Natural Resources Committee on Sept. 18th, 2023

[George Chahal, Liberal, Calgary Skyview, AB]

Yes, we are facing blackouts or potential blackouts over the winter and summer months. I was shocked when I heard about the moratorium.

You would agree that all sources of energy are important as we move forward. I believe you said that. Is that correct?

[Frank Des Rosiers]

It's been the government's view that we want to encourage all of those different sources. Again, Canada is blessed with such options, so we might as well use them. We are the envy of the world. Every time we meet with foreign delegations, that's one thing they take away from those meetings.

[George Chahal, Liberal, Calgary Skyview, AB]

Thank you.

[The Chair, Liberal, John Aldag]

We are out of time on that round.

We're going to continue on and go to Monsieur Simard, who will have six minutes on the clock.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

Mr. Des Rosiers, I will turn to you, but if your colleagues want to answer, I am open to that.

I will try to explain one of my recurring impressions when it comes to energy in Canada. People are said to be responsible for roughly 20% of emissions in Canada. Various sectors are also responsible for their share of emissions, but the oil and gas sector is responsible for the lion's share. However, I have the impression that what we have been doing since I arrived here in 2019 is trying to move from very dirty oil to slightly less dirty oil. Your strategies seem to be based on that. In the last budget, $80 million was announced for a low-carbon economy.

Take 2022 as a reference year: all the major oil companies posted $220 billion in profits, which is a record year, the likes of which we've never seen. The only thing the Standing Committee on Natural Resources is talking about is how we can help these people decarbonize their sector. Is it possible that low-carbon oil is not commercially viable?

If I start with that idea, then it's up to us, collectively, to assume the risk. It's up to the taxpayer to assume the risk of a low-carbon oil, or hydrogen made from oil. However, these companies are raking in obscene profits. It seems that what's polluting the federal government's energy policy is this oil straitjacket, and personally, I wonder when we're going to break free of it.

Earlier, you told my colleague Mr. Chahal that we needed more investment in the wind and solar energy sectors. I would be curious to know if you have a table showing the specific sectors in which you invest and the distinctions that can be made between the oil and gas sector and the wind, solar and hydro sectors. Is there anything like that in the department?

[Frank Des Rosiers]

It's a broad question, Mr. Chair, but I'll try to answer it as best I can.

I appreciate the member's concern about the oil and gas sector. If you look at the overall picture of emissions in Canada, a quarter of them come from transportation, a quarter from homes and buildings, and the rest are divided among the various industrial sectors. The oil and gas sector is certainly the major contributor to these emissions.

The government has put a lot of effort into supporting all industrial sectors, including the oil and gas sector, by setting emission targets and limits, but also technologies to help these sectors meet these targets. Carbon capture, utilization and storage, or CCUS, is one of these technologies. As my colleague mentioned earlier, this cross-cutting technology applies to a number of industrial sectors, including steel and cement, but also oil and gas, which intends to make extensive use of it. When representatives of these sectors appear before the committee, they will be able to talk about their plans in more detail.

The International Energy Agency forecasts that oil production will eventually peak and decline, but there will always be oil and gas production in the world, if only for non-combustion needs, whether for plastics, lubricants and so on. That market will exist, but Canada's ambition is to aim for low-carbon production.

[Mario Simard, Bloc, Jonquière, QC]

I understand Mr. Des Rosiers, but I would like to give you a concrete example.

I went with you to Berlin, where we met with people from Siemens. If we want to make blue hydrogen, even if we don't want to talk about colour, these people explained to the minister that they felt they would never provide this technology, because there are two important things to remember. The first is market risk, which governments should assume: a hydrogen molecule costs more if it's made from natural gas.

Second, I clearly remember that the Siemens representative also talked to me about technological risk. I'm sure there isn't a government that wants to take on that risk. That's why Siemens will never do an electrolyzer that incorporates a carbon capture strategy.

I listen to Siemens, because these are people who have expertise in this area. One of the biggest energy companies says that we're on the wrong track if we try to make hydrogen with carbon capture strategies, because the costs are much too high. I see that the government is prepared to invest a lot of money in this type of technology, and I wonder whose interest we're serving. Are we ultimately targeting what's reasonable, in other words, trying to decarbonize energy sources, or are we serving the interests of the big oil companies?

[Frank Des Rosiers]

I think you said it well: the position of the Government of Canada and, incidentally, of the other G7 countries is to aim for low-carbon hydrogen production. That's how taxation measures were designed, based on the level of carbon intensity. There are a number of ways to achieve that goal, and you mentioned one of them: the use of electrolyzers.

The use of natural gas with carbon capture allows for very low carbon intensity rates. In addition, the technology is proven, so there's really nothing to worry about technologically. Siemens is not a player in the field, let's be clear, but there are many other players keen to offer such technologies, including Canadian companies.

Technological risk is always present, because there is no such thing as zero risk, but there isn't great concern about carrying out such projects. For the past 30 years, we've been carrying out projects using CCUS technology that have already been tested to scale. It remains a worthwhile approach. It remains to be seen which route will be most attractive to investors. However, we're already seeing projects using electrolyzers in the east and CCUS technology in the west, and both are generating strong interest in Europe and Asia.

[Greg Reade, Assistant Deputy Minister, Crown Investment and Asset Management Branch, Department of Finance]

Can I add a response, Mr. Chair?

[The Chair, Liberal, John Aldag]

We're actually out of time on this one.

[Greg Reade]

No problem.

[The Chair, Liberal, John Aldag]

Okay. Thank you.

We'll go now to Mr. Angus, to make sure that everybody gets their rounds of questions.

Mr. Angus, it's over to you for six minutes.

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

Thank you, Chair.

Thank you, gentlemen. This is a really important discussion.

Since the Ukraine war, we've seen massive investments in Europe to move forward on clean tech and get off Russian oil and gas. Since the Biden administration came in, we've seen $240 billion in clean energy, $70 billion in the electric vehicle supply chain and $10 billion in solar manufacturing. There's a real concern that, if we don't move quickly, we are going to be left on the sidelines as those investment dollars move into the United States.

Mr. Jovanovic, is the Department of Finance looking at this with a sense of urgency? I know Mr. Kruger from Suncor believes the urgency is Suncor making as much money as possible. Other Canadians think the urgency is dealing with the climate crisis.

Does the finance department believe that getting these tax credits out quickly is an urgent matter?

[Miodrag Jovanovic]

Thank you for the question.

The short answer is yes. We are working diligently on finalizing draft proposals for all five of these credits.

As I mentioned in my remarks already, in August we released for consultation draft legislative proposals for the clean-tech investment tax credit, as well as the CCUS, where we're approaching the finish line—we've been consulting already three times—as well as the labour requirements that would apply to the four investment tax credits.

Our goal is, by the end of this fall, to be able to release draft proposals, then the next one on the clean hydrogen ITC and then the clean tech manufacturing ITC.

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

Thank you.

In terms of the clean manufacturing credit, correct me if I'm wrong, but that was the one that did not have labour obligations for apprenticeship or prevailing wage standards, whereas the Biden administration has made it very clear to blue-collar workers in the United States that manufacturing of clean tech is going to be tied to jobs.

Why has the department left those apprenticeship and prevailing wage standards out of the manufacturing for clean tech?

[Miodrag Jovanovic]

We can double-check that.

My understanding, with respect to the advanced manufacturing production tax credit in the United States, is that labour requirements do not apply. They may apply for the advanced energy project credit, which is the small remaining credit that is worth about $10 billion, depending on the estimate of course, compared to between $30 billion and $250 billion for the other one, for which the labour requirements—again, based on my understanding—do not apply.

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

We'll have to look into that, because when I talk to workers in the building trades, IBEW workers, particularly in the energy sector, they want to know that they're going to be part of this and not be left on the sidelines.

Mr. Des Rosiers, I'd like to ask you this in terms of the urgency of getting this off the ground given the amount of international competition. Calgary Economic Development recently did a study that said 170,000 jobs alone would be created in Alberta because there's no place else in Canada that has even close to the potential that Alberta has, yet we've seen the Danielle Smith government, for ideological reasons, kill billions of dollars in investment. That investment has threatened to go south.

Have you analyzed the potential impact of not getting those projects off the ground and whether or not that investment is going to go stateside?

[Frank Des Rosiers]

As I mentioned in my previous response, we don't have any quantitative estimates on this. We did hear preoccupations being voiced by firms, including publicly—and I think all of us would have seen this in the media—and their urging to try to bring this to the investment climate so the money can start flowing quickly. I'm encouraged that we'll eventually get there—hopefully, soon.

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

I certainly hope so. We've certainly spoken to many people in the west who were really ready to take advantage, and they have the expertise. If we lose that moment, it's going to hurt us.

Mr. Moffet, I wanted to ask you if you have read the recent International Energy Agency report that was released last week on the need to de-risk from financial investments in fossil fuels. Has your department read that report?

[John Moffet]

Yes, we have, certainly.

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

They are saying, “We are witnessing the beginning of the end of the fossil fuel era and we have to prepare ourselves for the next era”.

Fatih Birol from the IEA states:

Oil and gas companies may not only be misjudging public opinion...they may well be misjudging the market if they expect further growth of oil and gas demand across this decade.

New large scale fossil fuel projects carry not only major climate risks but major financial risks.

How do you assess the IEA's warnings to companies that are preferring to drill down on oil and gas rather than diversify? Do you think that is a threat to our economic competitiveness?

[John Moffet]

I think the government is wrestling with the question of what is the right balance in terms of driving domestic reduced demand for oil and gas—something we can control and where we are well ahead of the rest of the world—versus the question of what the role is of Canadian oil and gas in responding to global demand. Your question, then, is this: Are there competitiveness risks in overemphasizing domestic production?

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

It's also a climate risk. This is—

[The Chair, Liberal, John Aldag]

We're out of time on this one. There's not going to be time for any back and forth here, but thank you.

We're going to go now to a five-minute round for the first two questioners, beginning with Mr. Falk.

When you're ready, the floor is yours.

[Ted Falk, Conservative, Provencher, MB]

Thank you very much.

Thank you, to the officials, for your presentations.

Mr. Des Rosiers, I'm going to start with you for a little bit. You talked about being a dependable supply chain to new energy sources. We know that mining is going to be critical to that. We know that exporting clean energy like LNG is going to be critical to meeting those objectives. How has Bill C‑69 impacted what you say is critical to moving forward?