Thank you, Mr. Chair.
Mr. Badawey indicated that he had an amendment, but I guess we're sort of speaking more broadly to this topic. There's an amendment on the floor to remove the minister's appearance from the list of witnesses.
I want to speak to the larger issue. I'll do so now with your indulgence.
I think this might shed light on why the minister's appearance would be appropriate and also on some of the topics that I mentioned earlier in terms of why this is a matter of interest to me and to our party.
I'll just read from this article by Paul Wells, which appeared in The Logic on March 21, 2022. I found this very interesting—especially the last part, which I think the committee will also find interesting.
He begins:
Follow the Trudeau government long enough and you start to learn that their announcements are a shaky guide to their actions. Sometimes they do what they say they will! Other times it's more complicated.
I'll try not to insert my own opinions along the way and I'll just read this excerpt. It continues:
It's often handy to wait a while after an announcement and then check back in with two questions: “Have they really done it?” and “Should they really do it?”
Case in point: in April of 2021, the Canada Infrastructure Bank announced an agreement in principle to invest up to $655 million in the Lake Erie Connector, a 117-kilometre underwater transmission line to move electric power between Ontario and the Pennsylvania hub of the PJM Interconnection, a 13-state U.S. energy consortium.
Eleven months after its initial announcement, the Canada Infrastructure Bank's board still has not approved—
This was at the time of writing.
—its $655-million investment in the Lake Erie Connector, and no money has flowed to the project, while Ontario's Conservative government is asking hard questions about the impact it could have on greenhouse-gas emissions in the province.
“The Canada Infrastructure Bank's investment will”—
This is a quote.
—give Ontario direct access to North America's largest electricity market,” Catherine McKenna, who was then the infrastructure minister, said in the Bank's news release.
Ehren Cory, the Infrastructure Bank's CEO, was effusive. “This project will allow Ontario to export its clean, non-emitting power to one of the largest power markets in the world and, as a result, benefit Canadians economically while also significantly contributing to greenhouse-gas emissions reductions in the PJM market,” he said in the Bank's news release. “This is a true win-win for both Canada and the U.S., both economically and environmentally.”
It all had an impressive air of certainty about it. There was no hint of doubt in The Globe and Mail's coverage of the announcement. The paper's story said the power line's proponent, Michigan-based ITC Holdings, had all the necessary permits and could start construction before 2021 ended. And indeed the Bank's news release contained 13 uses of the word “will”, so it was possible to overlook the note of conditionality in its final bullet point: “The investment commitment is subject to final due diligence and approval by the CIB's Board.”
Eleven months after the announcement, the Infrastructure Bank's board still has not approved the huge investment and no money has flowed. The Bank is answering questions about its evaluation process by referring reporters to an evaluation of the Erie Connector project that's being carried out, not by the feds, but by a succession of Conservative provincial energy ministers, who have been asking the project's proponents hard questions about the impact it could have on greenhouse-gas emissions in the province.
Independent analysts and climate activists have had similar questions since the beginning. They're convinced Ontario will struggle to meet its own electricity needs in the next several years; that it won't have surplus energy to send to the U.S.; and that to cover the cost of building the Erie Connector by generating new energy for the purpose of shipping it south, the province would have to rely overwhelmingly on gas plants instead of cleaner energy sources.
Mark. S. Winfield, the co-chair of York University's Sustainable Energy Initiative, told The Logic the Infrastructure Bank seems “remarkably clueless about the electricity decision-making process and system in Ontario.”
The Canada Infrastructure Bank's potential investment in the Erie Connector comes down to a perfect marriage between a highly motivated investor and a stalled project. By the spring of 2021, the Bank was facing substantial and public pressure to make new investments. That pressure had been building for almost five years.
Bill Morneau, Justin Trudeau's first finance minister, announced the creation of the bank in November 2016. It would be a centrepiece of the Trudeau government's growth strategy, an absolutely massive fund—$35 billion—with a 10-year mandate to seek major institutional investors as partners in “transformative projects.” Once they got into the habit of following the Bank's lead, those investors would multiply the federal effort many times over: Morneau anticipated that each dollar of federal investment could leverage as much as $11 from deep-pocketed institutional investors such as other countries' pension funds. Dominic Barton, the prominent consultant who had helped conceive the infrastructure bank project is head of Trudeau's volunteer Advisory Council on Economic Growth, told one interviewer in 2017 that the goal was to bankroll really big projects on a scale that could transform the work of a nation. “Fewer, bigger is better than many,” Barton said then. He wanted transportation and power transmission projects “that you can see from the moon, maybe.”
The moon turned out to be an elusive suitor. Investments from the Bank were rare occurrences and none lured multiples of the Bank's investment from institutional investors. Slow progress led to management churn. The Bank's first head of investments resigned in 2019 after only 10 months on the job. Veteran public-service administrator Michael Sabia became the chair of the Bank's board in April 2020, replacing its inaugural chair and leading to the departure of its first CEO, Pierre Lavallée. Sabia in turn left the Bank after only eight months to become the deputy minister at the department of finance.
It fell to Cory, the bank's CEO since October 2020, to build a “results-focused organization,” as the Bank put it in the news release announcing his appointment. As the COIVD-19 pandemic dragged on, the Bank was saddled with even higher expectations: Now it was to drive a post-pandemic economic recovery. “I've also been clear to [Cory] and the board that they need to deliver in the first quarter,” McKenna, then the minister responsible for the Bank, told The Logic in February 2021. The Erie Connector announcement nearly made that deadline, arriving two weeks into April.
Part of the mystery here is why the Erie Connector needs a dime of government money. Its developer is ITC, the largest independent electricity transmission firm in the United States. ITC in turn a subsidiary of Fortis, a St. John's holding company with a steady track record of stock growth, 48 consecutive years of increasing dividend payments, and $58 billion in total assets. So the company that's asking for Infrastructure Bank money is almost as big as two Infrastructure Banks.
ITC Corp. acquired the rights to the Erie Connector project—
This said it was a 10-minute read. I'm not sure how I'm doing, but we're getting there.
—from the Lake Erie Power Corp in 2014. The project received approval from Canada's National Energy Board in 2017. But then the momentum went right out of it.
This is exciting.
“The trouble is the project has been shopped for three years and no one has jumped aboard,” The Hamilton Spectator reported in 2019. The paper quoted an ITC executive: “'There was an excitement a couple of years ago, but it's kind of quiet because it's not built.'”
There's no necessary scandal in the prospect of the Infrastructure Bank enabling a private project that had stalled. The Bank exists, to some extent, to tip the balance of decision-making on such projects. “In many cases, vital infrastructure projects wait on the sidelines until the risk profile is resolved and the business case for investment by private sector materializes,” Félix Corriveau, the Infrastructure Bank's spokesperson, wrote in response to questions from The Logic. “The private sector, in partnership with the CIB, can play a role in delivering important infrastructure. Without—”
Again, this is CIB messaging.
“—CIB acting as a catalyst for private-sector investment, it could mean decades of waiting until the risk and economics are addressed.”
Here he's talking about essentially the government de-risking private projects that have questionable merit. It continues:
As with many infrastructure projects, “there is a very long payback period for a project like this,” Corriveau wrote. “It will take years to build, and many more years before the line has paid for itself.” The demand for power across the line will depend on things like the pace of each jurisdiction's energy transition, he added, and their respective economic growth. “These are all risks that the project must absorb. The CIB is in this project to help mitigate those risks, and in doing so to make it more viable for the operator and more beneficial to Ontarians.”
The problem is that publicly available modelling suggests Ontario is heading toward a substantial crunch in generating capacity. The province is unlikely to have extra electricity just lying around, and to make extra electricity for an export market it would need to rely heavily on gas-generated power, with its attendant greenhouse-gas emissions.
The Connector would be able to run electricity southward into the U.S. PJM consortium's grid, or northward into Ontario. Which way would account for most of the freight? The Bank's Corriveau said the “expectation” is that “energy will flow from Ontario to PJM over the long term given that Ontario has a much higher share of the lower marginal cost sources of supply—which is typically non-emitting—compared to PJM.”
Over that longer term, according to the latest Annual Planning Outlook from Ontario's Independent Electricity System Operator (IESO), the output of the lowest-emitting source of electricity, the province's three nuclear-generating stations, will be diminished as one is retired and the other two refurbished.
Meanwhile Ontario's domestic demand for electricity will see strong growth as the province experiences “an emerging transformation of the economy” driven by rapid growth in everything from electric vehicles to LRT transit to electric lighting in cannabis grow-ops. The upshot: “Major challenges” to the Trudeau government's hopes of reaching net-zero emissions in the energy sector by 2035, York's Winfield has written with the University of Ottawa's Colleen Kaiser.
That's because energy production on top of current levels will almost entirely come from gas plants. “By the late 2030s electricity-related [greenhouse gas] emissions are projected to be 600 per cent above 2017 levels, with the curve continuing upwards from there,” they wrote.
Generating extra energy to push through the Connector would add to that grim greenhouse-gas prospect, said Jack Gibbons, the chair of the Ontario Clean Air Alliance. “The CIB should not be using taxpayer dollars to subsidize increased gas-fired electricity generation and GHG pollution in Ontario.”
One of the most surprising parts of this saga is that when asked about its due diligence on the Erie Connector file, the Bank replied with reference to an evaluation the Ontario government is carrying out. “We expect to reach financial close once the discussions between ITC and the IESO have been completed,” Corriveau said.
To their credit, Ontario's energy ministers have spent months urging the IESO to give the Connector project's tires a good hard kick. In a May 2021 letter to the IESO, then-minister Greg Rickford asked it to report back to him on “the potential domestic and global greenhouse-gas (GHG) impacts of any electricity imports and exports through this transmission line.” If ITC couldn't come up with a model that provides “sufficient value to ratepayers,” the Connector project “would not proceed to contract execution,” Rickford wrote.
The IESO's responses to the minister aren't public. But in a Jan. 26, 2022 letter to to the IESO, Rickford's successor Todd Smith said he is permitting the Connector project to proceed to another, final round of evaluation. Smith sounds encouraged by what he's heard to date: “The project has many potential benefits to Ontario including improved system reliability, the creation of new opportunities to sell Ontario's surplus electricity to the benefit of Ontario ratepayers by lowering electricity costs, and a significant reduction in [greenhouse gas] emissions.” He has asked the IESO for a fresh assessment of “the project's value to ratepayers and the IESO's level of certainty in the value proposition.”
That report to Smith is due tomorrow, March 22.
Again, this is 2022. It goes on:
Based on the answers he gets, Smith might approve construction on the Erie Connector, which would in turn apparently trigger the $655-million Infrastructure Bank investment.
What drives Gibbons at the Ontario Clean Air Alliance up the wall is that all of this discussion of a 117-km electricity link under a Great Lake ignores the possibility of a simpler solution to power-sharing in a low-carbon future: linking to Quebec's power grid, which runs mostly on nearly zero-carbon hydroelectricity. Such connections would make 7,500 MW of Quebec hydro available in Ontario at less than half the price Ontario pays for its nuclear-generated electricity, the group argues.
Perhaps it's time to sum up, and to suggest a path forward.
This is where, folks, I think we'll find this interesting. It says:
We have two governments making decisions, in processes of limited transparency, about an international energy link proposed by a subsidiary of one of the richest and soundest companies in Canada. Credible experts worry that the Erie Connector would drive up carbon emissions in Ontario. Independent analysts wonder why governments wouldn't prefer a made-in-Canada solution that is cheaper and would tend to reduce emissions.
All of this is the sort of thing that a committee of the House of Commons might reasonably want to investigate. In a minority Parliament, opposition parties have all kinds of latitude to haul a project like this before MPs and ask questions to which the available answers are so far limited.
The Environment, Natural Resources, and Infrastructure committees, singly or in combination, could play. MPs could approach the Erie Connector, not as a scandal—because there's no reason to suspect it's anything of the sort—but simply as a question about how to make the best choices when allocating substantial government resources in an attempt to build a clean-energy future.
The Bloc Québécois could investigate the Hydro-Quebec alternative. The Conservatives could seek value for money. The NDP and Greens could keep an eye on the climate implications. And the Liberals, who have always claimed the Infrastructure Bank was arm's length from government but whose minister was cheerleading a Bank investment before the Bank had even decided to make it, could get back into the business of showing an interest in the details of governance. All that's needed is for a few MPs to decide this project is worth their scrutiny.
Thanks for your forbearance, Mr. Chair and colleagues.
I think that spells out, rather clearly, first of all, why the minister should be part of this study, why this study is warranted in the first place and a few of the lines of inquiry that are very much in the public interest and would be a benefit to Parliament and to all Canadians.
With that, I appreciate the ability to read the article in full. I found it very interesting. I understand that now we're several years later, but this is still a matter of great interest because the Canada Infrastructure Bank is still out there. Its CEO is still out there trying to find ways to put public money into private infrastructure to help private investors make a private dollar.
As everyone around this table knows, we do not think that this objective is in the public interest, and that's why we have supported the recommendation that has already been put before the House that the Canada Infrastructure Bank be abolished or that it substantially reform its objectives so that it works more exclusively in the public interest.
I'll leave it at that, and I know we're going to have more opportunities. I sit at this table and I spend lots of time, as others do, listening to Liberals and Conservatives read from documents and talk out the clock. I thought today perhaps I would take a turn at adding more substantially to the record than I usually do.
With that, I'll say thank you again and pass it back to you, Mr. Chair.
