RNNR Committee Report

NEW DEMOCRATIC PARTY SUPPLEMENTARY OPINION ON METHANE REDUCTION FUND ONSHORE PROGRAM STUDY – June 15, 2022

The New Democratic Party thanks Environment Commissioner DeMarco for his clear analysis of the problems with the Onshore Program of the Emissions Reduction Fund. The need to tackle the venting and release of methane gas has been recognized as an urgent priority at the international level because methane is a planet killer. The program was initiated in response to Prime Minister Trudeau's strong commitment on the global stage to tackle methane emissions from oil and gas operations.

According to the International Energy Agency (IEA), "reducing methane emissions is a powerful and cost-effective way to act" in the face of the climate crisis. The IEA and IPCC recognize that currently available technology could be employed to meet the necessary reduction targets.

This ERF Onshore Program provided an opportunity for Canada's energy sector to show they are committed to addressing the destructive impacts of this gas that has been identified as a planet killer. And yet the program clearly failed in its objectives.

The New Democrats share the concern of the Environment Commissioner that if lessons are not learned government will continue their legacy of failing to meet any of the international targets they have set for dealing with the climate crisis.

On November 25, 2021, Canadian Environment Commissioner Jerry DeMarco released a report highly critical of the government's Emissions Reduction fund program, saying in a news release that "We can't continue to go from failure to failure; we need action and results, not just more targets and plans."

In response to the release of the report, the Standing Committee on Natural Resources passed the following motion at its meeting on December 15, 2021:

That, pursuant to Standing Order 108(2), before February 15, 2022, the committee undertake a two-meeting study concerning the development and implementation of the Emissions Reduction Fund – Onshore Program, with particular focus on the method of accounting for greenhouse gases; that the committee invite the Minister of Natural Resources, the Commissioner of the Environment and Sustainable Development, experts and stakeholders; that the committee make recommendations on the future of the program; and that the committee report its findings to the House.

Key Findings

• The Environment Commissioner found that the Onshore Program of the Emergency Reduction Fund, which was sold to the public as a program to reduce methane emissions, was, in fact, used as a subsidy for the oil and gas industry. The program was constructed to meet the financial needs of companies in the oil & gas sector.
• The program was unable to properly measure any methane reduction, which may have taken place due to design flaws.
• Ministry staff were reluctant to accept criticism of the program's design flaws and remain opposed to using the Commissioner's recommended accounting principles. The Commissioner says this does "not bode well."
• Meeting and exceeding our targets on methane emissions reduction is well within reach but will require the government to strengthen regulations. The technology to reduce emissions already exists and can be easily deployed.

HIGHLIGHTS FROM THE TESTIMONY OF CANADA'S ENVIRONMENT COMMISSIONER

• In November 2020, the government launched the onshore program of the emissions reduction fund, which was part of Canada's COVID-19 economic response plan. The government saw the $675-million program as a way to help struggling companies in the energy sector deal with lower oil prices during the pandemic.
• Overall, we found that the department did not design the program to ensure value for the money spent or credible and sustainable reductions in greenhouse gas emissions in the oil and gas sector.
• When designing the program, the department did not apply greenhouse gas accounting principles or the concept of additionality, which is that emissions reductions should not be attributed to the program if they would have happened regardless of complying with regulations. More than half of the total reductions targeted by the program had already been accounted for under the federal methane regulations. The department, therefore, misstated what the program could achieve.
• We also found that the department's expectations for the 40 projects funded in the program's first intake period were overestimated. For 27 funded projects, companies had indicated in their submissions that projects would increase oil or gas production. However, the department did not factor in the emissions from increased production into its estimations. Had these emissions been accounted for, they would have lessened or even outweighed the emission reductions expected from these projects.
• Without a complete picture, if we look at programs like this in a myopic way, perhaps it's no surprise that over the last 30 years, the trend in Canada is that emissions are going up, even though we have individual programs intending to diminish those emissions. We recommend looking at the full picture in creating, designing and implementing a program like this.
• Yes, this fund is a type of subsidy.

RECOMMENDATIONS

• 1.      Climate-focused programs must be constructed with the clear and sole objective of dealing with the climate crisis. Allowing the methane reduction program to be used as a subsidy for the oil and gas sector completely undermined the Prime Minister's promise to the international community. We recommend that government ends its pattern of subsidizing the oil and gas sector unless it can be clearly shown that serious emissions reductions can be attained and verified. The industry is highly profitable and must take responsibility for the damage they are doing and pay for mitigation efforts to limit further impacts on the environment.
• 2.      The government has promised new regulations in order to meet a 40-45% reduction in methane by 2030. We recommend that industry be closely monitored to ensure this happens and to include financial penalties for failing to meet these targets.
• 3.      The government needs to implement all the recommendations of the Environment Commissioner report 4 - Emissions Reduction Fund – Natural Resources Canada
• 4.      The government must ensure that funds provided to further climate mitigation have transparent accountability mechanisms to fulfill these objectives. If these programs include job retention, clear statistics of jobs created or sustained are included in government accounting.
• 5.      The government must ensure that progress toward Canada's methane reduction targets is provided promptly and transparently and provides predictable and timely updates to the national inventory.
• 6.      The Department of Natural Resources must fully accept the Commissioner of the Environment and Sustainable Development's recommendation that the department develops baseline scenarios and emissions projections for programs intended to reduce emissions.