Natural Resources Committee on Nov. 17th, 2022

[Mario Simard, Bloc, Jonquière, QC]

Thank you.

This then means that the government made a decision to buy $7.4 billion in infrastructure without asking for further input.

When I look at what has been done in the past, I see that Kinder Morgan was accountable to the Canada Energy Regulator as to how the expansion was going to be done. However, the government never asked the CER for information on the profitability of the project.

Presently, I feel that it is the state that is taking all the losses related to the purchase of the pipeline, while the big oil and gas gluttons will be able to use this infrastructure and reap only profits.

At the Canada Energy Regulator, were there ever any questions asked in connection with the purchase of the pipeline?

[Jean-Denis Charlebois]

First, the government's purchase of the pipeline was not subject to a decision by the Canada Energy Regulator, as it was an equity transaction by the government. As a regulator, we had no specific role to play.

Second, while the government did not seek the advice of the Canada Energy Regulator, or the National Energy Board as it was called in 2018, the government may have sought the advice of other organizations. However, we are not aware of this.

[Mario Simard, Bloc, Jonquière, QC]

I see.

You're telling me that the government bought a $7.4 billion pipeline, that the pipeline costs $21.4 billion today, and that the government made this decision, which, let's face it, was very questionable economically, and you had no knowledge of what kind of information they relied on.

The Canada Energy Regulator does not know what kind of information the government had. This is what I understand. However, one thing bothers me.

I was looking at a document wherein Kinder Morgan told you in 2013 that if they were involved in the pipeline expansion, the operating costs should not be higher than the toll.

The Canada Energy Regulator said in 2019 that it would not be appropriate to raise the toll on the big oil gluttons, even though the operating costs have exploded. You said we should stick to 22 % of current overrun costs.

For me, this is a strange decision. It means that it is the state that bears all the risks and it is the state that pays for an infrastructure for the oil gluttons, who, for their part, have absolutely nothing to bear.

Do you have any documentation to support this decision?

[Jean-Denis Charlebois]

First of all, the documents that explain how the tolls are going to be calculated are transparently available on the Canada Energy Regulator's website. I assume the government consulted them before making a decision on the pipeline purchase.

Secondly, you talk about tolls, so the tolls that will have to be paid by shippers. As we speak, we do not know what these tolls will be. The mechanics of their calculation are already available, but the final amounts have yet to be determined.

As long as this information is not available, we cannot assume that the fees will be too high or too low. The board of the Canada Energy Regulator will have to decide whether the tolls are just and reasonable when the case is presented to it.

[Mario Simard, Bloc, Jonquière, QC]

Thank you.

Could you provide the committee with all the documents from the Canada Energy Regulator in relation to the pipeline and the famous toll issue?

[Jean-Denis Charlebois]

We can easily follow up and pass on—

[Mario Simard, Bloc, Jonquière, QC]

Thank you.

Ms. Petit, in your presentation, you said that Canada Economic Development for Quebec Regions was a key federal player in regional economic development.

However, many people have approached me to say that your agency systematically refuses all projects involving the forestry industry. Is that your understanding as well?

[Marie-Claude Petit]

No, it is not.

We have approved many projects involving the forestry industry over the past year. Since 2015, we have already supported more than $72 million in forest industry projects. There are different criteria to consider when we approve such projects.

In the past year, we have made a significant investment in Uniboard Canada in Val-d'Or. I was at the plant yesterday to see some of the work that will be undertaken. This is a major modernization of this facility, which creates a lot of jobs in the Val-d'Or region.

Investments continue to be made according to criteria and priorities that are established. We are also examining, in different regions, the possibility of developing projects that will allow the use, for example, of forestry residues.

I hope that answers your question.

[The Chair, Liberal, John Aldag]

Thank you.

We're out of time.

We're going next to Mr. Angus, who will have six minutes.

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

Thank you, Mr. Chair.

Mr. Charlebois, in December 2021, the Canada Energy Regulator laid out its scenario for Canada's future oil production that predicted a major increase up into the 2030s. Then it would flatline. Then at 2050 it would be roughly similar to what it is today—slightly lower, but pretty close.

Is that the CER's projection today?

[Jean-Denis Charlebois]

What you describe is our projection from our “Canada's Energy Future 2021” report, which was under the evolving policy scenario. This means we have projected what would be the production of oil and gas in a context where Canada's climate policies were to become increasingly stringent, as they have been so far.

Perhaps I may add one point of clarification: This is not a scenario where Canada meets net-zero emissions by 2050. That specific scenario is something we are currently working on and will be available in the spring.

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

Okay, that's interesting, because Mr. Guilbeault said that with his green plan they were using the Canada Energy Regulator modelling. I find it dramatically at odds with what the International Energy Agency is saying. They say that the only way we're going to keep to 1.5°C—the red line from catastrophe—is to decrease from 100 million barrels a day to 24 million barrels a day in 2050. Yet, what we see is that Canada carries on as if it's business as usual, and I find that concerning.

One of the ways that we get to this major increase that you predicted, the extra million barrels a day coming up into the 2030s, of course, is the TMX pipeline.

I'd like to turn my comments to that.

The tolls for the shipping of the TMX pipeline were originally assessed when the value of the pipeline was $1 billion. Kinder Morgan walked...when the costs were $5.4 billion, because they couldn't pass those tolls on to the companies that were shipping.

Will you confirm that the CER has limited the cost overruns to $7.4 billion of the cost of the pipeline? That would be transferred to shippers, but any overrun costs are not going to be transferred to the shippers.

[Jean-Denis Charlebois]

I cannot confirm that.

What I can confirm, though, is that the methodology that will be used to calculate the final tolls on the pipeline was approved in 2013. That methodology includes certain cost categories that are capped, and some that are not capped. This means that to the extent that there are cost increases above and beyond the cap for certain categories, then those cost increases are for the account of the pipeline rather than being able to pass those increases to shippers.

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

I'm sorry, but I'm running out of time here. These costs were figured in 2013. In 2022, this project is now $21 billion, with massive overruns of at least $17 billion.

Would you confirm that what the shippers are being told they will pay is 22% of the actual cost overruns based on a $7.4 billion budget? All the rest of that, at least 78% of the shipping costs, is right now going to be subsidized by the Canadian taxpayer. Would you confirm that?

[Jean-Denis Charlebois]

I cannot confirm that, because that particular analysis, with all of the actual numbers and mechanics to do it, will be the subject of an application that is yet before the commission. I know the numbers you are citing have been floating around in the media. Some might have been available elsewhere. However, in terms of the actual regulatory review of final tolls for the expansion, this is a file that is not before the regulator, so I cannot speak to the accuracy of it.

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

Okay.

You spoke very clearly about your mandate in cost recovery. It would be an extraordinary free ride for very profitable companies if the Canadian taxpayer is covering 75% to 78% per barrel of every barrel that's shipped—an extraordinary subsidy.

At what point will the public be informed of whether or not we are paying the cost of every barrel that's shipped, on top of the $21 billion that we're carrying for the price to this pipeline. Will the CER come back and say to the public, “We think it's in the public interest to transfer all of the cost to the shipper”—I mean, that's how the free market is supposed to work—or is it possible that we are going to be stuck with those costs?

[Jean-Denis Charlebois]

The regulatory proceeding that will be undertaken to evaluate the appropriateness of the tolls of the expanded system will be public for all Canadians to see. There are sometimes instances where some segments are confidential, but that remains to be determined. But by it's very nature, the proceedings are fully transparent to the public.

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

Have you read the Parliamentary Budget Officer's report that says the TMX pipeline has a net negative value of $600 million? Have you read his report? Do you concur with it, or do you think he has his facts wrong?

[Jean-Denis Charlebois]

I have read the report. It's not for me to judge whether the report is accurate or not. There are certain assumptions that are disclosed in the report. Other assumptions and mechanics such as the cash flow analysis is not public, so I cannot opine on whether it's accurate or not.

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

Thank you very much.

Would you be able to share with our committee any of the toll agreements that happened going back to 2013?

[Jean-Denis Charlebois]

Absolutely, that is what I will share. Yes, I agreed to that with Mr. Simard.

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

Thank you so much.

[The Chair, Liberal, John Aldag]

Thank you. We're out of time on this round.

I'm just looking at the clock. We should be able to get through the full second round, which will take us 25 minutes, and then we'll see where we are at that point.

For five minutes, first up we have Mr. Patzer. When you're ready it's over to you.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you very much.

Thank you to all the witnesses. It's great to see Abdul Jalil here today as well. You did some great work on a document on agriculture manufacturing and its importance to western Canada a couple of years ago.

I'm just going to ask you this, Mr. Jalil. Do you have a definition for “subsidy” that your department uses?

[Abdul Jalil]

Thank you very much. Can you explain—subsidy for what?