Natural Resources Committee on Sept. 25th, 2023

[The Chair, Liberal, John Aldag]

Good morning. I call this meeting to order.

Welcome to meeting number 73 of the House of Commons Standing Committee on Natural Resources. We meet today to resume our study of Canada's clean energy plans in the context of the North American energy transformation. We will then proceed to sit in camera to discuss committee business.

We had hoped for two panels today, originally, but the first panel was unavailable. They are interested in coming, so we're working on getting them scheduled. We have one panel today, but we do have some important committee business to turn to, and that's why we built time into the schedule.

I'll go to Mr. Angus first and then come back to welcome our witnesses.

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

Thank you, Chair.

I'm concerned as to whether or not Mr. Rich Kruger has agreed to testify to our committee. I know that we put that as a priority. Has Suncor agreed to make sure that Mr. Kruger would be coming here to testify?

[The Chair, Liberal, John Aldag]

I'll do a full update when we're in committee business, but the invitation has been made. We've made contact with his office, and we're working right now on finding a date. I'll give further details on that, but that motion is in the process of being moved on and a meeting scheduled. I'll have a more thorough update when the time comes.

For those of our witnesses who are online, welcome. I know that some of you have been with us before. Just as a reminder, you'll need to mute and unmute yourselves. We don't have the ability to control that easily from here, so we'll get you to do that. You have your choice of language—floor, English or French—and you can control that yourselves. Comments should be addressed through the chair, and screenshots or photos are not permitted now that we're in session.

In accordance with our routine motion, I'm informing the committee that all remote participants have completed the required connection tests in advance of the meeting.

Thank you to the witnesses for making time to do that. It's an important part of our procedures.

I'd like to welcome our three witnesses. We had hoped for a fourth, but there was a last-minute issue.

We have, much to our pleasure, Andrew Leach, associate professor, University of Alberta; Dale Friesen, senior vice-president, corporate affairs, and chief government affairs officer, ATCO; and finally, from the Indian Resource Council Inc., Stephen Buffalo, president and chief executive officer.

Thank you to each of you for taking the time to be with us today.

We're going to go through the opening statements. Each of you will have five minutes. I have a clock with me, and you can see me on screen. I'll give a yellow 30-second warning. When the time is up, I'll give you the red card. Don't stop mid-sentence, but do wind up your thought. We'll use the same system when we get into questions and answers, just to keep the flow going.

We'll have about an hour. Then we'll suspend and move into a closed meeting, and that's how the morning is going to go.

First up, why don't we start with Mr. Leach?

If you're ready to go, I have five minutes on the clock and the floor is yours.

[Dr. Andrew Leach, Associate Professor, University of Alberta, As an Individual]

Thank you, Mr. Chair.

Members, thanks to all of you for having me here.

Thanks to the chair and the clerk for working around my teaching schedule, which I think was a bit of a burden for you.

Your topic of study is an important one. I'm really glad to be here to talk to you about it.

The IRA, or the Inflation Reduction Act of 2022, has changed the energy landscape in North America, and I would say that it's one of the most important climate change policies that we've seen anywhere to date. It's in our—

[Mario Simard, Bloc, Jonquière, QC]

Excuse me, Mr. Chair.

[The Chair, Liberal, John Aldag]

I'm stopping the clock.

[Mario Simard, Bloc, Jonquière, QC]

I'm being told that the witness's sound quality isn't good enough for interpretation.

[The Chair, Liberal, John Aldag]

Mr. Leach, just give us a second to figure this out. We did do a sound test and it was cleared, but obviously if it's not working, it's not working. We'll see what we can do to get this resolved. Just bear with us for a moment.

[Dr. Andrew Leach]

Can you hear me okay on the floor?

[The Clerk of the Committee, Mr. Patrick Williams]

Could you move the mike a little closer to your mouth and maybe bend it back a bit?

[Dr. Andrew Leach]

Is this any better? I also have another desktop mike that I can try here.

[The Chair, Liberal, John Aldag]

We're going to suspend the meeting. This is going to take a bit longer than expected, so we'll suspend to get the sound issues sorted out and be right back.

The meeting is suspended.

[The Chair, Liberal, John Aldag]

We're ready to go.

Mr. Leach, if you want to start over, I will reset the clock to five minutes, and we'll get you going again. I apologize for that, and the floor is yours.

[Dr. Andrew Leach]

Thank you, Mr. Chair.

Thank you, all. I hope this works. If not, of course, please skip me and move on. Out in Alberta, I guess we don't have great Internet.

As I was saying [Technical difficulty—Editor] really important one. It's a policy that has changed the energy landscape in North America. I would argue that it's one of the most important climate change policies that we've seen anywhere to date. The scale and scope of what it's trying to do, applied in an economy the size of the U.S., is going to swamp most other measures.

Just to give you a sense.... I'm sure you've seen some data, but new research, which your clerk will provide to you—I apologize; I was only invited on Friday, so I didn't have time to get a full brief in—by John Bistline and co-authors, published in Science, pegged that the Inflation Reduction Act is likely in and of itself going to put the U.S. on target for a 37% reduction in emissions below 2005 levels. Canada, by contrast, even with a broad suite of additional measures as modelled by Environment Canada, would only get to 34% below 2005 levels. Those numbers, and also the scale of investment that we're going to see south of the border, are going to—or already has, I guess—put substantial pressure on Canada to redouble its efforts.

I could speak to many aspects of what's changing in North America today, but I want to focus on one part for the most part, and that's electricity. I'll fit in a little bit on oil sands at the end.

I do think that one of the challenges we see when we quote big economy-wide numbers like those I just cited for emissions out of the U.S. is that they hide important sectoral differences and [Technical difficulty—Editor] dealing with, arguably, since the Chrétien government and the Kyoto protocol. It's simply that, if you look at the [Technical difficulty—Editor] group or the EIA, they're all seeing that most of the emissions reductions in the U.S. are coming [Technical difficulty—Editor]—

[The Chair, Liberal, John Aldag]

I'm sorry, Mr. Leach. I'm going to stop it here. You're cutting out.

[Dr. Andrew Leach]

Okay, I'll stand down.

[The Chair, Liberal, John Aldag]

I'll come back to you at the end to see if maybe Alberta is still waking up. I'll go to our other two witnesses, and we'll go through those. I still have about three minutes on the clock for you. We'll see if we can improve your connection in any way, but right now we will pause it right there.

We will go to Mr. Friesen and give him five minutes on the clock, and we'll see if we can get Mr. Leach back for his opening statements.

Mr. Friesen, the floor is yours.

[Dale Friesen, Senior Vice-President, Corporate Affairs, and Chief Government Affairs Officer, ATCO Ltd.]

Thank you. It's a pleasure to be here.

Esteemed Members of Parliament, good morning. Thank you for the invitation to speak with you.

I would like to pay tribute to the traditional territories of the people of the Treaty 7 region in southern Alberta. The city of Calgary is also home to the Métis Nation of Alberta Region 3.

For more than 75 years we have provided safe, reliable and affordable energy to hundreds of communities around the world, and we're privileged to serve more than 40 million customers worldwide. We own and operate electric and natural gas utilities in Alberta, Yukon, the Northwest Territories and Western Australia. We also own and operate about 500 megawatts of power generation, with a pipeline of more than 1.5 gigawatts in wind and solar projects.

In our view, Canada's competitiveness is a result of a constellation of variables. Fiscal policy, including ITCs like those proposed by the Government of Canada, is vital, but it must be considered along with other factors. Finalizing these critical supports is important, but it will not be enough to secure Canada's competitive position. We believe that to do that, Canada must focus on six areas.

Number one is to prioritize public safety, affordability and competitiveness. Demand for energy will grow as the transition gathers momentum. That will require unprecedented infrastructure investment. We will have to build more in the next 25 years than we've built in the last 100. The scale and pace of this investment will have costs and reliability impacts. Getting it wrong could result in provincial energy shortages, soaring costs and risks to public safety.

Number two is to leverage regional strengths to drive national outcomes. Impacts to safety, cost and reliability can be effectively managed by leveraging jurisdictional strengths rather than painting all provinces with the same brush. Just as in families, where some have natural strengths in mathematics, arts or sport, we have to consider that each of the provinces is different, so we should play to those strengths.

Number three is to align regulatory processes with policy goals. Canada's investment climate has been shaped by an array of overlapping policies, regulations and mandates. Simply put, it's complex. When you look at the Inflation Reduction Act in the States, its simplicity is what drives its power.

Number four is to account for labour market constraints. The transition to a low-carbon economy requires a skilled workforce to develop and operate new tech and infrastructure. We're already facing skill shortages and wage inflation. We're being told that in the States for every renewable energy worker there are four jobs.

Number five is to capitalize on global market opportunities. There are several global market opportunities available to Canada, but time is short. Expanding clean energy exports presents significant economic opportunity, particularly for clean fuels like hydrogen. By establishing policy support for transport and export infrastructure, the government can send an important signal to trading partners and investors alike.

The last thing is to accelerate indigenous ownership. Indigenous nations must share in the economic benefits of developments in their communities. That is why ATCO has approximately 50 partnerships with indigenous groups, which generate millions of dollars annually for these important communities. However, the lack of funds for equity ownership in energy projects poses a significant challenge for many of these communities. The provincial indigenous loan guarantee programs in Alberta and Ontario have shown how they can overcome traditional constraints, and the Canada Infrastructure Bank has been very helpful. However, “fit for purpose” instruments at the national level would help further advance economic reconciliation.

In conclusion, we appreciate that the government has pledged significant financial incentives for the energy transition; however, they may be insufficient to maintain Canada's competitive position in the global net-zero race. We must prioritize regulatory alignment and efficiency, labour attraction, export market development and indigenous economic participation.

Thank you for this opportunity.

[The Chair, Liberal, John Aldag]

That's excellent. Thank you for your opening comments.

We'll go now to Mr. Buffalo.

When you're ready, the floor is yours for five minutes.

[Stephen Buffalo, President and Chief Executive Officer, Indian Resource Council Inc.]

Thank you, Chair and committee, for the opportunity to speak today.

My name is Stephen Buffalo. I'm the president and CEO of the Indian Resource Council in Canada. Our organization represents first nations who have produced or have direct interests in the oil and gas sector.

Our mandate is to advocate for federal policies that will improve and increase resource development opportunities for first nations and their members. Although we've focused on oil and gas, many of our members have engaged in solar and wind projects and transmission lines. They're looking at carbon capture and are starting to look at equity opportunities in nuclear with small nuclear reactors.

I'm sure members of the committee know that first nations have been historically excluded from economic opportunities in this country. We have little say on the activities taking place on our lands, even as they diminish our aboriginal treaty rights. We have worked hard to defend our rights over the past decades and, as a result, things are getting better.

We still face a number of challenges in growing our economies. The IRA has exacerbated these.

The first is Canadian competitiveness. Investors can move their capital, but we can't move our territories. We're seeing investment flee south to the United States because they have a more friendly business environment. Many of our members are involved in deals that are stuck in purgatory because there's no certainty around investment tax credits, environmental regulations, labour requirements and so on. It seems that every month some new government plan or policy comes through that puts us all on the back foot. Our members need more consistency in order to attract investors and to build projects.

The second is the support for first nations to become partners in energy projects. The IRA includes more than $720 million in tribal-specific programs or set-asides for tribes within other programs. The tribes are also eligible to apply for billions of dollars from other funding programs. I'm honestly still learning a lot about these things.

One of the biggest incentives is the refundable tax credits. As non-taxable entities, tribes generally have not been able to take advantage of tax credits designed to incentivize green energy deployment and neither will our members. To solve this, the IRA allows tribes to receive direct payments in lieu of tax credits, and they can stack regular tribal credits and so on in other projects on our tribal lands. Tribes can receive tax credits of up to 70% of the project costs. This is supercharging not only for energy transition in the United States but for indigenous economic development as well. We would love to see these programs replicated in Canada.

The other thing in addition to tax credits is that the IRA has established a tribal energy loan guarantee program. It's a fund of $20 billion. It started as a Canadian idea. We have it in Ontario, Alberta and Saskatchewan.

I know of the government's establishment of a national indigenous loan guarantee program. As the chair of the Alberta Indigenous Opportunities Corporation, I strongly support this. It will unlock so much opportunity for our members and make us partners in the Canadian economy, but I've also heard concerns that it excludes fossil fuels. I want to take this opportunity to strongly request that you do not—I repeat: “you do not”—take opportunities for our nations off the table. Even as we engage enthusiastically in clean energy investments, we depend on revenues from oil and gas. The Indian Act funding is not enough: Our leaders do not need to manage poverty.

We need, finally, to get a piece of the pie from the projects that are happening in our territories, extracting our own resources. Many companies are lining up to partner with us, but we need to bring equity to the table. Both the Alberta and the American loan programs explicitly allow fossil fuel projects. It would be a real slap in the face if the Canadian program denied these opportunities to us.

Thank you. I look forward to answering any questions.

Hay hay kinana’skomitin.

[The Chair, Liberal, John Aldag]

Thank you so much for those opening comments.

Mr. Leach, it looks like you have a new background. We'll see if that brought us a new level of connectivity. If you want, we'll go back to you and see if your sound quality is good. I'll turn it over to you.

There are about three minutes left on the clock for you if you want to pick up where you left off.

[Dr. Andrew Leach]

I sure hope so, Mr. Chair. Please cut me off if it's terrible. How does it sound?

[The Chair, Liberal, John Aldag]

It's starting strong.

[Dr. Andrew Leach]

Okay. That's perfect.

As I was trying to say before my Internet cut out, I think one of the errors we often make in comparing Canada with the U.S. is that we forget that the U.S. has just so many more opportunities for investments in emissions reductions in its power sector compared with ours. It's these opportunities that dominate the investments in the emissions reductions from the Inflation Reduction Act.

Canada has one of the cleanest electricity grids in the world. The U.S. right now is about three times as emissions-intensive as Canada. This means that the U.S. is consistently able to reduce emissions by shifting from coal to gas and from gas to renewables, and it has much more opportunity for large investments than we do.

I think one of the cautions I would give to your committee is that we should also not forget that the U.S. provides a better market and, in most cases, better solar resources than Canada. Most of the investments that we're seeing and tracking in the U.S. under the IRA are tied to solar and storage.

Why is the U.S. better for solar? It's in part because its peak energy demands and peak electricity demands tend to occur in the mid-summer with air conditioning load. This correlates really well with solar and short-term storage, unlike demands in Canada, which, as we know, tend to occur in the wintertime.

Low-cost solar is revolutionizing the global energy landscape, but as I write in my new, forthcoming book, the challenge for solar isn't sunsets. It's not lack of subsidies. It's winter. We need to think about how different technologies work in our energy system and not simply try to replicate what's happening in the U.S.

Let me turn briefly to oil and gas, which is the other focus. Canada's oil sands are about 12% of our national emissions, and roughly double that for the entire oil and gas sector. Just the oil sands alone are 60% more than our national electricity. While the U.S. is driving all of its investment in electricity, we, from an emissions perspective, rightly turn and say, “What about oil and gas?”

While the U.S. produces substantially more oil and natural gas than we do, its oil and gas production and processing emissions are a much smaller share of its national total, so the IRA doesn't need to affect that sector as much as our emissions policies would to generate the same level of emissions reductions. The key question for technology deployment in the oil sector in particular is.... I guess there are two. Will Canadian governments be willing to provide enough subsidies or to impose regulations that make that technology attractive or necessary for oil and gas companies, and will shareholders support those investments?

It's not so much about whether costs will have to be incurred to drive down our emissions, but rather about who should bear those costs and the extent to which industry will come to see abatement as existential rather than just potential opportunity for capital investment.

We're bombarded a lot with U.S. news, research, commentary and policy solutions. One message that I have for you today—through my broken Internet connection—is to keep your focus on what will work for Canada and what fits best with our challenges. Don't just simply try to replicate what's happening in the U.S.

Thank you.

I'm ready to answer the committee members' questions.

[The Chair, Liberal, John Aldag]

Thank you so much. We made it through that.

Now we're going to go to our questions. The first round of questions will be six minutes for each member, and first up we have Mrs. Stubbs.

Mrs. Stubbs, the floor is yours.