Natural Resources Committee on Nov. 24th, 2022

[Dr. Heather Exner-Pirot]

That's a great question. There's so much more that we could be doing. We are the second-largest country in the world and we probably have the most.... We're only number eight in terms of mining value. Number one is China and number two is Russia, so it is incredibly important—for us and for our allies—that we develop more critical minerals.

I know there's been some good push in the government to start planting some seeds on that, but the regulatory system is still a huge barrier to getting investment into mines so they can get developed and start producing those minerals. It's also hard to do a whole critical minerals supply chain in Canada with 40 million people. It has to be done with at least North American integration, and we probably need to start integrating our Asian allies and European allies. I think people are at least talking about that.

The American military is investing in Canadian mining and impact assessments, and that's a wild thing. Canada should be doing at least what the American military is doing, but the bigger point is that everyone sees how important it is that Canada step up its game in critical minerals. The IEA says that to reach net zero we need six times the amount of mining we have today, and we are nowhere near on track to doing that given the investment that we see.

[Viviane LaPointe, Liberal, Sudbury, ON]

Mr. Helin, I see you have your hand up. Do you want to add a comment to that as well?

[Calvin Helin, Chief Executive Officer, INDsight Advisers, Macdonald-Laurier Institute]

I didn't have a comment relating to that particularly. I wanted to give a bit of an indigenous perspective on natural resource development and some of these issues. Is that permitted, Chair?

[The Chair, Liberal, John Aldag]

I'll leave it to Ms. Lapointe.

Yes, she says that's fine.

[Calvin Helin]

First of all, I would like to acknowledge the indigenous people from where I am, the Salishan in Vancouver, and the indigenous people in Ottawa. I'm actually not too sure who they are.

Before I speak, I will say that I was the adviser to the Kenney government in setting up the Alberta Indigenous Opportunities Corporation. Essentially, it has provided loan guarantees to indigenous groups to get involved in the natural resources sector.

I think there's a great frustration in the indigenous community that their interest in becoming active participants in the economy is being frustrated by government policy, particularly in the natural resources sector. Instead of managing our poverty, there's a huge interest in getting back to the prosperity that existed prior to Europeans coming to the Americas. Since we were deprived of our traditional territories, there's a real need for us to have access to capital.

I would recommend that the federal government look at something like this program on a national basis. I think there's a role for subsidies. Certainly in my lifetime, I've watched subsidies go to every industry. In Quebec, the two big names that come to mind are Bombardier and SNC-Lavalin. There is a role for subsidies. There is a role for government.

Where government steps outside its role, I believe it creates unnecessary costs and burdens on the taxpayer. I think the TMX pipeline is one example of that. We had a pipeline that was going to be built for $7 billion or $7.5 billion—

[The Chair, Liberal, John Aldag]

I'm sorry. I'm going to have to stop you. We are over the time, but you may be able to continue when we get to another round of questions.

Now we'll move to our next member.

Mr. Simard, you have six minutes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

Mr. Giroux, you concluded in June that Trans Mountain was no longer a profitable undertaking. My research shows that Kinder Morgan had already found that the pipeline was not profitable in 2013. If we rely on the 2019 figures, which included tolls to cover a $7.4 billion project, it was already limited.

As a final point, I am wondering whether expanding the pipeline is a political project or an economic project.

[Yves Giroux]

You are in a better position than I am to answer that question. My role is essentially to determine whether it is probable that in its current form and according to the existing parameters, and looking only at the pipeline itself, the expenses incurred to build and extend it and the projected revenue, the pipeline will or will not generate profits. My analysis is limited to that.

[Mario Simard, Bloc, Jonquière, QC]

Right, but I understand from your analysis that it is unlikely that the project will generate profits. I am not going to put words in your mouth, but in my opinion this is no longer an economic project, it is a political project.

I have repeatedly heard Mr. Guilbeault and the Deputy Prime Minister say that the money that was going to be generated by Trans Mountain was going to be reinvested in clean energies. But how can money be reinvested in clean energies if the project results in a deficit?

[Yves Giroux]

According to our analysis, there will be no revenue or profits to be reinvested unless certain fundamental parameters change or a private sector actor is prepared, when it comes time to sell the pipeline, to pay more than what we estimate its fair market value to be.

There may possibly be profits, but at this point, that is not what is foreseen. Obviously, there are broader benefits for the Canadian economy than just the profits generated by the pipeline, but if we consider only the anticipated and past cash flow, it is unlikely that there will be...

[Mario Simard, Bloc, Jonquière, QC]

I understand.

To make it brief, it is unlikely that the pipeline will generate money to reinvest in renewable energies.

[Yves Giroux]

That's exactly right.

[Mario Simard, Bloc, Jonquière, QC]

I love your answer.

Have you ever done a study to find out what a fossil fuel subsidy means for the federal government? Does the Parliamentary Budget Officer have an idea of what the federal government invests in the gas and oil sector?

[Yves Giroux]

We don't have an exact idea of all investments in the oil and gas sector, primarily because it is difficult to distinguish the precise subsidies to the oil and gas sector from the tax breaks offered to the economy as a whole. We have not looked into all of the tax breaks and direct assistance to the oil and gas sector.

However, as I said in my opening remarks, a senator asked our office to estimate what tax breaks are given to the oil and gas sector, using certain precise parameters. That is what we did, but it does not include all subsidies and direct assistance to the sector.

[Mario Simard, Bloc, Jonquière, QC]

I am a policy maker. I sit on a committee that is studying the types of assistance offered to natural resource sectors. I can't get a clear picture of what is invested in the gas and oil sector, and this is a major problem for me.

What is the decision-making process based on? How can I compare the forestry sector and the gas and oil sector, for example, if I can't define what a subsidy to that sector means? Do you agree with my analysis?

[Yves Giroux]

I agree entirely. It makes your job difficult if you don't have all the information.

[Mario Simard, Bloc, Jonquière, QC]

It is difficult, if not impossible, because ultimately, it is not possible to do a comparison.

[Yves Giroux]

Without having a clear picture of the government resources or tax breaks allocated to each sector, it is somewhat difficult to determine whether their level is too high or too low.

[Mario Simard, Bloc, Jonquière, QC]

In the past, you did studies or analyses that also took the environmental costs into account. That is what you did in your last reports, for instance, if I am not mistaken.

Did you take the environmental costs into account in your report on Trans Mountain?

[Yves Giroux]

No, we considered only the construction costs and the profits or revenue generated by the pipeline over its useful lifetime.

[Mario Simard, Bloc, Jonquière, QC]

So another analysis could be done that would take the environmental costs into consideration and would make the profitability of Trans Mountain even less attractive.

[Yves Giroux]

It's difficult to do, but it's possible. Other witnesses have already done that kind of study.

[Mario Simard, Bloc, Jonquière, QC]

Right.

During the election campaign, Mr. Guilbeault said that by 2023, the government was going to end direct and indirect subsidies and the tax breaks given to the gas and oil sector.

At the start of the week, a representative from Export Development Canada told us that yes, the government was ending direct subsidies, but indirect subsidies and tax breaks would continue.

Do you have an idea of what those indirect investments and tax breaks come to?

[Yves Giroux]

We estimated the value of the tax breaks in response to a request by Senator Galvez, and we published our results in a report in December 2021. In 2019, using five measures, the tax breaks given to the oil, gas and coal sector amounted to $2.4 billion.

[Mario Simard, Bloc, Jonquière, QC]

I sometimes see figures come up about the annual tax breaks given to the oil and gas sector, some of which reappear often.

Just now, Mr. Gunton talked about a range from $4.4 to $86 billion, depending on the criteria used. Do you have a more precise idea of what that might look like?