Natural Resources Committee on Sept. 25th, 2023

[Shannon Stubbs, Conservative, Lakeland, AB]

Thank you, Mr. Chair. My colleague, Jeremy Patzer, will be taking my round.

Thank you.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you very much to all the witnesses for coming.

Thank you, Mr. Chair, for hosting the meeting.

Mr. Friesen, in your opening remarks, you talked about how ATCO has some equity partnerships with indigenous communities across Alberta. I'm just wondering if you can help explain what these equity partnerships entail and why they are so important for Canada's natural resource industry and indigenous communities.

[Dale Friesen]

Thank you, honourable member.

ATCO has over 50 partnerships, as I was saying. The picture behind me is actually a gift that was given to us by the Dene Tha' in the north, where we've partnered now for over 40 years in terms of the electrical grid. They started off with a small percentage of ownership and, over time, have now secured a majority ownership in that partnership.

We believe that partnership provides.... First of all, it's so much better than just sending money or cheques. It provides a steady income stream for the communities, so that they can use it for education and building capacity and for building the opportunity for other revenue streams in their community.

The Nasittuq North Warning System is a partnership with the Inuit. They have 51%, and 49% is with ATCO. It's running all of the north warning system for Canada and the U.S., and we're very proud of that.

Once again, we believe that ownership is what provides the ability for communities to truly participate in the earnings, the opportunities, the education and the capacity building. We see it as part of the truth and reconciliation that we should be doing.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

What challenges do Canada's ITCs, or investment tax credits, and the supports from budget 2023 pose to these equity partnerships? How could they be changed to further support indigenous partnerships?

[Dale Friesen]

That's a great question, honourable member. Thank you.

I think Andrew did a tremendous job of talking about the Inflation Reduction Act. It's the gorilla in the room. It's simple and it's already in play. The Canadian system with the investment tax credits.... We commend Finance Canada for its tremendous work on building these five different ITCs, but they're not finalized yet. The U.S. system is already in play, whereas the Canadian ITCs are not complete. They're still looking at things.

There are also ankle weights. If you compare it to two racers standing at the blocks, the American athlete would already be 10 metres ahead. Secondly, the ankle weights around the Canadian competitor would include the uncertainty around the ITCs and what they'll include. Another ankle weight would be the fact that the ITCs are linked to whether or not your province agrees to net-zero legislation by 2035. That has not yet been finalized, and it is not expected to be finalized until 2024.

There are these types of barriers, and then there's a lack of clarity in the contract for differences and how those will work.

I believe that Canada could be very competitive. It's just that we have to get these things right and we have to move more quickly in terms of getting them completed so that the boards can look at them and make decisions. In the States, it's relatively simple. Boards can look at a project and evaluate it, and those boards would include indigenous boards and indigenous partners. The other is that they could move quickly.

Another challenge we're seeing with our indigenous projects and our partnerships is funding and access to, say, SREP funding. The Canada Infrastructure Bank is great, and we applaud that. However, those types of things need to continue to enable our partners to secure the funding they need to participate in these exciting projects.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

You touched on one of the final points I was hoping to talk to you about. That's permitting, red tape reduction and issues like that. When you said it's tied to the clean electricity regulations but you're not going to have the information until at least 2024, that means there are basically only 11 years to be able to do that. We've already heard various reports that it will be a doubling, maybe even a tripling, of grid capacity to be able to do that.

However, what the IRA is also focusing heavily on doing is reducing permitting times and the regulatory burden for natural resources projects. How do regulations in Canada put our economy and investments at a disadvantage above and beyond what you've already outlined, especially when the U.S. IRA is focusing on reducing regulations?

[Dale Friesen]

Thank you, honourable member.

There are two things. When boards consider projects, one thing is the risk that they'll even proceed. Extensive delays through long regulatory processes increase that risk and increase the attractiveness of taking your money down to the States and investing it under the IRA.

There are many things that can be considered. I know that the Privy Council has done some great work in looking at how they can improve the speed at which projects are developed. Right now, even for a mine, I'm hearing 10 years. If you were to propose a new carbon capture sequestration project greater than 200 megawatts, I estimate it would take four, five or six years to get it approved. On the new hydro plants, we're being told by the large hydro producers that if they were to build another Site C, it could be up to 10 years or 20 years.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Wow. Thank you.

[The Chair, Liberal, John Aldag]

We're out of time on that one.

We're going to go now to Mr. Chahal for his six minutes.

[George Chahal, Liberal, Calgary Skyview, AB]

Thank you, Chair.

Thank you to our witnesses for providing important testimony today on the IRA.

Mr. Leach, I'm going to start with you.

I'm an Alberta MP from Calgary, and I know Mr. Friesen made some remarks as well. Do you believe that we produce enough energy in the province of Alberta to meet demand today and also in the future?

[Dr. Andrew Leach]

The challenge isn't energy as much as it is capacity. The challenge is whether we have the energy when we need it. Even in a world where we move toward more renewables, that challenge will become exacerbated. The big missing piece of the puzzle right now is interconnections with other provinces, dispatchables or resources we can turn on when we need them.

I don't worry at all about the total amount of energy. What I worry about is whether we'll have it available when we need it. That's electricity, but it's also other forms of energy as well.

[George Chahal, Liberal, Calgary Skyview, AB]

You mentioned having enough electricity. Do you think the moratorium that's in place will affect investment and jobs in Alberta? Will this set the renewable energy sector back?

[Dr. Andrew Leach]

Mr. Friesen might be in better shape to answer that, since I know they have some projects at various stages of development in Alberta, but absolutely.

The challenge, though, is that you do have real issues that have presented themselves, in part because our government and our regulators were very bearish on renewables. They didn't believe that renewables were cheap. They didn't believe that it was going to happen here. We put forward a market that said, “Guess what. We'll pay you for energy, regardless of whether you offer reliable services. Show up this hour with your energy, and we'll pay you for it.” Now we're suddenly really surprised that, when the cheapest form of energy in the world is solar power, people are doing exactly what our market tells them to do.

Probably, had we thought about this three or four years ago and been willing to say, yes, this is something that's going to come here, and saw companies like Mr. Friesen's building solar projects anywhere they could find land in and around the city of Calgary, for example, we would have avoided this. It's problematic, but it's not a problem that came about just overnight.

[George Chahal, Liberal, Calgary Skyview, AB]

I have a final question for you. With the IRA, where are we competitive and where should we focus further incentives in order to compete with the U.S. specifically?

[Dr. Andrew Leach]

The big challenge for us is that what we're putting on the table as a policy is a carbon pricing regime that is dependent on government policy over the long term. As long as that policy is clear to investors, that this policy will be in place for a long period of time, people invest in that. The incentives financially are stronger than some of the ones in the IRA. However, if you ask a board if they're willing to make a bet on that, they're going to say, “Who's going to be in government in two years? Is that government going to continue the same policy?” That's the big change, as Mr. Friesen highlighted in the contracts for differences, that allows you to say to a company, “Do you know what? Regardless of a change in policy, we are going to offer you some certainty.”

My take on that would be to make sure that those are benchmarked to the consumer carbon price so that we don't have companies that are essentially locking in their own carbon price and at the same time arguing to remove carbon prices across the broader economy. Let's get the best of both worlds.

[George Chahal, Liberal, Calgary Skyview, AB]

Are we at risk, if we didn't have a carbon price, of being tariffed with carbon border adjustments from the European Union, for instance, and other countries?

[Dr. Andrew Leach]

I think we certainly are if we don't have carbon policies or credible climate change policies. That's always been my push. We want to have policies that, if implemented globally.... If the world took our policies and every country in the world implemented them, we'd meet global goals. We're at that stage right now with the policy suite that we have. If we step back, we lose a key line of defence against exactly those types of measures you talked about.

[George Chahal, Liberal, Calgary Skyview, AB]

Thank you.

I'll shift over to you, Mr. Friesen. Thank you for joining us today.

You made some comments in your six points that demand will grow, that we need more infrastructure and that we could be faced with provincial energy shortages. Were you aware, or was your company aware, of the provincial government's moratorium on the renewable energy sector before it came out?

[Dale Friesen]

Thank you, honourable member.

No, we were just as surprised as everyone else. As you know, we have a pretty large renewable book, and it was a surprise.

For those who aren't aware, in August the Government of Alberta put a six-month pause or moratorium on approvals until February 29, 2024.

Alberta has about 24,000 megawatts of projects of renewables in the backlog, which is about double the total demand. We want to build a part of that. That's equal to about 20 Site C hydro dams and about four Bruce nuclear plants. There's a fair bit there where they need to be certain about integration. In the Yukon, where we have a high integration of renewables, this last summer we were struggling with a couple of power outages caused by frequency disturbance. Renewables are great, but it's the way you integrate them that's important, as Mr. Leach was saying, so that you ensure the reliability of the grid.

[George Chahal, Liberal, Calgary Skyview, AB]

We have another study coming up on Canada's electricity grid. I think you could add valuable insights to that.

Has the moratorium on the renewable sector delayed any of your projects, or has this provided uncertainty in the projects that you are looking to build? Do you think this will have an impact on your company and the sector moving forward?

[Dale Friesen]

Currently, we have Forty Mile Solar. It's already gone through the process, so we are not impacted, to answer that question. We actually believe that in the long run.... It's frustrating in the short term, but we believe it's a good thing in the sense that, if we get this right, it can be a way to ensure that as we go forward in the implementation of renewables and baseload power we can address the problems of reliability.

In March of this year, the Alberta Electric System Operator came out and expressed concerns in a report about reliability of the system, which goes to public safety. We think that taking steps to review it, as long as it doesn't take more than the six months, is actually a good thing in the long term for power projects in Alberta.

[The Chair, Liberal, John Aldag]

Thank you. We're out of time on that one.

We're going to go now to Monsieur Simard. You have six minutes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

Mr. Leach, on the subject of energy, many witnesses told us that, if we wanted to promote the deployment of clean energy, we had to put a price on carbon. You know as well as I do that producing green hydrogen, or even blue hydrogen, is more expensive than producing oil. It also costs more to invest in new technologies. So a number of people came and told us that we had to put a price on a molecule. If a hydrogen molecule, say, has a small carbon footprint, we have to put a price on that.

Earlier, in response to my colleague Mr. Chahal, you said that there had to be a clear carbon price for investors and a credible environmental policy, and that investors had to have confidence in what was put in place.

If I understand you correctly, that means that you are in favour of carbon pricing.

[Dr. Andrew Leach]

Of course, Mr. Simard.

I'll answer in English, just to make sure that I'm clear.

I previously headed up a panel in Alberta under then premier Rachel Notley, which recommended the imposition of a carbon pricing system that's very comparable to the system that's in place now nationally. It was also built off the system that's in place in Quebec. A lot of the elements are in common. It's not a cap-and-trade regime, but it does have, for example, a similar allocation of emissions credits to industrial actors, etc., for competitiveness reasons. It drew a lot of inspiration as well from the WCI. It's 100% in favour of carbon pricing.

The challenge, of course, is in providing that long-term signal. This isn't unique to carbon. If you're going to invest in a rental property today, you want to know that there's not just going to be a market for the next year or two, but there's going to be a market that allows you to amortize the capital cost of that project. The same is true of carbon capture and sequestration, green hydrogen, blue hydrogen, etc.

[Mario Simard, Bloc, Jonquière, QC]

That's perfect. I like your answer. I agree with you that we need an investment framework that tells us the parameters won't change along the way.

Now, I think I read an interview you did with the CBC. You said at the time that the effect of carbon pricing on the price of oil was quite minimal. I think you said 20¢ a barrel. That's nothing compared to all the uncertainties that cause oil price fluctuations.

In your opinion, does carbon pricing have a direct impact? When people put gas in their car today, do they see a noticeable difference because of the carbon price?