Environment Committee on June 6th, 2024

[The Chair, Liberal, Francis Scarpaleggia]

Good afternoon, everyone. I call this meeting to order.

First of all, I'd like to welcome certain members who are not permanent members of this committee. We have Mr. Kurek, who is replacing Mr. Leslie. We also have Ms. Stubbs, Ms. Goodridge, Mr. Morrice and Mr. Weiler. It's déjà vu all over again with Mr. Weiler and Mr. Kurek because they are former committee members.

I would also like to welcome the witnesses, all of whom are appearing by video conference. I want to assure Ms. Pauzé that the sound tests have been successfully completed.

First of all, we have Rich Kruger, who is chief executive officer of Suncor Energy. We also have a familiar face, Brad Corson, who is president and chief executive officer of Imperial Oil Limited. Then we have Jon McKenzie, president and CEO of Cenovus Energy, and Susannah Pierce, who is president for Canada and CEO of Shell Canada. Lastly, we have Michele Harradence, who is executive vice president and president of gas distribution and storage at Enbridge.

Each witness will have five minutes for opening remarks, and then we'll go to three rounds of questions and answers.

Mr. Kruger, we will begin with you. The floor is yours for five minutes.

[Rich Kruger, Chief Executive Officer, Suncor Energy Inc.]

Before I begin, on behalf of those of us in Calgary today, I'd like to acknowledge the ancestral territory of the people of the Treaty 7 region and also the home of Métis Nation of Alberta Region 3. While this short statement is quick and easy to make, it will take the dedicated work of all of us to make reconciliation a reality.

As an oil and gas executive with 40 years of experience, I could praise the transformational virtues of hydrocarbons over the past century, convey the world's dependence on oil and gas for decades to come, recite economic contributions to Canada's prosperity and, yes, discuss the concerning effects of climate change and greenhouse gas emissions. I can speak to these topics with knowledge and conviction; however, today I plan to dispel a series of myths and paint a picture of opportunity.

Myth number one is that oil and gas prosperity comes at the expense of the planet. I believe this is false.

Profits and the planet are not mutually exclusive; they're mutually dependent. The energy transition will take expertise, technology and funding: expertise in project planning and execution, which exists in the oil and gas sector; technology, which has been a hallmark of our industry since the early days of Spindletop or in Canada's case, Leduc; and funding from a financially strong industry, coupled with government support.

Myth number two is that Canadian energy companies are doing little on their own; rather, they are resisting the energy transition and decarbonization. I believe this is also false.

Canadian companies are among the world's most committed and proactive in reducing greenhouse gas emissions. We're literally putting our money where our mouth is. The companies here today, including Suncor, are spending hundreds of millions of dollars funding fuel switching and low-carbon power generation projects. They're making investments in energy efficiency, building and operating renewable fuels plants, and piloting technologies to lower emissions from in situ extraction. They are collaborating to advance a globally unprecedented carbon capture and sequestration opportunity, which is the oil sands' Pathways Alliance.

Myth number three is that Canada can demonstrate global leadership by restricting its oil and gas sector for the benefit of the planet. This is, perhaps, the most concerning falsehood.

The world will not consume one less barrel of oil simply because Canada chooses not to provide it. That barrel will come from somewhere else—in most cases, somewhere with less commitment to responsible development, democratic ideals, social accountability and climate action. How do I know? I've worked in many of the countries that hold the lion's share of the world's remaining reserves.

Now, here is the opportunity.

Canada is blessed with an abundance of oil and gas. It's number four globally in oil reserves. It's an amount that Canadians couldn't consume in more than 100 years. Hence, it has the opportunity to provide abundant, affordable and responsibly produced energy with lower emissions to people around the world, including allies that are increasingly concerned about energy security, and also to millions of others who require energy to achieve a quality of life that we take for granted. We can improve people's lives, increase Canada's prosperity and help tackle climate change. It's a winning proposition.

However, industry cannot unconditionally and unilaterally decarbonize Canada's oil and gas sector if, as a result, no one wants to invest in us or invest in Canada. It will take collaboration to create a stronger, safer, healthier and more prosperous world, with Canada as a leader in it. For industry, that's developing technology and investing in projects. For government, that's developing sound public policy and the enabling regulatory framework. Sadly, neither the requisite policies nor regulatory framework exist today in Canada.

Throughout history, Canada has punched above its weight around the world. Whether it was 80 years ago today on D-Day, with the landing at Normandy on Juno Beach, or sitting at the table shaping today's international climate accords, Canada has always been on the right side of history and has yet another opportunity to be there today.

Canadians expect more from their political and business leaders than pointing fingers and clinging to ideology. They expect their leaders to roll up their sleeves and work together to address issues, tackle challenges and capture opportunities. These are issues and opportunities that will determine their grandchildren's long-term health and prosperity.

If that is what this committee wants to do, I'm all in, and Suncor is all in.

Thank you, Mr. Chair.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you very much. You're right on time.

Mr. Corson, you have five minutes.

[Brad Corson, Chairman, President and Chief Executive Officer, Imperial Oil Limited]

Good afternoon, Mr. Chair and members of the committee.

Every day that Imperial carries out business across the country, including in this meeting, we do so on the traditional territories of first nations, Métis and Inuit, who have lived on and cared for these lands for centuries. I, along with Imperial, come here today fully committed to our reconciliation journey.

Imperial produces oil and gas, and manufactures petroleum products that are essential to Canada's energy security needs and vital to improving the standard of living for all Canadians, while significantly benefiting the Canadian economy in the form of job creation and supporting federal and provincial treasuries with substantial tax and royalty revenues.

Recent years have highlighted the importance of both doing our part to provide energy supply security and taking action to reduce emissions in support of a net-zero future, while growing value for our shareholders and other stakeholders. Imperial has worked diligently on emissions reduction road maps and business plans to lower greenhouse gas intensity in our operations and provide lower life-cycle emissions product solutions to our customers. Our decarbonization strategy includes lowering intensity and absolute emissions at our upstream and downstream assets, lowering the emissions intensity of products for our customers, and launching a low-carbon solutions business to help others decarbonize in hard-to-abate sectors.

I'm pleased to share that Imperial has implemented a company-wide goal to achieve net-zero scope 1 and scope 2 emissions from operated assets by 2050 through technology advancements and collaboration with government and industry partners. Building on our previous success in reducing greenhouse gas intensity in operated oil sands facilities by more than 20% between 2013 and 2016, Imperial aims to further reduce the greenhouse gas intensity of these assets by 30%, compared with 2016 levels, by the end of 2030. I'm pleased to note that we've already achieved approximately a 10% reduction in year-end greenhouse gas emissions intensity, compared with 2016.

The company is making significant progress and plans to achieve this reduction through many initiatives, including energy efficiency improvements, next-generation solvent technologies at our Cold Lake operation, using renewable diesel in our mining fleet at Kearl, and carbon capture and storage as part of our collaboration with the Pathways Alliance. Last month, we started production at our Grand Rapids project at Cold Lake using technology expected to reduce greenhouse gas emissions intensity by up to 40% compared with traditional methods. We are also piloting other technologies that could reduce greenhouse gas emissions intensity by up to 90% over traditional recovery methods.

Right now, we are building Canada's largest renewable diesel project at our Strathcona refinery in Edmonton, which, starting next year, will produce more than one billion litres of renewable diesel annually from locally sourced agricultural feedstocks. This renewable diesel will help reduce emissions for our customers by about three million metric tonnes per year. We are investing $720 million in this facility, which has created 600 construction jobs and could be foundational for creating a low-carbon hydrogen value chain in Alberta.

Imperial is exploring the potential for lithium from brine extraction, with an eye to creating a domestic supply chain of a key critical mineral for use in EV batteries. We have also tested bio-based co-processing at our refineries to deliver carbon-intensity reductions in our finished products. For greater detail on these initiatives, Imperial has shared the latest “Advancing Climate Solutions” report with the committee.

Over Imperial's 140-plus-year history, some business fundamentals have not changed. The investments we make are long term, and we operate in a global market that is subject to the cyclical nature of commodity prices. This cycle results in good years, including 2022, which was our most profitable. But that followed 2020, which was our least profitable, when Imperial reported a net loss of over $1.8 billion. Through it all, though, Imperial has steadfastly—

[The Chair, Liberal, Francis Scarpaleggia]

I'm sorry, Mr. Corson. I have to stop you there. We're over five minutes. There will be ample opportunity to advance your points in response to questions.

We'll go now to Mr. McKenzie of Cenovus.

[Jon McKenzie, President and Chief Executive Officer, Cenovus Energy Inc.]

Thank you, Mr. Chair.

We appreciate the opportunity to speak with you today about the work our industry is doing to help Canada meet its climate goals while ensuring that Canadians continue to enjoy a strong economy, long-term access to affordable energy and, in this increasingly unstable geopolitical environment, energy security.

Cenovus is one of Canada's largest energy producers, providing well-paying jobs to about 8,500 staff. Cenovus has been clear: We share the world's concerns about climate change. Oil and gas production contributes more than a quarter of Canada's total GHG emissions, and our industry needs to be a big part of the solution. That's why we're a proud member of the Pathways Alliance.

With expected coinvestment from governments, we and our Pathways partner companies have proposed to invest over $24 billion in emission reduction projects by the end of this decade. That's primarily for a shared carbon capture and storage network, as well as individual company projects that would feed into it.

We see an important role for our industry in helping secure a sustainable future for Canadians as the world transitions to a lower-carbon economy. That means reducing emissions. It also means keeping our industry strong and globally competitive for decades so that we can continue to make outsized contributions to Canada's prosperity. As you know, ours is a highly cyclical industry. Our fortunes rise and fall with the prices of natural gas and oil.

In 2022, for example, oil and gas companies reported a net income of just over $63 billion. In that same year, though, our industry paid about $50 billion in royalties and taxes. Compare that with 2020, when oil prices turned negative. Our industry reported net losses of over $45 billion. There were no income taxes paid by our sector that year and less than $5 billion in royalties.

Finally, look at the results from trough to peak. Over those three years, in aggregate, our industry reported total net income of about $53 billion. We paid one and a half times that much in royalties and taxes, almost $80 billion. That money helps pay for jobs, hospitals, education, social programs and other things that contribute to Canada's high standard of living.

A strong oil and gas sector is good for Canadians. We create hundreds of thousands of direct and indirect jobs and reinvest billions of dollars into Canada's economy, making our industry one of the largest investors in the country. Without oil and gas exports, the Canadian dollar would be weaker, increasing the cost of everything Canadians buy. Our industry also makes significant contributions to indigenous communities and is one of the largest employers of indigenous Canadians. Our energy sector is a strategic advantage for Canada in an increasingly unstable world.

Today, as the world's energy mix diversifies, every credible study shows that we will continue to need all forms of energy, including oil, to help meet the world's growing energy demand. That oil will be produced somewhere, and it should be produced in Canada, where we have some of the world's strongest regulations and industry-leading ESG performance.

Reducing carbon emissions is critical. Over the last three years, we and our industry partners have progressed multiple feasibility studies, engineering designs and environment plans and have started filing regulatory applications. We've also been advancing work on other technologies. However, before we can put shovels in the ground, we need many government permits and approvals, and we need regulatory certainty and coinvestment commitments.

In short, a strong oil and gas industry gives Canada access to secure supplies of energy on an affordable basis, supports our dollar and helps drive our economy. Today Canada faces a productivity crisis, declining GDP per capita and low business investment. A strong oil and gas industry can help get our economy back on track while we advance our work to reduce emissions.

With that, I'm happy to take your questions.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. McKenzie.

Now we will go to Shell Canada. Ms. Pierce, please go ahead.

[Susannah Pierce, President and Country Chair, Shell Canada Limited]

Thank you very much, Mr. Chair.

Good afternoon, and thank you for the invitation to participate today.

I want to first acknowledge that as I am in Toronto, I'm on the traditional territory of many nations, including the Mississaugas of the Credit, the Anishnabeg, the Chippewa, the Haudenosaunee and the Wendat peoples. I am very grateful to be healthy and in good spirits, and I hope you are, too.

Today's topic is at the core of Shell's strategy, which supports our purpose to provide more and cleaner energy solutions as we work to become a net-zero emissions energy business by 2050. Shell Canada Limited has operated in Canada for over 100 years. We are an integrated energy company, offering products and services ranging from aviation fuels to sulphur and EV charging. We operate fuel refining and chemical facilities near Fort Saskatchewan, Alberta, and Sarnia, Ontario, and have nearly 1,500 branded mobility stations across Canada. Shell Canada also produces shale gas and liquids in Alberta and B.C. and is a joint venture participant in LNG Canada. We are also proud of our advancements in carbon capture and storage, CCS, and low-carbon fuels.

There's no question the global energy system is in transition—and so is Shell. The pace of our own transition will be guided by how fast we can adapt our businesses and will depend on external factors, such as progressive government policy and customer choice. We believe our strategy will transform Shell into a net-zero emissions energy business, creating value for our shareholders, customers and wider society. However, our operating plans can't reflect our 2050 target yet as this is outside our 10-year planning period. In the future, as society moves towards net-zero emissions, we expect Shell's operating plans to reflect this movement. If society as a whole doesn't get to net zero in the same time frame, however, there's a significant risk that Shell may not meet its target.

We recognize the importance of Canada's climate targets and the need for society, including companies like ours, to play a role. Shell Canada has joined the federal government's net-zero challenge, which recognizes businesses developing and implementing credible net-zero emissions plans.

Shell has laid out short- and medium-term climate targets in support of our “net-zero emissions by 2050” target. These targets are complemented by the ambition to help address scope 3 emissions, which come from customers' use of the oil products we sell. This means we are working to reduce our own emissions and shift our product offering towards low- and zero-carbon products. Already we are making good progress. Globally, by the end of 2023, we'd achieved more than 60% of our target to halve scope 1 and 2 emissions from our operations by 2030, compared with 2016.

Shell Canada is well positioned to deliver on our strategy here in Canada. We are decarbonizing our operations, for instance, through reducing methane emissions and incorporating renewable power, such as hydro, solar and wind power, and CCS.

Increasingly, we are also investing to increase the supply of low-carbon fuels and rolling out EV charging across the nation, in partnership with governments and communities.

We are also contemplating other investments, including a large-scale CCS project in Alberta.

Decarbonization projects must be investable. We believe society will not achieve the needed scale of emissions reductions if projects are highly reliant on government funding alone. Instead, companies need to develop business models that are plausible and profitable, and can unleash private capital, while working closely with governments. It's worth knowing that last year roughly 8% of Shell's global investment was in Canada. The majority of the spend was on the LNG Canada project, which will use natural gas and renewable electricity to reduce emissions from the plant by more than one-third compared with the world's best-performing facility when it starts up. LNG Canada is the largest private sector investment in Canadian history and a once-in-a-generation opportunity for first nations, local communities, and provincial and national economies.

Shell supports a balanced energy transition, one in which the world achieves net-zero emissions, while still providing a secure and affordable supply of energy today. To help manage affordability for all Canadians, it's vital we don't dismantle the current energy system faster than we can build the clean energy system of the future. By working together with effective government policies, we can help shift consumer demand to low-carbon products and develop the infrastructure and technology needed for the energy transition. Shell's ability to raise and invest capital through the energy transition depends on delivering strong shareholder returns. Governments and taxpayers can't and shouldn't fund the transition alone. If projects don't offer attractive returns, capital won't be invested.

In closing, Shell has a clear strategy to become a net-zero emissions energy business by 2050 and has set clear targets to measure our progress. By making decarbonization projects investable, we can unleash further clean energy investment, which will ultimately benefit all Canadians.

I look forward to the discussions today.

Thank you, Mr. Chair.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Ms. Pierce.

I now give the floor to Ms. Harradence, from Enbridge.

[Michele Harradence, Executive Vice-President and President, Gas Distribution and Storage, Enbridge Inc.]

Good afternoon, Mr. Chair.

I'm Michele Harradence, EVP and president of Enbridge's gas distribution and storage business.

We acknowledge that our projects and operations span treaty and tribal lands, the national Métis homeland, unceded lands and the traditional territories of indigenous nations, tribes, governments and groups across Turtle Island. As such, we have a responsibility to preserve and care for the land, learn from her original inhabitants and move forward together in the spirit of healing, reconciliation and partnership.

In the spirit of reconciliation, I want to thank all parliamentarians for the important step this spring towards a national loan guarantee program. Following on the success of our own Project Rocket, where 23 communities purchased an equity position in our Athabasca system, thanks to the Alberta program, we believe the national loan guarantee is a critical step to open up more opportunities for indigenous communities to fully participate in Canada's economy.

Building on my copanellists' presentations, which represent the perspectives of upstream producers, I will focus today on the critical role of natural gas in delivering safe, reliable, affordable and sustainable energy to millions of homes and businesses in Canada and beyond.

Enbridge recently celebrated our 75th anniversary, and our Ontario utility has been operating for over 175 years. Over that time, we have evolved to meet society's changing energy needs while contributing to Canada's economic development and quality of life. Today, our gas distribution and storage business serves four million customers in Quebec and Ontario, including rural, northern and indigenous communities, and with our recent U.S. acquisitions will soon be the largest natural gas utility in North America.

We're North America's leading energy infrastructure company for oil and natural gas, moving resources from production to demand centres across the continent and around the world, and we're one of the largest renewable companies on the continent.

We also deliver benefits for Canada. In 2023, Enbridge invested over $2.5 billion in capital and spent over $3.6 billion on operations across Canada. We contributed over $3.15 billion in property tax, corporate tax and other taxes, and we firmly believe that natural gas has a key role in our energy future. In fact, the IEA predicts that the path to net zero will involve diverse energy sources that will shift over the decades.

Natural gas is a highly reliable energy source. It remains a cost-effective energy source for consumers, at about half the cost of oil or propane and about 50% cheaper than electric baseboard heating. Natural gas pairs well with renewable energy. When the sun doesn't shine and the wind doesn't blow, or in cold snaps and heat waves, natural gas is quick and easily dispatchable to meet peak demand.

A 24-7 economy requires 24-7 power, and as energy demand rises, all sources will be needed to meet it. For heavy industries like steel, chemicals and cement, natural gas is a critical feedstock and a fuel for the manufacturing process. In the future, these sectors may well be supported further by lower carbon options like renewable natural gas, carbon capture and storage and, eventually, hydrogen.

While of course electricity will have a vital role in the future energy mix, it's inextricably linked to natural gas. For instance, consider the growing power demands for data centres and AI. Clean tech, EV plants and critical minerals, which have been enticed by federal incentives, also create more energy demand.

We believe industry has a key role to play in reducing emissions related to natural gas. Enbridge is a signatory to the One Future Coalition, a group of over 55 gas companies aiming to reduce methane emissions intensity to below 1%. To get there, we're investing in modernizing our systems, and we're innovating to manage methane emissions. In 2023 we reported a 20% reduction in absolute emissions from 2018 levels and a 40% reduction in our methane emissions. We're encouraged by these results and focused on reaching our 2050 net-zero target.

As we look to ensure Canada's investment in its natural gas infrastructure remains used and useful, we're investing in low-carbon fuels that can be blended with natural gas. In Ontario, we're involved in a biogas facility that's turning organic waste into RNG, fuelling Ontario's first carbon-negative bus in the city of Hamilton. We also launched, just north of me here, North America's first hydrogen-blending project, which serves over 4,000 residential customers in Markham and which has lots of potential to grow.

Finally, Canadian LNG is providing energy security in Europe and Asia and helping to reduce global emissions by replacing coal-fired generation. Canada must look beyond our borders and the 1.5% of global emissions we produce to deliver our reliable, affordable and responsibly produced natural gas to our allies and partners.

I thank you. I certainly welcome your questions.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you very much to all of you.

Ms. Pierce, I would ask you please to raise the arm of your earpiece for the benefit of the interpreters.

Ms. Stubbs will begin the discussion.

Ms. Stubbs, you have six minutes.

[Shannon Stubbs, Conservative, Lakeland, AB]

Thank you, Chair.

Thank you to the witnesses.

I agree with everything you just said about LNG. LNG Canada was previously approved by the federal Conservative government, then deliberately delayed and risked by the government that froze all the applications, put that project under review—again unnecessarily—and then gave it the stamp of approval.

Because of the subject of the motion, I'm going to concentrate on upstream oil sands producers, but I invite all of the other CEOs to follow up on any questions I ask or on subjects you want to expand on with written commentary, which must be included in a final report from this committee.

I want to ask a very quick yes-or-no question of Mr. Kruger, Mr. Corson and Mr. McKenzie.

Recently, a statement was made that, after 40 years, your companies have done very little to combat climate change. Three Conservative colleagues at this table here represent the workers, indigenous workers, employers and contractors, and the communities in which all of your companies operate. That was shocking to us and not nearly what we see in our own backyards.

Answering yes or no, does that statement reflect your position and the position of your company?

[Rich Kruger]

I'll start. That does not represent Suncor's position.

[Jon McKenzie]

I would concur with that. That doesn't represent Cenovus's position either.

[Brad Corson]

Nor does that represent Imperial's position.

[Shannon Stubbs, Conservative, Lakeland, AB]

Thank you.

I'll start with Mr. Kruger. The time is very limited. Which country is the top competitor for energy investment in Canada?

[Rich Kruger]

Capital is global, but right now, we compete for investment capital with the United States perhaps more than with anywhere else today.

[Jon McKenzie]

I would agree with that. If you look at the top 10 producing countries, with Canada being four in most circumstances—sometimes, it's five—it is the U.S. that we largely compete with for capital.

[Brad Corson]

I would agree as well.

[Shannon Stubbs, Conservative, Lakeland, AB]

In which country is it easier to get things built? Is it the United States or Canada? How does Canada's regulatory and fiscal framework compare to the United States', as well as with those in other major energy-producing countries around the world, where, Mr. Kruger, you have lots of experience?

[Rich Kruger]

Shannon, you asked a direct question. I'll give you a direct answer.

From a regulatory policy standpoint, it's much more difficult to get things done in Canada. We have a level of complexity, a level of layering and an overlapping of policies in Canada that make it take a longer time and more cost to plan and execute energy projects than in the United States.

[Jon McKenzie]

I'd suggest the same. We don't have as many assets in the U.S. as other companies might have, so I can't speak specifically on a state-by-state basis, but I would suggest it's becoming increasingly difficult to get projects through the regulatory process in Canada.

[Shannon Stubbs, Conservative, Lakeland, AB]

Again, I invite further details and a written follow-up on these questions.

To the upstream oil sands developers, which have operated for decades, has it always been your understanding that upstream oil sands development is under provincial jurisdiction?

[Rich Kruger]

I'll go ahead. The resource is owned by the province. The vast majority of the permits and approvals we need and seek are from the province, unless it gets to some.... There are some select issues with water and things that require national approval.

[Jon McKenzie]

I would agree with that.