Evidence of meeting #3 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 program.
A video is available from Parliament.
5 p.m.
Liberal
Julie Dabrusin Liberal Toronto—Danforth, ON
That's fair. There's a place for regulations and then, as you mentioned, this is an incentive that goes beyond our current regulations.
5 p.m.
Liberal
Julie Dabrusin Liberal Toronto—Danforth, ON
Okay. You mentioned in your correspondence some concerns that you had about the program. I was wondering whether you feel that the changes that were made to the third intake respond to the concerns you had raised. Are you satisfied with this third intake?
5 p.m.
Director, Oil and Gas, The Pembina Institute
The changes to the third intake, I think, will address some of those concerns. We would still like to see Natural Resources Canada report out. We've heard the statistic that the fund has so far achieved 4.7 megatonnes of reductions, but we don't yet know what portion of that is actually above and beyond the regulations. What we need is for the government to show how much of that was incremental to what the regulations would have achieved anyway.
5 p.m.
Liberal
Julie Dabrusin Liberal Toronto—Danforth, ON
With respect to the third intake—because that's about the stats from the first and the second intake—now there have been some changes made to the program in that intake, and different rules are being stipulated for the eligibility. When you look at those, do you see that those address the concerns you'd raised?
5 p.m.
Director, Oil and Gas, The Pembina Institute
Yes. The third intake does require applicants to provide information about how their project will surpass regulatory requirements, so that point is addressed for that intake.
5 p.m.
Liberal
Julie Dabrusin Liberal Toronto—Danforth, ON
Great. I don't have very much more time, so I was hoping to hear from Mr. Kitchin.
You spoke quite a bit about the innovation that you're putting into place. Maybe you could take a second to speak to me about how you see the role of regulations, and then incentives such as the emissions reduction fund. What do you see is the interplay between those two?
5 p.m.
Director, Regulatory and Environmental Sustainability, Whitecap Resources Inc.
Yes, thank you.
I see the regulations playing a role to essentially set the minimum expectation of industry. It's to set the bar of where every producer needs to get to if they aren't there already.
Where I see incentives like the ERF coming into play is to reach beyond that, to go after project emission reductions that current regulations aren't incentivizing.
5 p.m.
Liberal
The Chair Liberal John Aldag
Great. Thank you.
We're now going to move to Monsieur Simard. You have six minutes.
5 p.m.
Bloc
Mario Simard Bloc Jonquière, QC
Thank you very much, Mr. Chair.
I have a quick question for Mr. Cosbey. I hope that he can hear me clearly and that the interpretation is working. I see the signal to go ahead.
Mr. Cosbey, in your presentation, you talked about reforming financial support to fossil-fuel industries and you listed some basic principles. If I understand you correctly, the support should not be offered to projects that are intended to reduce the cost of production, nor should there be support for projects that are intended to allow the industry to comply with regulations.
My impression is that the emissions reduction fund is a prime example of what you see as a bad practice in terms of funding fossil-fuel energy. Is that your perception?
5:05 p.m.
Senior Associate, International Institute for Sustainable Development
With the improvements that have been made in the third intake, the program comes much more closely into alignment with those principles. As has been noted, it's now mandatory for a project to demonstrate that it is going towards reduction of emissions over and above not just existing, but also pending regulations. So this does satisfy that criterion.
As to whether the support from the ERF lowers cost of production in the affected operations, that's a tricky accounting question. As far as we can tell, the requirements for extended, detailed financial additionality statements from proponents in the third intake will try to mitigate that risk. I think it's a reasonable amount of accommodation towards recognizing the principle as we've laid it out.
5:05 p.m.
Bloc
Mario Simard Bloc Jonquière, QC
Thank you.
I have a quick question for Mr. Kitchin.
Can you hear me clearly, Mr. Kitchin?
5:05 p.m.
Director, Regulatory and Environmental Sustainability, Whitecap Resources Inc.
Yes.
5:05 p.m.
Bloc
Mario Simard Bloc Jonquière, QC
I listened to your presentation on carbon capture. When we did a study on hydrogen here, a number of people told me that carbon capture techniques are not quite ready and that we are perhaps still at a research and development stage.
Earlier, my colleague Mr. Maguire asked you whether a tax credit for carbon capture would be a good thing for your area of activity. The emissions reduction fund suggests to me right away that the oil and gas sector is not profitable. Without the support from the federal government, the products that you are trying to market with a low carbon footprint are not profitable.
Am I right in saying that you are not able to reduce CO2 emissions in the oil and gas sector on your own and that you absolutely need federal government support?
5:05 p.m.
Director, Regulatory and Environmental Sustainability, Whitecap Resources Inc.
Thank you for the question.
There are emission reduction activities and projects that are profitable in different ways. They have varying abatement costs. I've seen in the range of $10 to $20 per tonne, all the way up to $300 per tonne to reduce emissions. While the economy has been stronger and is recovering, as we've seen with commodity prices, there is still limited capital to go around. While projects may be economic, the first focus for emission reductions is to ensure that we are achieving and exceeding established regulatory requirements and other regulations that have already been announced for the horizon. Then we need to look at other opportunities as well.
5:05 p.m.
Bloc
Mario Simard Bloc Jonquière, QC
I will try to be more clear.
A basic principle in economics is the principle of competition. To become competitive, one's costs of production must be lower than the income from the products one sells. If I understand correctly, you are not able to respond to environmental regulations on your own and you need government support. That is what the emissions reduction fund seems to be for and it is the point that my colleague raised just now when he was saying that there should be a tax credit for carbon capture. It means that, in terms of the market, you are not able to reduce the environmental footprint of the oil and gas sector without resorting to funding from the state.
If you could answer that question with a yes or a no, it would be simpler.
5:05 p.m.
Director, Regulatory and Environmental Sustainability, Whitecap Resources Inc.
The topic of carbon capture is not an area within my expertise, so I cannot speak to it in detail. I do understand that the technology is very expensive to install and operate. It's carbon capture processing in particular that requires government incentives to help get it across the line.
5:10 p.m.
Bloc
5:10 p.m.
Liberal
The Chair Liberal John Aldag
All right, that takes us to the end of that round.
For the final six-minute panel, we have Mr. Angus.
5:10 p.m.
NDP
Charlie Angus NDP Timmins—James Bay, ON
Thank you.
I'd like to start by asking a general question of the Pembina Institute. People I've spoken to in the industry say it's eminently possible to get to net zero with methane. We're talking about something that is really a planet killer. I would think that if I were the head of an oil company, I'd be out front saying we're going to deal with methane.
We have drones. We have AI. We have commercially feasible technology. Is it possible to make a commitment to get to zero on methane?
5:10 p.m.
Director, Oil and Gas, The Pembina Institute
We've seen evidence that it's possible to get very close to zero or to virtually eliminate it. Zero is always a hard thing to get to, but certainly addressing methane emissions is, as you said, very cost-effective. We have the technology. It's commercially available. It's currently being used by Canadian companies. We can get very close to zero.
5:10 p.m.
NDP
Charlie Angus NDP Timmins—James Bay, ON
I notice that in your letter to Minister Wilkinson in December you stated that the federal government is on track to miss the commitments it has already made.
Is that accurate?
5:10 p.m.
Director, Oil and Gas, The Pembina Institute
The indication we have is that they're not on track. The government released a progress report in late December, but that report really didn't take into account the updated numbers. Therefore, we still don't have a sense whether we are on track, but as I mentioned, the indication so far from these scientific studies is that we're not on track.
5:10 p.m.
NDP
Charlie Angus NDP Timmins—James Bay, ON
The frustration for me is that if we all agreed that this is a planet killer, that it is doable to fix this....
The Prime Minister made very strong commitments in Paris, and then he made much stronger commitments in COP26. As the environment commissioner stated, what is the point of making more dramatic promises if you can't meet the targets?
In terms of the targets that we have, is it possible through the use of regulation to say, “This is what has to be met. This has to be met over five, six or 10 years”? How much can we do through regulation?