Natural Resources Committee on Feb. 28th, 2022

[Eric Melillo, Conservative, Kenora, ON]

I appreciate that.

I don't think I have any time for a question, but the next one I would have asked would be about the effectiveness of an emissions cap. I'd be curious to get the thoughts of the witnesses on whether we should be looking at a cap for sectors across the country or specifically for oil and gas.

I am out of time. Unfortunately, I can't have any of you answer that right now. If you can keep it in mind if it happens to come up in future questions, I'd appreciate it. Thank you again for your time.

[The Chair, Liberal, John Aldag]

Witnesses, you are invited to send in additional information based on your interactions today. We ask that it be kept to no more than 10 pages. If there are unanswered questions or you have additional thoughts, please feel free to send those to our clerk. She'll get that information to our committee.

We're going now to Mr. Chahal, who will have six minutes.

It's over to you, Mr. Chahal.

[George Chahal, Liberal, Calgary Skyview, AB]

Thank you, Chair. I also want to thank all the witnesses for joining us today.

I welcome new members to the committee Mr. McLean, from my city, Calgary, and Mr. Bragdon. I look forward to working with you.

I'll start off my question with Ms. Winter.

Ms. Winter, what forms of support do you believe the Government of Canada should provide for technological development to reduce emissions? What measures do you believe are less effective in reducing emissions?

[Dr. Jennifer Winter]

Thank you for the question.

I would say that support for technological innovation should be put in place to address market failures. By that I mean not just the problem of emissions reductions but market failures insofar as innovation is a public good, so the benefits to society are broader than the benefits to the innovator. The policies should be, of course, carefully constructed to address that question and also to consider overlap between policies, in that emissions pricing itself provides that signal for innovation.

[George Chahal, Liberal, Calgary Skyview, AB]

Thank you for that.

I'm going to Mr. Tarvydas.

Mr. Tarvydas, there's been a lot of talk about natural gas being the bridge to a net-zero future. What is the role of natural gas as we move forward to a net-zero future? What are the challenges and opportunities with investments in natural gas and natural gas infrastructure?

[Robert Tarvydas]

Mr. Chair, I think natural gas has already played an important role in transitioning to a lower-carbon environment. The United States has achieved dramatic reductions in their own GHG emissions by moving from coal to natural gas-fired power, and the same has happened in some jurisdictions here in Canada. We're already seeing the role that natural gas can play and will continue to play. Here in Alberta, we've seen the phasing out of coal much earlier than even originally planned. It is, at least partially, the direct result of the move to natural gas-powered generation.

Natural gas also continues to play a pivotal role in certain industries where fuel substitution is either uneconomic or not even viable in some instances.

Don't forget that natural gas also plays a role as a feedstock in petrochemicals. Its use is not necessarily just in being burned to provide energy along the way.

I think it's probably safe to say that natural gas has already played an important role in the transition. It will continue to play a role in the transition. With the opportunity for things like carbon capture and storage or the direct capture of emissions from the atmosphere, it should be possible that natural gas can continue to play a role in the energy mix going forward.

[George Chahal, Liberal, Calgary Skyview, AB]

I'm glad you mentioned carbon capture and storage, because that was my next question.

Your role is at TC Energy and the Alberta Carbon Grid. As an Alberta MP, energy is top of mind for all Albertans—all types of energy. We want to be a global leader in all things energy, including clean energy.

On the role of the Alberta Carbon Grid and meeting our future goals, what type of investment is required to achieving our goals, and what type of investment has TC Energy made in this?

[Robert Tarvydas]

I'm sorry. Could I ask for a clarification?

Are you looking for a quantum of dollars or are you looking for a general statement about the kind of investment that would be required in this area?

[George Chahal, Liberal, Calgary Skyview, AB]

I'm looking for a bit of both: a total investment to reach our goals, from your perspective, and a current investment by your company in this Alberta Carbon Grid to meet our goals from what you're doing.

[Robert Tarvydas]

Thank you for the question.

Mr. Chair, the quantum in terms of carbon capture and storage, even within the Alberta context, is probably going to require investments in the billions of dollars. The Alberta Carbon Grid, as envisioned right now, is probably on the order of magnitude of many billions of dollars, probably $5 billion or more—along those lines.

Right now, our investment has largely been limited to investigative studies and doing some of the preliminary regulatory work. It would be in the millions of dollars that we have invested so far.

[George Chahal, Liberal, Calgary Skyview, AB]

Do you believe that these investments made can be done without government incentives? Can industry do it alone?

[Robert Tarvydas]

Anything is possible.

When we look across the North American environment, though, we operate in a competitive environment, especially with the U.S. The U.S. has an example of a tax credit for carbon capture and storage, which has probably led them to take a bit of a lead in terms of that technology. I think we can still catch up, but I believe that obviously the technologies can be accelerated with the use of potentially some sort of a tax incentive from government.

[George Chahal, Liberal, Calgary Skyview, AB]

Thank you.

I believe my time is up.

[The Chair, Liberal, John Aldag]

It is up.

Now we're going to Monsieur Simard, who has six minutes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

We're off to a good start, so I'm going to continue along the same lines.

My question is for the TC Energy representatives.

In their statement, one of them said that the sector would not be able to remain profitable if the government tightened the rules too much.

I have trouble seeing how it's possible to reduce the emissions intensity of the oil and gas sector without making huge investments in the carbon capture and storage technologies we hear so much about.

I'd like one of the TC Energy representatives to clearly tell us whether that is something the industry alone can accomplish, without the financial support of the government.

[Robert Tarvydas]

Mr. Chair, I think there are two parts to the question. I'll try to address both of them.

In my opening statement, what I was specifically referring to is the risk that a very prescriptive regulatory framework for an emissions cap would reduce the degrees of freedom for operators in the oil and gas sector to comply. Obviously, the more prescriptive the regulatory environment, typically the more expensive it is to comply. That's why you heard some of the statements from some of the economists at the beginning—

[Mario Simard, Bloc, Jonquière, QC]

I don't mean to cut you off, but I think I want to narrow down your answer a bit. I believe Professor Leach said in his opening statement that a barrel of oil had never been as emissions-intensive as it is today. The emissions intensity of a barrel of oil is rising, not declining.

It feels as though you're trying to convince us that it is possible to produce oil with a lower carbon footprint. Personally, I think it's impossible to do in a cost-effective way. As soon as you try to lower the emissions intensity of oil, you automatically have to invest in R and D. In light of that, I want to know whether your sector is cost-effective or not. If it can't be done without the financial support of the government, we have a real problem.

I'd like a clear answer to that, please.

[Robert Tarvydas]

Mr. Chair, if I understand the question to be whether the industry can support R and D without government tax credits, the answer is yes, but in a globally and certainly continentally competitive environment, it's probably important to keep Canadian industry on the same footing as U.S. industry, and that's where potentially tax credits come into play.

[Mario Simard, Bloc, Jonquière, QC]

We know two big projects are under way in Alberta to sequester, capture and store carbon, with the Alberta and federal governments providing 57% of the funding. That tells me your sector isn't able to make oil production less carbon-intensive. On top of not being able to reduce its carbon intensity, the sector doesn't want an emissions cap.

What is your solution for reducing oil and gas sector emissions? I can't see it. You want to put the burden on all the other emission-producing sectors, when you're the biggest emitter of greenhouse gases.

[Robert Tarvydas]

Mr. Chair, I'm not sure where the honourable member got the idea that I'm not, or my company is not, in favour of a cap. I actually indicated that we were in favour of it during my opening statements.

[Mario Simard, Bloc, Jonquière, QC]

Yes, you're in favour of a cap, but my question is whether you can adhere to a cap without financial support from the federal government.

Can you do that?

[Robert Tarvydas]

Mr. Chair, I honestly don't know the answer to that question. I believe that right now there has been interest from government levels in supporting the development of this new technology. Just like any new technology, including some renewable energy sources, they were all supported by government initially and probably would not have been as economic as quickly as would otherwise have been the case. I think that's no different in the case of carbon capture and storage.

[Mario Simard, Bloc, Jonquière, QC]

I have a question for Ms. Winter.

In your opening statement, you said that the source of emissions didn't matter and that the oil and gas sector should not be singled out. I can give you some real-life examples. Where I'm from, aluminum is a major industry. In a few years, the sector will have managed to produce carbon-neutral aluminum thanks to inert anodes. Almost all the R and D costs were assumed by Rio Tinto, which made a decision to get in the carbon-neutral aluminum game.

When I see the mountains of taxpayer money being invested in Canada's oil and gas sector, I think it's a bit rich to say that the source of the emissions shouldn't matter. We all know oil is the problem. Disregarding the source of the emissions places the burden on all the other sectors of the economy. That is more or less what one witness told us.

Do you agree with that statement?

[Dr. Jennifer Winter]

Respectfully, I would say that the problem of emissions is due to consumers. Firms are supplying the products that consumers want and the fossil fuel sector is a cheap source of energy.

My comment about where emissions come from is that what we should focus on is the least-cost emissions reductions first, not target specific sectors.

Thank you.

[The Chair, Liberal, John Aldag]

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

Now we're going over to Mr. Angus, who will have his six minutes and first round of questions.