Natural Resources Committee on Oct. 16th, 2023

[Shannon Stubbs, Conservative, Lakeland, AB]

—before the passage of that half a decade of an unconstitutional law, but we won't be able to get to that today.

[The Chair, Liberal, George Chahal]

Colleagues, I would ask everybody to once again....

I'm sorry, Mr. Aldag, but we do not have unanimous consent.

Unfortunately, Ms. May, you do not have time today. Hopefully you will at another time.

Mr. Kruger and Ms. Strom, thank you so much for joining our committee today and providing testimony. I hope we'll have an opportunity to see you again sometime in the future. Thank you so much.

[Rich Kruger]

Thank you.

[The Chair, Liberal, George Chahal]

We'll now suspend so we can get set up for our next panel.

[The Chair, Liberal, George Chahal]

I call the meeting back to order. I will now welcome the witnesses who are with us for the second panel today.

We will start with opening statements for five minutes from Mr. Charles Séguin, associate professor, Université du Québec à Montréal, who is online.

[Dr. Charles Séguin, Associate Professor, Université du Québec à Montréal, As an Individual]

Thank you, Mr. Chair.

Members of the committee, I'm pleased to present my thoughts on the climate crisis and Canada's energy sector. My 11 years of experience as a university professor and researcher, particularly on reducing greenhouse gas emissions, inform my views.

Greenhouse gas emissions generated by economic activity are a classic negative externality issue: Consumers and producers have no private economic incentives to consider the impact their emissions have on climate. Economic efficiency can be restored by introducing emissions pricing, incentivizing consumers to lower their demand for emissions-intensive products, and incentivizing producers to change their production processes and their product lines.

Of course, there are imperatives other than economic ones that can lead individuals and organizations to take action to reduce their greenhouse gas emissions. Moral, reputational and image considerations, among others, come into play. In the business world, these other considerations can take the form of various standards or certifications. Environmental, social and governance criteria are a good example. In a previous era, the triple bottom line was used to represent sustainable development objectives implemented in a business context.

Nevertheless, recent comments by Suncor CEO Mr. Kruger show that economic issues, particularly profitability, remain central to the decisions Canadian businesses make, including businesses in the energy sector. That's why economic incentives to reduce greenhouse gases must be maintained if Canada is to meet its international commitments.

There are various types of economic incentives, including taxes and subsidies. Taxes and subsidies have different fiscal implications for governments, but they also have various peculiarities for non-renewable natural resources like oil and natural gas. Because policies to combat climate change generally increase levels over time, for fossil fuel developers they can mean a tougher competitive environment or even an implied threat of expropriation. In response to such gradual policies, developers might therefore choose to accelerate their fossil fuel extraction while there is still time. This accelerated extraction also leads to accelerated greenhouse gas emissions, and therefore climate change.

This phenomenon, also known as the “green paradox”, doesn't manifest itself in the same way in all situations. It's more pronounced when energy transition policies are based on regulatory approaches and subsidies. Conversely, when policies are based on pricing approaches, chances of a green paradox emerging are much lower, if not non-existent. It's worth noting that cap-and-trade systems like the one in Quebec, which allow emissions to be banked but not borrowed, help reduce the green paradox phenomenon. This mechanism encourages emitters to reduce their emissions beyond the targets set by governments at the outset of policies, to secure greater flexibility as policies become more binding.

I'd like to emphasize that the green paradox is not important enough to call into question the gradual aspect of greenhouse gas emission reduction policies. The need to allow time for technological innovation, reorganization of supply chains, replacement of durable goods and changes in consumption habits, among other things, supports policies that gradually become more restrictive. The long-term investments that businesses and households must make to adapt effectively to these policies are also an argument in favour of advance announcements with clearly defined long-term objectives.

These factors tip the scale toward carbon pricing policies to reduce greenhouse gas emissions. They allow for a gradual approach, with long-term objectives, while also minimizing the risk of a green paradox. The advantages of carbon pricing policies are worth bearing in mind at a time when we are not yet clear of the inflationary environment. It might be tempting to substitute them with subsidy or regulatory policies, or even have no policy at all, to reduce the burden on consumers. In my opinion, it would be preferable to offer one-off support to consumers while businesses adjust to new low carbon production methods and consumers change some of their habits and replace some of their durable goods. That way, carbon pricing policies will enable a more efficient transition of corporate production. Consumers will have more affordable products to choose from.

Thank you for your attention. I'm ready to answer your questions.

[The Chair, Liberal, George Chahal]

Thank you, Mr. Séguin.

We'll now move to Mr. John Vaillant, journalist and author, for five minutes.

[Dr. John Vaillant, Journalist and Author, As an Individual]

Thank you very much.

I'm an independent journalist and author from Vancouver. My work is evidence-based and fact-based. There are about a thousand endnotes, footnotes and citations in this book. Fire Weather is currently a bestseller and finalist for national prizes in three different countries. I think it's because the topic, how our appetite for petroleum has supercharged the atmosphere, endangering us all, resonates with people, especially after this terrible summer of CO2-driven heat and fire.

Before I get into that, I want to say how honoured I am to be here. I come in good faith, as a proud Canadian who loves this country and is grateful for the extraordinary gifts that petroleum has given us. Canada and the oil industry are about the same age, and we both have come a long way in a short time. Unfortunately, so has our climate.

When Fort McMurray caught fire in May 2016, I was as shocked as anyone. Winter was barely over. Local lakes were still frozen, and yet the temperature in northern Alberta hit 33°C. More disturbing was the relative humidity of 11%. Do you know where 11% humidity is normal? It's in Death Valley, in July. When you transpose the climate of the hottest, driest place in North America to the Canadian boreal forest, a famously flammable ecosystem, otherworldly things are going to happen, and they did.

Here's a quick science lesson. Radiant heat, the heat that tells you not to touch the candle flame, travels at the speed of light. On May 3, 2016, the radiant heat coming off the Fort McMurray fire, 10 kilometres wide with hundred-metre flames, was 500°C. That's hotter than Venus. That was Fort McMurray on May 3, May 4, and day after day after that. That was also this summer in B.C., Alberta, Quebec and the Northwest Territories.

Firefighters in Fort Mac described houses burning to the basement in five minutes. I thought they were exaggerating. They weren't. I talked to physicists. That's what fire can do at 500°C. As a result, the firefighting operation became a life-saving operation, because there was no time to do anything else.

What surprises everyone about 21st-century fire is how fast it moves. Talk to anyone in Slave Lake, Fort Mac, Kelowna, or Enterprise, Northwest Territories: There was a plume over there, and now I'm running for my life.

This is happening because the hotter and drier the air and the forest, the faster and more explosive the fire. Climate science isn't rocket science. By the 1770s, the greenhouse effect was understood in principle. By the 1850s, the heat-retaining characteristics of CO2 had been identified. By the 1890s, scientists were considering the possibility that industrial CO2 could alter the earth's climate. By the 1930s, evidence of warming was observed in global temperature records. By the 1950s, mass spectrometers could measure CO2 in parts per million, hence the famous Keeling curve.

By the 1970s, Exxon, Rich Kruger's old company, was doing cutting-edge climate science. Internal memos reveal surgically accurate predictions regarding the relationship between increasing CO2 and the climate disruption we are now experiencing. Exxon knew, and so did Suncor.

Then, in 1989, they turned their backs on their own science. They did it because they cared more about the money. They did it because they know the oil industry is, in essence, a fire industry. That means it's a CO2 industry, which means it's a climate-changing industry. This is basic chemistry and physics. We cannot deny or gaslight or greenwash that fact away.

To be clear, oil is a 19th-century fuel. The internal combustion engine was prototyped in 1860. Why on earth are we still using it?

Two hundred thousand Canadians were driven from their homes by wildfires this summer. Tens of millions of North Americans were shrouded in toxic smoke. The Amazon River is drying up. If we don't reduce emissions now, we're going to make this planet uninhabitable. Canada's leadership matters here. Our survival depends on it.

Here's the upside. When it comes to renewable energy potential, Canada really is a superpower. Right now, we are perfectly poised to embrace the greatest greenest energy opportunity the world has ever known.

So who's stopping us?

Thank you.

[The Chair, Liberal, George Chahal]

You're right on five minutes. Thank you, Mr. Vaillant.

We'll now go to Mark Cameron, vice-president of external relations from the Pathways Alliance.

You have five minutes, sir.

[Mark Cameron, Vice-President, External Relations, Pathways Alliance]

Mr. Chairman and members of the committee, I am pleased to be here on behalf of the Pathways Alliance today.

Pathways represents Canada's six largest oil sands companies. That includes Suncor, which spoke here earlier this morning, as well as Canadian Natural, Cenovus, ConocoPhillips Canada, Imperial and Meg Energy. Collectively, our six companies operate 95% of the oil sands production in Canada, which is the majority of Canada's total oil and gas production. Our companies contribute tens of billions to Canadian GDP and to federal and provincial revenues and royalties. They employ tens of thousands of Canadians.

However, we recognize that we are a major contributor to greenhouse gas emissions and to the problem of climate change. Oil sands operations emit about 80 megatonnes of CO2 equivalent per year, which is about 11% of Canada's total GHG emissions. We are a significant contributor to Canada's emissions challenge; therefore, we have to be part of the solution.

That's why, in 2021, our six companies came together and decided that we had to jointly tackle the challenge of emissions reduction. All Pathways companies have a goal of net-zero emissions from oil sands operations—that is, eliminating all scope 1 and 2 emissions—by 2050.

In the short term, we have a plan to reduce emissions by 22 megatonnes between now and 2030, starting with our foundational project, which is a carbon capture and storage network that will be the largest in Canada and one of the largest in the world. This project will capture carbon from 16 different oil sands sites, 14 of which will be connected by a 400 kilometre-long pipeline going from Fort McMurray to south of Cold Lake in eastern Alberta, where CO2 will be sequestered underground in deep saline aquifers. This project will initially store 14 megatonnes per year of carbon, which could be expanded to 40 to 50 megatonnes per year as additional capture is added in the 2030s and 2040s.

Our foundational project will add $16 billion to Canada's GDP and create over 100,000 person-years of labour during the construction phase from now to 2030, so this project would not only be a major emissions reduction. It would also be a huge economic driver for Alberta and Canada.

We are pursuing other technologies from electricity cogeneration, energy efficiency and the use of solvents in the extraction process, to newer technologies like the use of hydrogen as a fuel source, small modular nuclear reactors and, eventually, direct air capture to remove CO2 directly from the atmosphere. We will need all these levers if we are going to meet our goal of net-zero operations by 2050.

While CCS is now proven technology—we have four major CCS projects in Canada already—it is costly technology. To be competitive, we'll need federal and provincial governments to coinvest with industry in this important opportunity.

We've had strong dialogue with both levels of government and also with 26 first nations and Métis communities in our project region. Both the federal and Alberta governments have helped support the project. The investment tax credit for carbon capture and storage announced by the federal government two years ago will be essential to building these projects, as will be a recently announced Alberta sequestration incentive.

We're also pleased that the federal government has announced that it is exploring carbon contracts for difference as a mechanism to help shore up Canada's industrial carbon price, which would help support the ongoing operations of carbon capture.

These are great proposals, but none of these measures are currently in place. Other jurisdictions, such as the United States with the Inflation Reduction Act, and also the United Kingdom, Norway, the Netherlands and others, have introduced incentives for carbon capture that are actually much more generous than what Canada and Alberta currently have in place. When Canadian companies are competing for capital investment globally, we need to be able to demonstrate that we have as attractive an environment as possible for carbon capture and other new technologies.

The federal, Ontario and Quebec governments have made the decision to match the Inflation Reduction Act when it comes to battery technology for electric vehicles. We think that carbon capture—a technology in which Canada is already a global leader and that is probably the single biggest emissions reduction opportunity Canada has—needs similar treatment.

With the right combination of federal ITCs or other incentives, Alberta incentives, carbon contracts for difference and other measures, we think Canada can compete with anyone in the world.

With that, I'm pleased to answer any of your questions. Thank you.

[The Chair, Liberal, George Chahal]

Thank you, Mr. Cameron, for your testimony.

We will now go to Adam Waterous, chief executive officer from the Waterous Energy Fund, who's online.

You have five minutes, sir.

[Adam Waterous, Chief Executive Officer, Waterous Energy Fund]

Thank you and good day. Thank you for the invitation to speak with you.

Over the last eight years, my family and I have founded three projects in an effort to try to do our part to help position Canada as the North American leader in addressing the climate change challenge and fighting the energy poverty emergency.

The first project, which we founded in 2015, is the Calgary Airport-Banff Rail—or CABR—project, which will be North America's first hydrogen-powered, zero-emissions passenger rail system, and the first entirely new intermunicipal dedicated track passenger rail system ever built in Canada.

As background, my wife, Jan, and I have lived in Banff for the last 26 years and grew increasingly concerned about the impact that personal vehicles were having on Banff National Park. Returning passenger rail to Banff would be the obvious transformative solution, but the government was not in a position to develop it, so my wife and I decided to lean in and see if the private sector could create a reliable high-frequency system that would run on a new dedicated track we would build within the CPKC rail corridor.

To advance the project, we first worked with CPKC to lease the Banff train station, and then entered into an MOU to lease the space within the corridor to build the track. We structured the project as a public-private partnership, and brought in as our development partner the infrastructure arm of CDPQ.

We have secured the support of the four mayors of the municipalities along the route. The federal government, through the Canada Infrastructure Bank, has been a wonderful partner and agreed to fund 50% of the capital cost. We are currently collaborating with the Alberta provincial government on a study to optimize the rail connection at the airport. If all goes according to plan, we hope to begin construction within 24 months, with a three-year build, so that CABR can be in service in late 2028.

The second project, which we started three years ago, was Banff National Park Net Zero 2035, an effort to make Banff North America's first net-zero emissions community. We created the initiative as a result of Jan and I working with the transition accelerator to determine that the transportation emissions by visitors and residents in Banff National Park were 105 metric tons each year, by far the largest of any national park in the world. For perspective, compare that to Zion National Park, the U.S. national park that most closely resembles Banff National Park in visitation. Banff has 63 times the per-visitor transportation emissions.

It was clear that Parks Canada on its own was not able to reduce the impact of the personal vehicle. We saw the opportunity to transform Banff National Park from worst to first through the collaboration of leaders from business, academia and government. The Banff National Park Net Zero 2035 initiative's short-term priorities include advancing such projects as pedestrian-only zones within the town and replacing personal vehicles to popular points of interest in the park with shuttle link systems. A medium-term priority is converting Banff's space heating needs to hydrogen, using innovative technology to convert natural gas to hydrogen at a community-level facility. As we like to say, “If Banff can't become net zero by 2035, Toronto doesn't stand a chance by 2050.”

The third project we founded in 2017 was Strathcona Resources Ltd., which will likely be one of the first oil companies in North America to deploy carbon capture and storage at scale. By way of background, Strathcona was created by Washington state's clean energy fund, a private equity investment business that has, among other professionals, me and our three sons. We have grown the business over the last six and a half years into Canada's fifth-largest oil company. Strathcona's business plan will help fight the energy poverty emergencies to organically grow production over the next eight years from 185,000 barrels a day to 325,000 barrels a day.

Strathcona has principally grown by consolidating three core areas by acquiring 10 smaller subscale businesses into a single operating entity. Each of these smaller entities lacked the financial capacity to fund the necessary capital investments required to be able to reduce CO2 emissions. Strathcona's thermal assets, which currently produce 9,000 barrels a day, are located in southern Alberta and Saskatchewan. This provides us the opportunity to sequester the CO2 directly into reservoirs beneath those facilities, unlike the Athabasca oil sands, which had to build a CO2 pipe to southern Alberta.

Strathcona has the potential to reduce its emissions through CCS by 2030 by 60%, and ultimately to reduce them up to 90%. Strathcona has already taken the first regulatory steps in implementing CCS, receiving some of the first permissions to drill test sequestration wells in both Alberta and Saskatchewan. Strathcona's full implementation of CCS is waiting for a finalized fiscal regime from the federal and provincial governments.

I'll be glad to take your questions.

[The Chair, Liberal, George Chahal]

Thank you, Mr. Waterous, for your testimony.

We will now move to our first round of questions with Ms. Stubbs.

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

Mr. Chair, it's very likely we're going to have votes, so I would request that maybe we have a truncated round, so that everyone gets a chance to ask questions of the witnesses. I would suggest maybe two or two and a half minutes, if everyone agrees. Otherwise, we will be here and we may get cut off.

[The Chair, Liberal, George Chahal]

The bells are ringing.

Mr. Angus, your timing was impeccable to take the floor to make that—

[John Aldag, Liberal, Cloverdale—Langley City, BC]

Could we ask for unanimous consent to do one truncated round while we have our witnesses here?

[The Chair, Liberal, George Chahal]

Colleagues, would you like to do two and a half minutes each for one round? Would that work for everybody? Do we have unanimous consent?

[Shannon Stubbs, Conservative, Lakeland, AB]

We do, but, Chair, I might also suggest then that we provide the opportunity to welcome these witnesses back so that they can have full opportunities to speak since the meeting did start late and now it's being interfered with by bells and a vote.

[The Chair, Liberal, George Chahal]

The only challenge we have is that this was the only date we had for the study. If that is the committee's will, at a future committee business meeting we can raise that and have a conversation.

Mr. Angus.

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

I think it's a very interesting thing. I want to thank my colleague for always being super reasonable. She and I get along famously on almost all things except policy.

[The Chair, Liberal, George Chahal]

Okay. We have unanimous consent. We will give two and a half minutes to every party so that's one question each. We will end the meeting after that.

Mrs. Stubbs, the floor is yours for two and a half minutes.

[Shannon Stubbs, Conservative, Lakeland, AB]

Thank you, Chair.

Unfortunately, I do hope that we will be able to have witnesses called back, because now I must speak to the motion that I put on notice. I'm going to do that now. What I hope is that Adam Waterous at some point today, or in the future, will be able to expand on the importance of oil and gas to lift all Canadians as well as vulnerable people right around the world out of energy poverty, with higher standards of living and quality of life.

I would also mention to Mr. Vaillant...and, of course, he talked at length about a region that I'm from. My riding was the front lines for helping evacuees coming from Fort McMurray. Of course, the investigators did note about that fire that it was caused by a combination of human activity related to recreational vehicles, power lines, arson and some other human-caused factors. Hopefully, that will be expanded later on for a fact-based conversation about that particular fire, which impacted the communities and the indigenous people whom I represent.

At this time, I want to speak to a motion that I think needs to urgently become the absolute top priority for this committee, which is that the Supreme Court on Friday ruled that Bill C-69, which has been in law for half a decade and was supported by the Liberals and the NDP by the time it left the House of Commons but faced opposition from all provinces and all territories, either outright opposed to it or calling for major overhauls....

To that end, I want to speak to the motion that I put on notice, which asked that the committee recognize that Bill C-69 has been ruled unconstitutional by the Supreme Court of Canada—

[The Chair, Liberal, George Chahal]

Mrs. Stubbs, is that the motion you brought forward this morning?

[Shannon Stubbs, Conservative, Lakeland, AB]

No. I'm speaking to the one that you got notice for on Friday.

It's that the committee recognize that the bill has been ruled unconstitutional by the Supreme Court of Canada in a 5-2 decision, that the Chief Justice of the Supreme Court said Parliament has to “act within the enduring division of powers framework laid out in the Constitution” and that all provinces and territories called for major changes to Bill C-69 that were ignored; therefore, it's the opinion of this committee that Bill C-69 should be repealed and report that finding to the House in order for the House to vote on the viability of the bill given the Supreme Court's majority ruling.

This is extremely important, of course, because the judgment said that Bill C-69 invites the federal government to make decisions where it has no jurisdiction. It requires assessments of projects with little or no possibility of federal effects to have a federal review. It represents an unconstitutional arrogation of power by Parliament in which the decision-maker gets practically untrammelled power to regulate projects whether Parliament has jurisdiction to regulate or not. The purposes of the IA are considerably broader than what is—

[The Chair, Liberal, George Chahal]

Ms. Stubbs, we're going into debate now.