Natural Resources Committee on Sept. 25th, 2023

[Dr. Andrew Leach]

For sure.

I think we do see an impact at the pump. We simply don't see the impact that would be there with a larger carbon price. If we wanted the results of $300-a-tonne carbon price, for example, we would want to impose one.

What we have today is a $65-a-tonne carbon price, so we see a marginal increase, whether it's in the price of gasoline at the pump, the value of different emissions reduction opportunities that could be undertaken in the industrial sector or the incentive to not undertake certain activities. You'll see that in investment, for example, for renewable power in Alberta. It's probably the one where you see it dramatically—or on the coal power side. That carbon price is enough to say, “Do you know what? It's no longer worth it for me to operate a coal plant, and I would rather convert,” as Mr. Friesen's company has done to convert, very early on, many of their coal assets to gas.

It's going to have the same impact for people who are a good fit for electric vehicles, but that doesn't mean it's enough so that all of a sudden everyone is going to say, “I do not want to drive anymore.” Some people are going to make those transitions. As the price increases, those transitions become more likely.

[Mario Simard, Bloc, Jonquière, QC]

People said there had to be a price on carbon. There is a carbon tax. Quebec has its own system. It does not operate like the rest of Canada when it comes to carbon pricing.

What's your opinion on the clean fuel regulations? In your opinion, is that a tax? I don't think we should look at it that way.

Do we have to have this type of regulation if we want to reduce the energy sector's carbon intensity?

[Dr. Andrew Leach]

That's a good question. I would say that it really depends on the context.

If we're talking about a tax in the constitutional sense—so for exemptions for provincial assets, etc.—it's absolutely not a tax. It's a regulatory regime. If by “tax” what you mean is that it imposes additional costs in some way, that's a much broader definition of “tax” than most economists would use. However, absolutely, there are going to be some costs imposed in the supply chain because of the clean fuel standard. I think that's clear in, for example, the regulatory impact assessment that has come out from Environment and Climate Change Canada.

The answer to the second part of your question links to what I said earlier, which is that if we want a system that drives emissions down.... I'll use Quebec as an example. Quebec has a price on transportation fuels that comes in through its WCI, but emissions from transportation in Quebec have grown faster in recent years than emissions from the oil sands.

I'll cut that off there at your request.

[Mario Simard, Bloc, Jonquière, QC]

Thank you.

[The Chair, Liberal, John Aldag]

I'm sorry. Six minutes went by quickly, so we're out of time.

I also want to mention to the members and acknowledge that Mr. Leach has a hard stop at noon today, so he'll be dropping off at noon. We can keep going perhaps one more round after—we'll see where we are.

I don't want to eat up Mr. Angus's time, so we'll go over to him for six minutes.

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

Thank you, Mr. Chair.

I think one of the things that surprised everybody was how fast the impacts of the IRA began to be felt in the American economy; things shifted so dramatically within a 12-month period. One of the pushes we did as New Democrats to get the government to really move on clean-tech incentives was so that we didn't see a bleed-off of jobs, opportunities and investments to the United States because of the IRA.

We just had Gil McGowan of the Alberta Federation of Labour speak. He is very concerned about the impact of the Danielle Smith government's stopping of the clean energy projects under way in Alberta and the damage that's going to do to certainty, and also about whether or not that's going to shift investment stateside. What are your views on Danielle Smith's move to place this moratorium on the clean energy potential in Alberta?

Go ahead, Mr. Leach.

[Dr. Andrew Leach]

Thank you.

My views on that are basically the same as what I said earlier. I think we missed an opportunity to be prepared for the fact that solar and wind have become some of the cheapest electricity generation resources in the world. Because of that, we're caught in a little bit of a policy problem.

Will it detract from investment? I think it will, absolutely, in the near term. The government has told people that there are going to be changes in the transmission regulations, that there are going to be changes in the electricity market, and that there are going to be changes in a lot of aspects that reach beyond simply the project approvals for solar and wind. Without knowing that, you're not going to advance a project at all.

That said, we do have a lot of projects. Again, I come back to Mr. Friesen's company, which has projects that are still under construction today, if I recall correctly. Others do as well. This was only for projects deep in the regulatory approval process, not projects that were already under construction. I think the impact happens six months or a year from now. That's when it will really start to be felt on the construction jobs front. It's earlier on in the engineering, design, front-end, legal services, etc., fronts.

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

Thank you.

I've been looking at Texas, which is hardly a progressive state in anybody's world view. I think we can all agree that it's very conservative. However, in the last three years, its solar and wind have exploded at an unprecedented rate. There are now 880,000 clean energy jobs in Texas. Houston is slated to become the clean energy capital, perhaps, of the world. We're seeing that it already has 51 gigawatts of power in clean tech online with another 42 coming on. That's apparently one of the reasons it was able to withstand the brownouts this summer in the huge massive heatwaves. The air conditioners kept going thanks to solar.

Do you think there are lessons to be learned from the speed with which Texas has moved on building a clean energy system?

[Dr. Andrew Leach]

I think we're learning those same lessons here in Alberta. Your colleague mentioned earlier about the AESO study in the spring. The grid operator in Alberta was thinking about what would happen if we had 2,000 megawatts of solar. Six months later, we have 4,000 megawatts in the queue, so we've seen that rapid explosion as well.

Texas is a nice parallel, but where I would highlight the differences is that our big crunch times for electricity and energy come in the last couple of weeks of December and the first couple of weeks of January. That's a very different environment for solar, and in some cases even for wind, than it is in Texas. Their high-energy demands occur in the peak summer months, when it correlates really well with solar, or even in stormy seasons, when it tends to be a little bit windier in their area than it is here.

There are some lessons, but it's not a perfect fit.

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

That's very helpful. I was speaking to someone involved in the clean energy industry who told me that he didn't think there was a location in the world better than Alberta for solar and wind just because of the geography and the like.

If you were saying that we needed to actually create a balance in the winter months on clean tech, what would you be suggesting? Would it be geothermal, hydrogen, battery capacity...? How would you see it?

[Dr. Andrew Leach]

I think the biggest opportunity lies in interprovincial power lines. We have great hydro resources. On either side of Saskatchewan and Alberta, we have provinces with great hydro resources. We should have projects under construction right now that integrate those markets more. We probably need other incentives and other suppliers that will come online, but those will respond to the market. I think batteries is another area where we'll see those respond to the market.

Again, the biggest challenge is just that one weeks-long period in the winter of low solar, low wind and so on. The energy is great. It's just that you don't get energy when you need it. I'll redirect you to my forthcoming book, where I have a graph that highlights it. I can't show it to you today, but I'll try to ping you with it online.

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

Thank you for that.

I know that one of my colleagues from Calgary is interested in the electricity grid issue and the need to create maybe not a national grid but regional hubs where, say, Alberta and British Columbia can work together, and perhaps Ontario and Manitoba. Certainly, the Atlantic loop is very interesting.

Do you think that potential of regional and interprovincial development could export some of the huge resources coming out of Alberta, but also import when necessary?

[Dr. Andrew Leach]

That's exactly the model. I think the more integration you have, you take advantage of those resources. You take advantage of the capacity that's in BC Hydro. You take advantage of the energy that comes from the foothills wind and excellent solar in Alberta, which would work really well together, and then link to the U.S. I think it's not just east-west but also north-south. Then you get very different weather regimes. The sun doesn't shine in Alberta at night, but the wind is always blowing somewhere. The sun is shining in most places when we need electricity at its highest levels.

There are some opportunities there, for sure.

[The Chair, Liberal, John Aldag]

That's the end of our six minutes.

Mr. Leach, before you go, thank you so much for making the time available. If you want to stay around until you need to drop off in the next couple of minutes, that's fine.

If any of you have additional information, up to 10 pages, that you'd like to submit, we'd be happy to accept that. You can send that to our clerk for translation and distribution to our committee members.

We'll move now to the next round. We'll do five minutes for the first two and two and a half minutes for the next two. Then we'll see where we're at. We do have some committee business, so we'll see how things go.

First up is Mr. Falk for five minutes.

The floors is yours.

[Ted Falk, Conservative, Provencher, MB]

Thank you, Mr. Chair.

I'd like to thank all the witnesses for their presentations.

Mr. Friesen, I'd like to begin with you. You made a comment in your opening remarks about how “getting it wrong” will come at a big cost. I think in some of your subsequent remarks you used the terminology that we need to “get it right”.

I know that Alberta has been a leader in renewables, in wind and solar, and that in fact your company, ATCO, is heavily involved in that. Can you tell us roughly what percentage of the power produced in Alberta is from wind and solar?

[Dale Friesen]

Thank you, honourable member.

I think it's around 30%. I don't have it exact, but I think there are about 3,400 megawatts of wind and about another 1,200 megawatts of solar out of a total grid capacity of probably about 15,000 megawatts.

It's a high percentage. I think it's over 30% in terms of capacity of power installed.

[Ted Falk, Conservative, Provencher, MB]

Alberta is already a significant partner in the renewables. In your comments, you also mentioned that you thought it would be a good idea to continue along that path.

Can you also tell me a bit about hydrogen? Where is hydrogen? Are we getting close to having it scalable and to its being used easily?

[Dale Friesen]

In terms of hydrogen, you hear a lot about colours. There's green from solar renewable energy and blue made from natural gas. With CCUS, you can achieve over 90% emissions-free hydrogen, which is, in terms of the life cycle, similar to or better than solar-generated. We do both in Perth. We think it plays a role.

Right now it's cost, but as the carbon tax increases, there's a break-even point that occurs around 2028, when with the price of natural gas with the carbon tax, it will be cheaper or the same price to use hydrogen rather than natural gas.

Right now, it would be more expensive, but if you're a large oil company and you are using it for industrial purposes, with the offsets, credits and ITCs that are applied, it's already competitive. We believe, with the government's investment tax credits—if we can get clarity on the contracts for differences—and these other tools, it is something that you could use even now.

[Ted Falk, Conservative, Provencher, MB]

Thank you, Mr. Friesen.

You also made the comment that the regulatory environment or regimes need to be consistent with the goals of the government.

Can you talk a bit about where we are as a country?

[Dale Friesen]

Right now, the industry is feeling a bit in between. It's sandwiched. You have the federal and provincial governments, and I think in some provinces there are different needs and different regional concerns in the laws and regulations that are in place.

For instance, in the investment tax credit, one of the concerns we have is that it's not clear if our project.... Even though we might be technically eligible for investment tax credits for our CCUS project or our clean hydrogen project, if the province doesn't agree to the net-zero 2035 regulations, which aren't yet even developed or finalized.... It will be in probably 2024, when we expect the Canada Gazette, part II, to come out. The provinces have to agree to them now, or else you may not be eligible for the ITCs and that creates enormous risk for boards that approve projects.

I think that's one of the real differences that we face. The IRA's already in place and the rules are clear. You can go to the board, you can get the direction and you can start building. Here, we won't even be able to get a final board decision until, say, mid-next year, when we have the certainty of how these things are all going to work together.

[Ted Falk, Conservative, Provencher, MB]

Thank you for that, Mr. Friesen.

Mr. Buffalo, you talked about how in the U.S., the business environment is much friendlier.

Can you expand on that, please?

[Stephen Buffalo]

I think most of the tribes I've come across and worked with feel that they have a little more autonomy in deciding what's being done for them.

Here in Canada, especially with first nations, Indigenous Services Canada.... In the oil and gas space, it's the Indian Oil and Gas Canada that really tries to dictate and tell us what to do. It's not a very savvy business case. It seems to watch over. Most times, any revenues that we see, for example, in the oil and gas space, the government attempts to control. Some nations have been able to take control of their oil and gas revenue money now, but it's still a struggle.

As long as Indigenous Services Canada is overseeing our nations, it will be really tough. Now that the provinces.... With some of these new projects that are coming forward, the access to capital is an issue.

Some of the conversation today was about what Alberta did with the moratorium on renewables. For first nations, of course, we're heavily invested in some of these projects, but at the same time, a regulator could ensure that there's cleanup placed on something, such as abandoned wells. This is because, at the end of the day, here in oil and gas, we're stuck with abandoned wells that should be orphaned because there's no owner. The same thing could be said for solar panels and wind turbines in our traditional territories.

A lot of these things, in which the government is interfering, really hamper our economic development and try to more or less guide our ship, when we can make those decisions ourselves for the most part.

[The Chair, Liberal, John Aldag]

Thank you. We're done there.

We're going to go now to Madam Lapointe, who will have five minutes.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you.

Mr. Friesen, in your opening statements, you mentioned that the Government of Canada needs to “leverage regional strengths”. Can you expand on this?

[Dale Friesen]

Thank you, honourable member.

That's a great question. In Canada, over 84% of the electric system is already emissions free. The provinces of Quebec—with Hydro-Québec—Ontario, B.C. and Manitoba are at nearly 100%, but other provinces, such as Saskatchewan, Alberta and Nova Scotia, are not nearly so far along, so the impacts aren't felt equally. It's not the same lift to build out and then replace your system.

Those regional differences mean that with a clean electricity regulation the burden is going to fall a lot more heavily on those provinces that aren't blessed with a rich supply of hydro, nuclear and renewable power already. That's one of the differences that I was referring to.