RNNR Committee Report

More Stability, Clarity and Consistency is Necessary from the Government for Growth, Investment and Competitiveness in the Oil and Gas Sector

House of Commons Standing Committee on Natural Resources: Dissenting Report

This dissenting report reflects the views of the following Members of Parliament who served on the Standing Committee on Natural Resources (the “Committee”): John Barlow (Co-Vice Chair of the Committee, Foothills), Candice Bergen (Portage-Lisgar), and Shannon Stubbs (Lakeland).

Background

On February 24, 2016 the Committee undertook a study titled “The Future of Canada’s Oil and Gas, Mining and Nuclear Sectors: Innovation, Sustainable Solutions and Economic Opportunities.” The Committee divided the study in three parts: oil and gas, mining and nuclear.  Over the course of seven meetings, the Committee heard from 33 witnesses who highlighted a number of existing and emerging trends that are driving change in the sector, in addition to a variety of challenges that must be addressed in order for Canada’s oil and gas sector to remain competitive.

Reasons for a Dissenting Report

The Committee studied the future of Canada’s Oil and Gas Sector. In the opinion of the members from the Official Opposition the resulting report brought forward by the government failed to adequately represent the testimony presented by witnesses at committee on a number of critical issues related to the study. There were areas of testimony and important subjects relating to Canada’s oil and gas industry that deserve more focus than reflected. This dissenting report seeks to provide further clarity and accuracy on these issues while providing the Government of Canada additional recommendations to ensure the strength and long term sustainability of Canada’s oil and gas sector.

Four critical areas, not highlighted in the study include:

a)    The fact that it is not necessary to include upstream greenhouse gas emissions in pipeline projects because it is provincial jurisdiction. This is an inconsistency in comparison to other sectors as it is not required of any other Canadian industry;

b)    The Government of Canada has created great uncertainty in the industry through unnecessary project delays and the duplicative five principles of the new  transitional assessment process, which have a negative impact on investment;

c)    Canada has a world-leading regulatory regime and an internationally renowned track record of environmentally and socially responsible oil and gas development;

d)    The United States is not only our best customer, but is also Canada’s biggest competitor. This highlights the critical need for strategic infrastructure to ensure new and diverse markets for Canadian oil and gas.

Taken together, we as Members of Parliament on the Committee, therefore, feel that it is our duty to our constituents, to Canadians, to the oil and gas stakeholders and workers, and to the witnesses, to respectfully present this dissenting report.

Committee’s Report Fails to Adequately Address Uncertainty in the Oil and Gas Sector caused by the Government

The Committee’s report failed to sufficiently address the concerns brought forward by many witnesses regarding the uncertainty that the Government of Canada has created in the oil and gas sector with the five interim principles for their new assessment process for natural resources infrastructure projects. One witness pointed to regulatory uncertainty as a reason for investment decline, he said, “we keep changing the rules, we keep changing the method, and we create additional time frames that weren't anticipated at the beginning, and investors get scared.”[1] Another witness stated “there is a degree of uncertainty, and I think over the course of time in the near term here we'll see what that leads to, what the process is,”[2] and another said “we’ve scratched our heads a little bit…,” and he spoke of the interim process as being “a bit up in the air”.[3]  Another witness stated, “The key role for government … are to set a policy environment that provides clear signals across all sectors of the economy, that reduces uncertainty; provides clear incentives for the broad directions we want to work.”[4] Also, a witness outlined the importance of time limits on assessments, “I think that environmental assessment should not be used as a delaying tactic. Sometimes it is used in this way. I like some of the things the previous government brought in, by putting time limits on environmental assessments. I think there needs to be flexibility.”[5]

Unfortunately, the Committee’s report failed to accurately reflect the reality of the uncertainty facing the sector caused by and exacerbated by the current government.

Committee Report Fails to Recognize Canada’s World Leading Regulatory Framework and Record of Strong Environmental Stewardship

The Committee heard from witnesses who spoke contrary to the government’s narrative which is predicated on the assumption that the current regulatory framework is broken and it needs to be changed to restore the public confidence and trust of Canadians. One witness said that Canada’s standards “are the best in the world in our mind.”[6]  Another witness stated that, “the safety record of the pipeline industry in Canada is very good, compared to other pipeline systems around the world, and we believe that transporting oil by pipeline is a better alternative than by rail.”[7] Another witness reinforced the excellent standards of Canada’s regulatory framework when he said, “Canada also has world-leading environmental regulations. Of the top oil reserve holders, only Canada is covered by world-class, stringent environmental regulations and oversight. It is the only major oil-producing jurisdiction with comprehensive greenhouse gas regulations. As the world demand continues to grow, Canada’s environmentally and socially responsible production will be an important source of supply; the world needs more Canadian energy.”[8]

Though the government has tried to present the current regulatory framework as having significant and insurmountable problems, the Committee heard from a witness who said they “don’t fundamentally believe that the environmental assessment processes run by the federal and provincial governments are broken.”[9] Through Canada’s strong regulatory framework and the excellent work of the National Energy Board, one witness testified “I'd say that over the past 10 years, under NEB auspices, several pipelines have been built. Certainly the Line 9 pipeline was approved under the NEB process. The Access pipeline and the initial Keystone pipeline were built. There is a list of pipelines that went through the regulatory process under the NEB, that went through consultation, that went through environmental review, and that were built.”[10] This testimony speaks to the quality of Canada’s regulatory framework, Canada’s strong environmental stewardship, and emphasizes the fact that there were pipelines built in the last 10 years under the former government.

As we have seen, numerous pipelines have been approved and constructed under the current regulatory framework while consistently maintaining the excellent safety and environmental standards that Canadians demand and deserve. (See tables 1&2 pg. 7-8)

The Committee report as presented falls short of providing a genuine account of the witness testimony which expressed the quality of Canada’s regulatory framework, and our outstanding and respected record of environmental stewardship.

Committee Report Fails to Address the Critical Need for Strategic Energy Infrastructure to Remain Competitive in the Global Market

The Committee heard from witnesses who explained the need for investment in energy infrastructure. One witness said “as long as the world needs oil and gas to fuel our cars and power our plants, we need to support the competitiveness of Canada's industry. For our network, this means building export infrastructure, both pipelines and LNG facilities. Stopping pipelines in Canada does not speed up the development of alternatives to oil, and it doesn't slow growing oil demand in emerging economies, which is where most of the growth in energy demand will come from in the future. China and India need petroleum, but they don't much care if it comes from Canada or somewhere else. As investment in the oil sector moves away from Canada, greenhouse gas from oil production just moves with it, likely to jurisdictions with fewer environmental safeguards.”[11] The testimony reflected both the need for investing in energy infrastructure and the strength of Canada’s environmental record. Regarding the growing market for oil and gas another witness said “transportation infrastructure is required to meet these growing energy needs, and pipelines remain the safest and most efficient and the lowest greenhouse gas-intensive way of moving energy over long distances.”[12] From an economic perspective, one witness expressed that “the lack of export infrastructure means that Canadian crude is often, but not always, trading at a deeper discount which, when you're already kind of hurting for prices, is an additional burden to the industry.”[13]

The Committee report did not reflect the witness testimony that clearly stated the significant demand for Canadian oil and gas, and the subsequent need for strategic energy infrastructure in order to support long term Canadian competitiveness in the energy sector. 

Committee Report Fails to Present the Impacts of a Carbon Tax on the Canadian Oil and Gas Sector

Canadian governments already collect $17 billion dollars annually from the oil and gas industry to fund essential government programs and services. The economies of resource-rich provinces do not need an added tax at a time when commodity prices are low, the energy sector is experiencing an historic downturn, and businesses and citizens are already struggling. Because of Canada’s strong record of environmental stewardship, one witness explained that “Canada contributes less than 2% of the world's greenhouse gas emissions, and CEPA members who operate Canada's transmission pipelines are responsible for a negligible part of those emissions.”[14] The Committee heard from one witness who provided testimony regarding a carbon tax and said “unless it's aligned with trading partners, the price of carbon can cause a lack of competitiveness. This should be of concern to people concerned about the climate as well as people concerned about the economy, because if you're simply moving business to other jurisdictions, you're not actually reducing overall carbon emissions. The ideal would be carbon pricing that's North American or even worldwide, which would prevent those kinds of competitive leakages.”[15]

The Committee report, as presented, demonstrates the testimony in favour of a carbon tax but failed to provide the testimony which spoke of the adverse effects a carbon tax would have on industry and consumers if Canada implements a carbon tax independently, not aligned with our North American trading partners. This testimony placed Canadian competitiveness in the global energy market at the forefront of the discussion of implementing a carbon tax and proposed a framework that would seek to minimize externalities to the oil and gas sector.

Conclusion

We strongly encourage the Government to consider the full testimony of witnesses heard during the study titled “The Future of Canada’s Oil and Gas, Mining and Nuclear Sectors: Innovation, Sustainable Solutions and Economic Opportunities.” Outlined in this dissenting report are four critical issues that the government will need to address in order to ensure that Canada remains competitive in the global oil and gas market. We encourage a collaborative approach from the government encompassing the points highlighted in this dissenting report. The government must ensure certainty in the sector not only among potential investors, but also project proponents and workers who rely on the industry for their livelihoods. The government must recognize its role in instilling public confidence in our world-leading regulatory framework and our strong record of environmental stewardship. We also encourage the government to support strategic energy infrastructure. The Government should consider any and all impacts a carbon tax would have on a variety of factors, including Canadian competitiveness. Further to these points, below are five recommendations we implore the government to consider when developing policy regarding the future of the oil and gas sector.

Recommendations

1.    We strongly encourage the Government of Canada to establish and make publically available strict, clear criteria and a fixed timeline for their assessment and consultation processes for major projects. The timely approval of new energy infrastructure projects would not only reduce Canada’s reliance on foreign oil, but would also allow responsible, world-renowned and respected Canadian oil and gas to reach broader international markets.

2.    We strongly encourage the Government of Canada to show confidence in our national regulators by allowing them to make evidence-based decisions independent of government politicization and unnecessary, duplicative interim principles.

3.    We strongly encourage the Government of Canada to publicly and unequivocally support strategic energy infrastructure approved by the national regulators after extensive and thorough evidence-based processes to ensure Canada’s competitiveness in the global energy market.

4.    We strongly encourage the Government of Canada to recognize and to promote Canada’s world-leading regulatory framework and environmental standards and stewardship by instilling rather than eroding public confidence in our national regulators and Canada’s energy developers.

5.    We strongly encourage the government not to impose any additional tax or regulation on the oil and gas sector or the Canadian consumer that our continental trading partners and competitors do not have. This includes measuring the upstream greenhouse gas emissions from pipelines, as laid out in the five interim principles, given pipelines do not contribute to these emissions in any material way and upstream emissions fall under provincial jurisdiction. Any national carbon pricing initiatives should undergo a thorough economic assessment to ensure balance between economic growth and environmental stewardship and responsibility.

Respectfully submitted,

John Barlow, M.P.

Foothills

Hon. Candice Bergen, M.P., P.C

Portage-Lisgar

Shannon Stubbs, M.P.

Lakeland