane emissions associated with upstream oil and gas production or natural gas production in particular.

Any programming that continues to search for efficiencies or the elimination of fugitive and vented methane emissions certainly helps, to go back to that carbon intensity of hydrogen production. It requires a multi-faceted approach to look at the oil and gas sector and how it can contribute to emissions reductions that will come back to the hydrogen benefits we're talking about.

That would be my main comment there: a focus on continued reductions combined with some of the provincial initiatives as well, or certainly positioning our natural gas production sector favourably compared to others. One example I'll use is a recent report comparing the colours of hydrogen, blue hydrogen and green hydrogen. It was using methane emission factors that were not really representative of what's going on in Canada, in Alberta. My understanding from some of the commentary back was that we were probably 25% of that total, or let's say a 75% improvement from what was being used in international benchmarking.

We're continuing to see improvement. That continues to position our hydrogen production sector favourably as well.

[George Chahal, Liberal, Calgary Skyview, AB]

Do you believe we've seen value for money and optimization of resources with our first intakes of this program?

[Brent Lakeman]

I'm not in a position to comment on the intake of the program. I haven't done that detailed review. I'm not an expert in that area.

[George Chahal, Liberal, Calgary Skyview, AB]

Mr. Green, thank you for being here. NRCan has made various changes to the program for the third intake period. In your opinion, have these changes improved the program? Do you think the newly established cost-per-tonne threshold is likely to provide value for money?

[Tom L. Green]

The department has worked to improve the program in response to the commissioner's result analysis.

One of the key things to recognize here is that the regulations do not require the elimination of all continuous sources of intentional routine venting. I wish they did, but they don't. We have a lot of oil wells that produce associated gas, and that gas is perhaps not near a gas collection network right now. These projects have allowed a tying into that infrastructure, which allows that gas, instead of being vented or flared, to supply energy needs or to be used for on-site fuel. I think that's an improvement over the regulations.

To change the regulations—which we would really like to see; we want to see them ramped up—does take time. I think this fund, intake three, will help reduce emissions in the interim period.

[George Chahal, Liberal, Calgary Skyview, AB]

Do you have any other suggestions that would help improve the program, moving forward?

[Tom L. Green]

I think the changes that have been made are very constructive. I wouldn't be able to get into that level of detail.

[The Chair, Liberal, John Aldag]

The clock has run out there, so thank you.

We are moving on to Monsieur Simard.

You have six minutes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

Mr. Pineau, I found your remarks very enlightening, especially since my colleague Mr. Chahal just told us that the program's objective was to help the oil companies. I find that intriguing. I think that we're making progress.

In your presentation, you said that the program may have existed because oil prices fell during the pandemic and that now, with oil prices rising and companies becoming profitable again, the program may no longer be needed.

I'm wondering about the government's motivations. Why did the government set up the emissions reduction fund? I don't think that it was to reduce emissions from the oil and gas sector, but rather to provide financial support. I gather from your explanation and Mr. Chahal's that the goal was to provide financial support to the oil and gas sector during the crisis, not to reduce GHG emissions.

As a result, I want to address an issue that worries me a great deal. Isn't there a new way of doing things now, in which emissions reduction is being used as an excuse to financially support the oil industry? This was done to some extent with hydrogen.

I'd like to hear your thoughts on this, Mr. Pineau.

I also want to hear from Ms. Levin afterwards.