Evidence of meeting #43 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 billion.
A video is available from Parliament.
Noon
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We expect there's a difference—between the pipeline and expansion costs and the expected income flows—of negative $600 million, so it would be a loss of about $600 million.
I'd also like to point out that in 2018, we were asked what the economic impact would be of a reduction in the discount at which Western Canadian Select sells compared to WTI. That was one of the rationales for buying the pipeline in the first place. We estimated at the time that a five-dollar reduction in the price of the discount at which WCS sells would increase nominal GDP by $6 billion, which is probably one explanation behind the decision to purchase the Trans Mountain.
12:05 p.m.
Conservative
Ted Falk Conservative Provencher, MB
That means the current government bought a project that had a book value of less than $1.5 billion and a projected project cost of roughly $3 billion, and turned it into a $21-billion expenditure.
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Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Well, that's—
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Conservative
Ted Falk Conservative Provencher, MB
Only a Liberal government could do that.
You don't have to comment on that.
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Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Thank you.
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Voices
Oh, oh!
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Voices
Oh, oh!
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Conservative
Ted Falk Conservative Provencher, MB
Do you have any analysis at all as to why the cost has risen from a projected $7 billion to—
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Liberal
The Chair Liberal John Aldag
We're at the end of the five minutes, but if you can, give a very brief summary. Then we have to move on.
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Executive Director, Resource Works Society
The Government of Canada has pointed out that the government revenue increase from TMX will be $46 billion over the course of its construction and the first 20 years. I know the economic impacts of the project were not studied, as Mr. Giroux told the CBC. The whole reason we're doing this project is to have an economic impact, so to not consider that question in any analysis of it, to me, is an oddity of process.
In terms of why the situation is what it is, we missed the window of cheaper construction costs due to delays. I count about 20 lawsuits that were brought forward by various pressure groups for the specific purpose of delaying and making the project more expensive. The end result is that the project has been made more expensive.
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Liberal
The Chair Liberal John Aldag
We'll have to stop there. You will have more rounds coming up.
Mr. Chahal, we'll go over to you. You have five minutes.
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Liberal
George Chahal Liberal Calgary Skyview, AB
Thank you, Mr. Chair.
Thank you to all the witnesses for their testimony today.
Mr. Muir, I will start with you.
We have talked a lot about CCUS technology and its impact in our western provinces and about how it's extremely important to meet and hit our targets moving forward. Have you done any analysis on how many jobs would be created through CCUS and the economic impact of it?
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Executive Director, Resource Works Society
The short answer is that no, I have not done that study, but what I would say is that we have an example developing right now. It's known as the Pathways Alliance, which represents half a dozen of the largest oil sands companies that have made a generational bet on CCUS. What they are going to do is capture carbon and put it in a pipeline. They are going to move it to a place in Cold Lake, Alberta, where it can be injected underground and kept there for the length of time it will be kept there, which is, I guess, forever. That's a multi-billion dollar transformation, according to this consortium or group, to have net-zero oil sands and take out the production side of carbon. The group has deemed this to be a viable investment.
I have mentioned already President Biden's bet on CCUS. I would note that we have seen the Boundary Dam in Saskatchewan as an early adopter. I know it's often criticized because it cost so much and the benefits took a while to come along.
To my surprise, when I was in the U.K. a couple of years ago, I was being told about the Teesside carbon capture project in the north of England, which was going to sequester carbon from the North Sea oil fields. It was a consortium of TotalEnergies, Shell and BP. I said, “Oh, that's interesting. Where's the technology from?” They said, “It's from Saskatchewan. They have this great carbon capture thing.” The company behind that in Saskatchewan can get meetings in China more easily than in Canada because somehow we have a cultural cringe about things we excel at ourselves.
I think the carbon capture story has a long way to go. Of course, it's going to need further investment and development. Everyone acknowledges that.
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Liberal
George Chahal Liberal Calgary Skyview, AB
You mentioned the Pathways Alliance and the tremendous economic impact it will have in Alberta by creating thousands of jobs, so I would like to see further analysis on the numbers for that. You also mentioned the U.S., President Biden and the Inflation Reduction Act.
What other areas of investment would you like to see from the Government of Canada to make sure that we can compete, lead, hit our goals and targets when it comes to reducing emissions, invest and create jobs to get that economic impact? What would you like to see from the government?
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Executive Director, Resource Works Society
That's a great question. Thank you.
I had a moment of insight yesterday. The Ottawa bureau of Bloomberg News published an analysis of the Biden IRA plans. It was about what that would mean from an Ottawa perspective and what the opportunities are for Prime Minister Trudeau and his government to operationalize the natural advantages we have. What I took away from this, and I believe it's true, is that there are only so many things we can do well. We're only 40 million people. We have certain things we're very strong in. Ms. Exner-Pirot mentioned critical minerals, and I agree. We have energy metals like copper and uranium. We have some lithium potential in this country too.
We should focus on a small number of things and try to do those really well. Let's draw from things we're already very good at, as we have natural resources in the ground and human resources. I call it “resource tech”. It's not a term that has caught on yet, but I think it's one of our greatest contributors to Canadian prosperity. It ought to be a category we talk about and take some pride in.
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Liberal
George Chahal Liberal Calgary Skyview, AB
Thank you.
I'd like to go to Ms. Exner-Pirot from the Macdonald-Laurier Institute.
You talked about nuclear energy. Could you also comment on some of the areas of investment you would like to see from the Government of Canada given the supports provided by the U.S. and what we could do better?
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Senior Fellow, Macdonald-Laurier Institute
I would note and acknowledge that they invested just under $1 billion in the SMR demonstration project, the biggest ever in the Canada Infrastructure Bank. But what the U.S. Department of Energy is doing is looking at nuclear fuel and enriched nuclear fuel. Most of the small modular reactors are going to need what they call HALEU fuel, which is high-assay low-enriched uranium. Right now Russia is the only commercial provider of that, and if we want to have most of the SMR models fuelled, we will need more of it.
The Americans have been investing to promote companies, with high upfront capital costs to do that, but that's restricted to facilities in the United States. Even though, for example, Cameco has joint ventures with partners in the United States, only the partner in the United States can benefit from those government supports.
If we want to be a leader in SMRs, we already have the uranium ourselves. We already produce enriched fuel in Ontario, but it's for the CANDU reactors. We might want to look at or consider that as well. This would be around $1.5 billion, so it is a lot of money, but given the market and the potential, it's not out of order.
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Liberal
The Chair Liberal John Aldag
Thanks. We're out of time.
We'll go now to Mr. Simard. He will have two and a half minutes for his next round of questions.
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Bloc
Mario Simard Bloc Jonquière, QC
Thank you, Mr. Chair.
Mr. Giroux, you said earlier that we have not determined that the Trans Mountain project is not profitable.
I would now like us to consider the profitability of carbon capture and storage strategies. I don't know whether you are aware, but there are two big projects of this type in Alberta, for which 57 per cent of the financing comes from public funds.
Have you ever done a study to analyze that situation?
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Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We have not yet studied carbon capture and storage projects and how profitable they are. However, what I know about the projects that have been started up elsewhere in the world to date is that they are profitable only if a substantial carbon tax is levied, of at least $100 or $150. I don't know whether that is the case for the Canadian projects.
