Minister Garneau appearance at the Committee of the Whole on the 2019-2020 Supplementary Estimates A on December 9, 2019: Natural Resources Canada

The briefing materials from Transport Canada provided to the Minister of Transport before his appearance before the Parliamentary Committee-of-the-Whole on December 9, 2019.

On this page

• Hot issue: Trans Mountain Expansion project
• Hot issue: Trans Mountain Expansion indigenous consultations and accommodations
• Hot issue: funding to address indigenous priorities regarding the Trans Mountain Expansion project
• Hot issue: Trans Mountain Expansion project
• Hot issue: Pipeline infrastructure
• Hot issue: Clean energy and clean growth
• Hot issue: Canada’s energy advantage
• Hot issue: Transforming petroleum sector key facts

Hot issue: Trans Mountain Expansion project

General

• The Government of Canada is determined to see the Trans Mountain Expansion project (TMX) completed.
• The government approved TMX because it is in the public interest.
• While we know that Canadians have diverse views on this project, we are confident that we have delivered on our commitment to get this right.
• Pipeline construction is now underway, with Trans Mountain Corporation (TMC) hiring over 2,200 people to work on sites in Alberta and British Columbia, and permitting processes are progressing well.
• Pipe is on site Alberta and will be in the ground before Christmas. TMC anticipates construction will be completed in 30 to 36 months.
• With a focus on Indigenous, local and regional workers, the project is providing good jobs for heavy equipment operators, trades people, environment and safety specialists, engineers and construction managers.
• We also continue to strengthen relationships with Indigenous communities as TMX moves forward. This includes working together on initiatives related to Crown commitments, accommodation measures, or any other TMX-related activities.
• Another important step on the path toward reconciliation is the government’s commitment to explore the possibilities of Indigenous economic participation in TMX. The Department of Finance conducted the initial engagement in July and August 2019 to understand Indigenous communities’ views on how they could have an opportunity for meaningful economic participation in the project. The government will have more to say on the next steps in the near future.
• TMX will create thousands of good, middle-class jobs; unlock new global markets to boost the price of Canadian oil; generate billions in revenues each year to help fund clean energy solutions; and help advance reconciliation with Indigenous peoples, including through economic opportunity.
• By creating prosperity today, we can invest in the clean jobs, technologies, and infrastructure of the future — and help Canadians benefit from opportunities presented by a rapidly changing economy.
• That is why all new corporate tax revenues, as well as profits earned from the sale of TMX, will be invested in the clean energy projects that will power our homes, businesses, and communities for generations to come.

Judicial review by the Federal Court of Appeal

• The government is preparing to vigorously defend the TMX approval decision at the upcoming hearing in December 2019.
• The government remains confident that it has taken the necessary steps to get this right and that the reconsideration and consultations were done properly by following the guidance set by the Federal Court of Appeal.

Hot issue: Trans Mountain Expansion indigenous consultations and accommodations

Question

Is the government delivering on its commitments to accommodate impacts on Indigenous groups?

Proposed reply

When the Government approved the Project this past June, we committed to continuing to engage directly with Indigenous groups to collaboratively implement the accommodation measures to ensure that they respond to the needs of Indigenous communities.

Since that time we have been hard at work.

I am pleased to report that we have initiated contact with all 129 potentially impacted groups on all of the accommodation measures, and in some instances we are actively engaged with groups on developing and implementing the measures.

We have hosted face-to-face meetings and workshops with Indigenous groups and for some measures we have delivered capacity funding so that Indigenous groups can actively participate in the development and implementation process.

For many of the accommodation measures the Government has committed to a co-development process with Indigenous groups. This is a process that cannot be rushed. It takes time and care to get it right, and that is what we are going to do.

Hot issue: funding to address indigenous priorities regarding the Trans Mountain Expansion project

Departments (TC and DFO/CCG) are requesting $75,347,251 for the 2019-2020 Supplementary Estimates A.

Key messages

• On June 18, 2019, the Prime Minister announced that the Government of Canada approved the Trans Mountain Expansion (TMX) and that every dollar the federal government earns from this project will be invested in Canada’s clean energy transition.
• This decision was informed by consultations with Indigenous peoples that involved meaningful, two-way dialogue, which fulfilled the legal duty to consult and helped identify new accommodation measures and conditions to appropriately address potential impacts on Indigenous rights and concerns expressed by Indigenous communities.
• The Government of Canada is determined to see the Trans Mountain Expansion (TMX) project completed.
• The Government of Canada is committed to making investments to accelerate the transition to a clean economy such as in renewable sources of energy and electrification to get remote communities off-diesel.
• Another important step on the path toward reconciliation is to get Indigenous communities that have expressed interest to participate economically in the project. We have wrapped initial engagement and are currently considering the input received to develop next steps.
• Construction is underway, with over 2,200 people working at sites in the Edmonton and Burnaby areas.
• Pipe is on site Alberta and will be in the ground before Christmas. TMC anticipates construction will be completed in 30 to 36 months.
• With a focus on Indigenous, local and regional workers, the project is providing good jobs for heavy equipment operators, trades people, environment and safety roles, engineers and construction managers.
• Funding has been allocated to multiple departments to support the Government of Canada in implementing the Trans Mountain Pipeline Expansion Project, including accommodation measures to address the concerns of potentially affected Indigenous groups, and responses to Canada Energy Regulator recommendations.
• Transport Canada and Fisheries and Oceans Canada (including the Canadian Coast Guard) are seeking $75.3 million to work with Indigenous groups to deliver accommodation measures designed to directly address concerns identified by Indigenous groups during consultations, pertaining, in part, to marine safety and the environment.
• It is expected that funding for the other TMX accommodation measures announced on June 18^th will be sought through future estimates.

Background

• Transport Canada is requesting $31.5M in Grants and Contributions for the following:
  • $30.0M to implement the Crude Oil Tanker Technology Demonstration Program, which will support the development and demonstration of next generation low underwater noise, low emissions oil tankers that will service the project.
  • $1.5M in contribution funding will support the implementation of the Enhanced Maritime Situational Awareness Initiative (EMSA) and will enable three additional communities in the TMX project area to become pilot host communities and join the existing EMSA initiative under the Oceans Protection Plan.
• Fisheries and Oceans Canada is requesting a total of $43.8M (including $14.1M for Canadian Coast Guard) for the following:
  • $15.4M for the Salish Sea Initiative to respond to cumulative effects and to facilitate the participation of Indigenous groups in the stewardship of the Salish Sea.
  • $6.4M for the Aquatic Habitat Restoration Fund to assist in the maintenance and restoration of fish and fish habitat in watersheds along the TMX pipeline corridor, including inland watersheds in British Columbia and Alberta, the Fraser River watershed, and in the Salish Sea.
  • $1.0M for DFO’s participation in the Terrestrial Cumulative Effects Initiative to increase Indigenous capacity to study and address cumulative effects in the terrestrial environment.
  • $5.2M to implement a comprehensive plan of action to address Recommendations 5 & 6 from the Canada Energy Regulator related to the significant adverse environmental effects on the Southern Resident Killer Whale.
  • $1.8M to provide increased capacity to deliver on regulatory review responsibilities and the whole of government implementation of federal responsibilities.
• The Canadian Coast Guard is requesting funds for the following:
  • $4.0M for resources for the Victoria Marine Communications and Traffic Services Centre to support Fisheris and Oceans-led implementation of the Government’s response to the Canada Energy Regulator’s Recommendation 5.
  • $1.0M for the creation of Coast Guard capacity and administration with officials housed at Headquarters in Ottawa and in Western Region.
  • $8.0M to implement the Co-Developing Community Response Initiative to address Indigenous communities’ concerns about the risks of increased tanker traffic on the environment and culturally-important and sacred sites in their traditional territories. This includes funding for the Enhanced Collaborative Situational Awareness Portal (E-CSAP) to improve marine information sharing with maritime partners.
  • $1.1M for Coast Guard to pursue and implement a proposal put forth by Pacheedaht First Nation to construct a multi-purpose facility as part of the Co-Developing Community Response initiative.

Hot issue: Trans Mountain Expansion project

Questions and Answers
December 2019

General

1 What are you announcing today? What are the next steps?

Today marks the beginning of pipeline construction on Spread 1 of the Trans Mountain Expansion (TMX) project. Construction will begin on Section 2 in short order and continue across the pipeline route over the next few seasons.

2 Why did you approve the project?

The Government of Canada committed to moving forward on this project in the right way, by following the clear guidance from the Federal Court of Appeal (FCA).

The TMX project is in the public interest.

It will create thousands of good, middle class jobs, increase access to global markets – allowing us to get a fair price for Canadian oil and support workers who depend on a strong energy sector – and deliver revenues that will help fund the clean energy solutions we need.

This project was approved subject to the 156 conditions from the NEB, as amended by the Governor in Council to accommodate impacts to asserted and established rights. We are also implementing a broad response plan to address the NEB’s 16 recommendations.

The TMX project falls within our emissions target under our national climate plan – the most ambitious climate plan Canada has ever had. A plan that includes a price on pollution, investments in renewable energy, phasing out coal, a 100 megatonne cap on greenhouse gas emissions from the oil sands, and more.

3 What has the government been doing since approving the project in June 2019?

The Government of Canada established the Phase IV Partnership Office — a focal point to partner and work with Indigenous communities and deliver on commitments, including accommodations measures and the government’s response to the Canada Energy Regulator’s (CER) 16 recommendations.

With this office in place, the government and Indigenous communities is well-placed to work together efficiently, and focus on results to the benefit of communities, the environment, and the economy.

The engagement process with Indigenous communities on economic participation in TMX was also launched. The Department of Finance conducted the initial engagement in July and August 2019 to understand Indigenous communities’ views on how they could have an opportunity for meaningful economic participation in the project. The government will have more to say on the next steps in the near future.

The government has also made forward progress on TMX through the Indigenous Advisory and Monitoring Committee, as well as the Oceans Protection Plan.

4 How can you move forward on TMX when it is back before the courts?

The government is preparing to vigorously defend the TMX approval decision at the upcoming hearing later this month. We remain confident that we have taken the necessary steps to get this right and that the reconsideration and consultations were done properly by following the guidance set by the Federal Court of Appeal.

Economics

5 How much will the Trans Mountain Expansion project cost?

Trans Mountain Corporation will be in a position to provide an update on the project cost in due course. The government is committed to seeing TMX built and operated in the right way, including on a commercial basis. By doing so, we will realize a positive return for Canadians on the government’s investment to acquire the Trans Mountain Corporation.

The TMX project will create thousands of good, middle class jobs, including an estimated 15,000 direct and indirect jobs related to its construction, increased access to global markets – allowing us to get a fair price for Canadian oil and support workers who depend on a strong energy sector – and deliver revenues that will help fund the clean energy solutions we need.

6 How many jobs will it create and where?

The TMX project will create thousands of good, middle class jobs in construction, engineering, finance, and monitoring.

Construction is underway. As of September 30, 2019, Trans Mountain and its contractors have hired more than 2,200 people for the project, including Indigenous, local and regional employees. This workforce includes heavy equipment operators, trades people, environment and safety compliance roles, engineers, construction managers and administration staff.

At peak construction, there are expected to be 5,500 people employed in the construction of the pipeline on sites in Alberta and British Columbia.

TMX will also create economic benefits for many Indigenous communities, such as through contracting, financial compensation, and employment and training opportunities.

7 What are the benefits of the Trans Mountain Expansion project to impacted Indigenous groups?

TMX will create economic benefits for many Indigenous communities, such as through contracting, financial compensation, and employment and training opportunities. To date, TMC has signed over 50 mutual benefit agreements with Indigenous communities providing benefits worth over $400 million to those communities.

These agreements also provide for emergency response or environmental measures in Indigenous communities that will be funded by the company.

8 What will the pipeline actually do (i.e. how much oil will flow, the route, etc.)? (TMC)

The project consists of twinning the existing 1,147 km Trans Mountain Pipeline system between Edmonton, Alberta, and Burnaby, British Columbia, and related works such as expanding the Westridge Marine Terminal in Burrard Inlet.

It will include approximately 987 km of new, buried pipeline, built to modern standards with thicker steel and advanced monitoring systems, which will increase the current capacity of the pipeline system from 300,000 barrels per day to 890,000 barrels per day.

The vast majority of the pipeline route (89%) follows existing rights of way, mostly along the existing pipeline, and along roads and hydro lines.

Pipelines are the safest and most efficient way to move large volumes of oil across our country and to international markets.

TMX will allow Canada to get a fair price for its oil and refined petroleum products and to support workers who depend on a strong energy sector – and deliver revenues that will help fund the clean energy solutions we need.

9 How long will it take to build?

TMC currently estimates that TMX will be in service by mid-2022, but TMC is better placed to answer that question.

10 What are the economic benefits of this project (i.e. GDP impact, government revenues)?

The Conference Board of Canada estimates that, over the course of the project’s construction and the first 20 years of operation, the TMX project will add over $160 billion to the Canadian economy. The Conference Board also estimates that government revenues from direct, indirect, and induced benefits are expected to total $46 billion across Canada from construction and for the first 20 years of operation, including federal and provincial taxes:

• BC would receive $5.7 billion
• Alberta would receive $19.4 billion
• the rest of Canada would share $21.6 billion

This will fund critical services that Canadians depend on, and the clean energy solutions we need to address climate change.

11 What will be the federal revenues from the successful completion of the project, as well as net profits earned from the eventual sale of TMX?

The Government of Canada is committed to making investments to accelerate the transition to a clean economy such as in renewable sources of energy and electrification to get remote communities off-diesel.

We know the project will create significant economic benefits for the country. Every dollar the federal government earns from the project will be invested in Canada’s clean energy transition.

The Department of Finance estimates that additional federal corporate income tax revenues could be around $500M per year once the project is completed. These tax revenues and any profits earned from the sale of the pipeline will be invested in the clean energy projects that power our homes, businesses and communities for years to come.

12 When will you sell the pipeline?

The government chose to acquire the Trans Mountain Expansion project and related assets when political risks made it too difficult for the private sector to move forward. This is a sound investment, and the government has been clear that it does not intend to be the project’s long-term owner.

We will divest the Trans Mountain entities to a new owner or owners, in a manner and at a time that protects the public interest, including the government’s investment.

13 What is the status of the government’s engagement process on Indigenous economic participation in the TMX?

The Government conducted the initial engagement in July and August 2019.

This engagement sought to understand communities’ views on how Canada should approach the broader engagement process, and how economic participation in the project might be structured.

The government is considering the input received during the initial engagement and is currently developing its next steps.

14 What impact will this have on the price difference between Western Canadian crude oil and West Texas Intermediate – or the price differential?

The Trans Mountain Expansion will increase access to global markets, allow us to get a fair price for Canadian oil, and support workers who depend on a strong energy sector.

Canada’s pipeline constraints have been identified as a key contributor to the price differential between Canadian and US benchmarks. Despite recent optimization efforts from pipelines and their shippers, pipelines transporting crude oil out of Western Canada are currently operating at their full capacity. In fact, the existing Trans Mountain pipeline has been oversubscribed since 2006.

The TMX project will allow us to get a fair price for Canadian oil by reducing reliance on high-cost rail transportation, adding much needed export pipeline capacity, including an expanded marine terminal with up to 34 tankers per month, and connecting producers with global markets that fetch a higher price for their oil.

Estimates from energy industry consultancy firm Muse Stancil suggest that the construction of the project will increase in prices to producers by about $2.20 per barrel over that period.

15 Is there a market to sell to, especially in Asia?

At a time when over 95% of Canada’s oil exports are destined for a single market – the United States, Canadians understand the need to diversify to get a fair price for this resource.

The International Energy Agency forecasts that the demand in Asia will exist for some time as the world’s energy needs won’t change overnight. Chinese and Indian refiners have expressed their interest in diversifying their sources of crude oil, meaning there is a real opportunity for Canada. And we have a clear advantage. While markets will ultimately determine destinations for exports, tankers would be able to reach growing markets in North Asia faster by shipping from British Columbia than from ports on the US Gulf Coast (e.g. 11 days vs. 20 days) or the Middle East.

Canadian producers have stepped up, with significant, 15 and 20-year commitments that would account for about 80 per cent of the TMX project and existing Trans Mountain pipeline.

16 How is the expansion project being funded?

Canada TMP Finance Ltd., a Canada Development Investment Corporation (CDEV) subsidiary, is the sole financier of Trans Mountain Corporation (TMC) and has provided both debt and equity to TMC.

As of June 2019, Export Development Canada (EDC) had provided a total of $5.035 billion in loan [PDF, 887 KB] to Canada TMP Finance Ltd. (TMP Finance) in order to fund the acquisition of TMC and to provide capital to TMC for ongoing operations, including the construction of the Trans Mountain Expansion project.

EDC’s loans to TMP Finance have been funded entirely from EDC’s Canada Account.

17 What is the expected rate of return for Canadians on this project? Is this project still profitable?

The Trans Mountain Expansion project will return many other benefits to Canadians such as thousands of good, middle class jobs, fair prices for Canadian oil, and benefits for many Indigenous communities.

18 Was there economic analysis conducted before the government made the purchase?

The government viewed the acquisition of the Trans Mountain entities as a commercial transaction. Leading up to the acquisition, the government completed a detailed analysis and due diligence as is customary for transactions of this nature. It only made the decision to acquire the entities after it had a full understanding of the economics of the existing assets as well as the project and was confident of seeing a return on its investment. The government also considered the positive economic benefits of TMX in the context of deciding to acquire the Trans Mountain Corporation.

Environment

19 Was the project’s impact on the climate a factor in the Government of Canada’s decision to approve it?

Yes it was, because climate change is real and Canadians are already feeling its effects.

The government approved the TMX project in part, using the NEB’s report, which outlines emissions from construction and operation, and using our assessment of upstream and direct GHG emissions,

The project will not undermine our ability to meet our Paris target. We have a national plan in place with over 50 measures, including a price on pollution, and a 100 megatonne cap on greenhouse gas emission from the oil sands.

Canadians expect and deserve a practical and affordable plan to fight climate change, and that is what we are delivering. We will continue to take serious climate action that reduces pollution, grows the economy and creates good middle class jobs.

20 Will the pipeline cause an increase in GHG emissions? How does this fit with the national climate change plan?

The TMX project will not undermine our ability to meet our Paris target.

The CER will require TMC to offset all of the estimated one megatonnes of emissions from its construction, with the result that the construction of the project will not result in any net emissions.

The operation of the project will have emissions from two sources: on land (pipeline and port activities) and marine shipping. TMC estimates that the pipeline and port activities will generate about 400,000 tonnes of GHG emissions annually. These will come primarily from the electricity needed to power the pump stations, but will also be from some ground transportation and from possible methane leaks. These emissions are expected to decline over time as a result of carbon pollution pricing, methane regulations, vehicle regulations and the Clean Fuel Standard.

Canada is working with the International Maritime Organization (IMO) to reduce GHG emissions from shipping. These measures could include facilitating the use of low-carbon fuels and energy efficient technologies, and requirements to offset any increases in marine emissions above a given baseline year. The NEB concluded that, if the government implements the Board’s recommendation to develop and implement GHG reduction measures for marine shipping that align with the final IMO strategy by 2023, the GHG emissions from project-related shipping would be reduced. The NEB also noted that project-related marine vessels are already subject to various federal and international emission requirements, including standards for bunker fuel and energy efficiency standards.

In accordance with the Interim Principles, ECCC conducted an assessment of the potential GHG emissions associated with the upstream activities associated with the project. ECCC released a draft assessment report for public comment on May 19, 2016, and a final version on November 25, 2016. ECCC concluded that the project is unlikely to result in incremental emissions beyond those already included in Canada’s national emissions projections. This is because it is likely that most or all of the 590,000 additional barrels per day of oil and gas that can be transported by the project will be produced and moved to market by some other mode if the project does not proceed.

We know that different countries are taking different approaches to meeting their Paris commitments. The twinning of the Trans Mountain pipeline won’t increase the amount of oil we use in Canada or the world, but it will increase the benefits for Canada and help us transition, because any additional financial gains this project generates for the federal government will be reinvested in Canada’s transition to a cleaner future.

21 What about AB's cancellation of carbon tax?

The Government of Canada is taking action to ensure that there is a price on carbon pollution across Canada. The Pan-Canadian Approach to Pricing Carbon Pollution allows provinces and territories to choose whatever system works best for them, provided it meets the federal benchmark.

The federal backstop applies, in whole or in part, in provinces and territories that request it or that do not have a system that meets the federal benchmark. The federal backstop has two components – a regulatory charge on fossil fuels and a system for large emitters, known as the output-based pricing system, or “OBPS”.

Last June, the government announced that it would implement the federal pollution pricing fuel charge in Alberta, effective January 1, 2020, because of the province’s repeal of its carbon levy. At that time, the government announced that it would monitor any proposed changes to Alberta’s large industrial emitter system.

22 What about cumulative effects?

Canada is fortunate to have some of the most spectacular coastlines in the world. Under the OPP and Whales Initiative, the government is taking action to preserve, protect and restore our marine ecosystems vulnerable to increased project-related marine shipping and development.

The national Cumulative Effects of Marine Shipping initiative, for example, is helping identify the effects of existing and future vessel movements on the environment.

We are now going to supplement those actions. As recommended by the NEB, and as a result of consultations to discuss specific accommodation measures to address the concerns of potentially affected Indigenous groups:

• we are going to implement a cumulative effects plan through the Salish Sea Initiative, a long-term investment strategy to develop and support the capacity of First Nations along the Salish Sea to monitor and evaluate the impact of human activities on their local ecosystems.
• Inland, the Terrestrial Cumulative Effects Initiative will similarly respond to concerns about the cumulative effects from development through the co-development of a cumulative effects framework focused on understanding the current state of the environment and monitoring changes in response to natural processes. For example, the findings from this initiative will inform projects to restore fish habitat or analyze the local watershed. This initiative will be co-developed with impacted Indigenous communities.
• Finally, the Terrestrial Studies Initiative is already supporting Indigenous-led studies to better understand the project’s potential impacts, including on traditional land use. It will also inform the monitoring of cumulative effects from the construction, operation and maintenance of the project.

23 The NEB found that a worst-case marine spill from the project or a project related vessel could have significant environmental effects. How could the government proceed with the project given this risk?

The government is committed to protecting our oceans and keeping them healthy, clean and safe for future generations. Under the OPP, we are making major investments to help protect our coasts and waterways from the impacts of potential oil spills.

In addition to our ongoing efforts to strengthen Canada’s marine safety regime, Trans Mountain Corporation is required to comply with NEB conditions, and we are taking additional actions to implement the recommendations from the NEB. This includes recommendations focused on avoiding spills and on ensuring rapid, well informed and effective response capacity if they do happen.

24 How can you justify an even small increase in shipping when you know that it puts the existence of the Southern Resident Killer Whale at risk?

The impacts of TMX represent a small proportion of the cumulative effects that are affecting the Southern Resident killer whale (SRKW). As recommended by the Canadian Energy Regulator, the government will develop an offset program in response to underwater noise and strike risk from project-related vessels.

The government is implementing many initiatives, in a comprehensive plan of action, to address the threats to the SRKW and its critical habitat. These initiatives are intended to offset the impacts of project- related vessels and reduce cumulative effects on the whales. The government has a plan in place to monitor the effectiveness of these initiatives and will adaptively manage them to achieve our goals. These initiatives include:

• reducing underwater noise from marine traffic by developing a strategy that incorporates both voluntary and mandatory measures;
• making amendments to the Marine Mammal Regulations to reduce disturbance, including requiring a minimum approach distance of 200 metres to all killer whales in Canadian Pacific waters;
• partnering with the Vancouver Fraser Port Authority Enhancing Cetacean Habitat and Observation program on a voluntary vessel slowdown in Haro Strait and Boundary Pass, and a movement of tugs and other inshore traffic away from important foraging areas in the Strait of Juan de Fuca;
• working with the shipping industry to test and evaluate promising, safe and efficient quiet vessel designs, retrofits and operational practices to decrease underwater noise;
• deploying the best available technology to shippers for the project, in support of the reduction of underwater noise from the marine shipping associated with the project; and
• enhancing regulatory control of five key persistent organic pollutants (including flame retardants) such that they are completely phased out and, prohibiting two toxic flame retardants.

In addition, for the 2019 season, the government implemented seasonal measures that ran from June 1 to October 31:

• implemented a mandatory 400-metre approach distance to all killer whales in the SRKW critical habitat;
• Implemented three interim sanctuary zones in the Salish Sea to provide quiet foraging spaces for the SRKW;
• Implemented trial bubble fishery closures in the vicinity of killer whales in three “Enhanced Management Areas”. All commercial and recreational fish harvesters would be expected to temporarily stop fishing activities when killer whales are within 1 km between May and the end of October.

We have also taken action to improve the SRWK’s access to an adequate food supply. This includes:

• area-based fishery closures in key foraging areas for recreational and commercial salmon fisheries;
• voluntary fishing avoidance zones within 1000m of killer whales in key foraging areas between May and the end of October 2019; and,
• a commitment to release an additional 1 million juvenile Chinook annually from Chilliwack Hatchery for five years to support SRKW recovery.

The SRKW is a vital component of the local marine ecosystem and has cultural significance for Indigenous Peoples and coastal communities in British Columbia. The Government of Canada is addressing the main threats to this iconic species through investments, including within the $1.5 billion Oceans Protection Plan, the $167.4 million Whales Initiative and the additional $61.5 million for Southern Resident killer whales.

If pressed on the end of the 2019 measures:

The Government of Canada is evaluating the results of the 2019 measures to inform our approach for the 2020 season.

25 The pipeline cuts across the habitat of species at risk. How is this the environment and economy moving hand in hand?

We are confident that the effects of the project will be mitigated through implementation by the TMC of the NEB’s 156 conditions and by the Government of Canada’s plan to address the 16 recommendations proposed by the NEB.

Complemented by generational investments in Canada’s oceans and clean technology, TMX is clear evidence that we can grow our economy, deliver natural resources to international markets, safeguard our environment, and advance reconciliation with Indigenous peoples.

Additionally, the government continues to work with TMC to ensure steps are taken to help protect Canada’s coasts and preserve at-risk species, such as the iconic SRKW. To comply with the CER’s conditions, TMC is responsible for tracking the implementation of its commitments on the project. This includes working with Fisheries and Oceans Canada, and other stakeholders, to implement the Action Plan for the Recovery of the SRKW, as well as developing other measures to assist in its recovery.

26 What about the potential oil-spill risks of diluted bitumen?

To achieve a world-leading marine safety system, the government is putting in place concrete measures to enhance marine safety, to prevent and to better respond to marine pollution incidents.

As part of our work to strengthen our preparedness and response, the government has and continues to conduct wide-ranging research into the behaviour of diluted bitumen to understand how different petroleum products behave in marine and freshwater environments.

Existing research informs the actions of the Canadian Coast Guard, Transport Canada and private sector Response Organizations in the event of a spill.

Through the OPP, new investments will support further research to help spill responders better understand and predict how different petroleum products behave in Canada’s waters and specific environments. This includes in cold water, freshwater, brackish and marine conditions.

27 What does the research say? What is the government doing to address this?

Diluted bitumen is a petroleum product which generally has similar chemical and physical properties as conventional oil products, and, like conventional oil products, its fate depends on various environmental factors at the spill site. However, because diluted bitumen’s thickness and density can change more rapidly, response equipment designed for heavy oils need to be deployed more rapidly.

The Government of Canada has and continues to conduct wide-ranging research related to marine oil spills. Federal government scientists have been studying the fate, behaviour, potential impacts and effectiveness of response techniques on a variety oil products including diluted bitumen. This work is continuing with further investments under the Oceans Protection Plan and will strengthen response actions.

Under the Oceans Protection Plan, more than $80 million was provided in science funding for new partnerships, additional research and new approaches that will help inform responses to marine incidents such as oil spills. A new $45.5 million multi-partner research initiative is leveraging collaboration among the best researchers in the world and improving our understanding of how oil spills behave and how best to minimize their environmental impacts. The OPP funding also includes $16.8 million to support federal oil spill research so we can better understand how oil products, including dilbit, behave and degrade in different environmental conditions. $17.7 million is being used to enhance our ocean models so that emergency responders have access to better spill track predictions.

These initiatives will result in new knowledge that will enhance Canada’s ability to prepare for and respond to oil spills.

Indigenous

28 Construction on the project is moving forward. Does this bring Canada any closer to reconciliation?

We know that this is an issue where Canadians, including Indigenous groups, have deeply held, and different views.

We know that Indigenous communities have diverse views on this project, and we have heard those views throughout our consultation process. We acknowledge and appreciate those diverse views.

That is why we did things differently in our reconsideration of the project – following the guidance from the Federal Court of Appeal, engaging in a meaningful, two-way dialogue with Indigenous communities, and responding to what we heard. We are fully invested in this relationship and our commitments to communities moving forward.

No relationship is more important to Canada than the relationship with Indigenous Peoples. We continue to build on these relationships with Indigenous communities as TMX moves forward. This includes working together on initiatives related to Crown commitments, accommodation measures, or any other TMX-related activities.

Another important step on the path toward reconciliation is the government’s commitment to explore the possibilities of Indigenous economic participation in TMX. The Department of Finance conducted the initial engagement in July and August 2019 to understand Indigenous communities’ views on how they could have an opportunity for meaningful economic participation in the project. The government will have more to say on the next steps in the near future.

29 Did you get consent from Indigenous peoples to move forward with TMX?

We know that this is an issue where Canadians have deeply held, and different views. We recognize the right of Indigenous peoples to participate in decision-making in matters that affect them and their rights.

Meaningful engagement and consultation with Indigenous peoples aims to secure their free, prior and informed consent.

The focus of the re-initiated Phase III consultations was to have meaningful, two-way dialogue with Indigenous communities. We are confident that we fulfilled our duty to consult as part of these consultations, and followed the guidance laid out by the FCA.

We are building on this two-way dialogue through Phase IV.

30 What is Phase IV engagement? How can Indigenous communities be confident that Canada won’t abandon its commitments to them related to the project?

The Government of Canada committed to maintaining and strengthening relationships with Indigenous communities in the post-decision period of the TMX project. Phase IV will continue to build on the two-way, meaningful dialogue that was established in Phase III to help communities navigate initiatives related to Crown commitments, accommodation measures, or any other project-related activities.

Following the approval of the project, Canada established the Phase IV Partnership Office — a focal point to partner and work with Indigenous communities and deliver on commitments, including accommodations measures and the government’s response to the NEB’s 16 recommendations. With this office in place, the government and Indigenous communities are working together efficiently, and focusing on results to the benefit of communities, the environment, and the economy.

The TMX website will be regularly updated to include new sections dedicated to tracking the government’s Phase IV actions and aggregate other activities related to the project so that Canadians have a “one-stop-shop” to get informed on the project.

This approach is a whole-of-government effort that puts the needs of communities first, increases transparency and access to information, and shares important information about the project as it advances.

Hot issue: Pipeline infrastructure

Issue

Pipeline infrastructure

Canadian crude oil prices have largely recovered after reaching their lowest level in years in late 2018, resulting in lost revenues to producers and governments. Market access, including through increased pipeline capacity, is crucial to support the competitiveness of the petroleum sector.

Safety and security

Individuals and non-governmental environmental organizations have expressed concerns about the safety of oil and gas pipelines in Canada.

Key messages

• Canada’s energy sector, including Alberta’s oil and gas industry, has been a source of well-paying middle class jobs for Canadians from coast-to-coast-to-coast. The Government of Canada always has and always will stand with the energy sector and the hard working Canadians it employs.
• We feel and share the frustration of many in Western Canada because of the lack of market access for our oil and gas. Workers in our energy sector have faced real challenges and felt real anxieties.
• That is why we announced $1.6 billion to support workers and boost competitiveness as we do the hard work necessary to build pipeline capacity and get our resources to new markets.
• To support these efforts, our government approved the Line 3 replacement project, the Trans Mountain Expansion project, and has always supported Keystone XL.
• Our government will do the hard work necessary to build pipeline capacity and get our resources to markets, ensuring this sector continues to be a source of good middle-class jobs for Canadians.

Safety and security

• Canadians depend on the federal government to ensure that Canada’s oil and gas pipelines are built securely, and operate safely.
• We place the highest priority on health, safety, and environmental protection in all aspects of the oil and gas industry.
• That is why we put in place the Pipeline Safety Act, which came into force in June 2016, creating a culture of safety across Canada’s oil and gas sector.
• Companies are held liable regardless of fault and are required to have the resources to respond to incidents.
• We will continue to strengthen our pipeline safety system, including through the new Canadian Energy Regulator Act.

Hot issue: Clean energy and clean growth

November 18, 2019

Issue

The Government of Canada is investing heavily in clean technology in the resources sector to support Canada’s low-carbon future.

Key messages

• 82% of Canada’s electricity supply is non-emitting.
• Our government is committed to a cleaner energy future by building on our foundation of clean electricity – hydro, wind, solar – and doing more.
• That is why we have:
  • built up electric vehicle charging and alternative fuel infrastructure across the country;
  • made electricity grids smarter and more efficient;
  • reduced rural and remote communities’ reliance on diesel fuel;
  • supported emerging renewable energy technologies; and
  • developed more robust building energy codes.
• We will continue to invest in technology and innovation and to work with the provinces and territories, the private sector and international partners to excel in these areas.

Hot issue: Canada’s energy advantage

Competitiveness

1. Competitive tax and royalty regimes
   • Lowest corporate tax rate on new business investment in G7.
   • New tax measures allowing faster expensing of capital investments.
2. Modernized environmental and regulatory review process to provide investor certainty and ensure good projects come forward in a responsible, timely and transparent way.
   • Timelines and a ‘one project, one assessment’ approach are set in legislation.
   • Working with Indigenous peoples to meaningfully consult on projects and every aspect of development, including safety and security (e.g. monitoring committees).
3. Highly educated and skilled workforce, world-class universities and research institutions.
4. Taking a nation-to-nation approach to our relationship with Indigenous peoples, who are becoming partners and leaders in project development.
5. We are among only two (Norway), major oil producing nations that have put a price on carbon, with a provincial cap on oil sands emissions.
   • Spending billions to reduce industry and consumer costs by spurring innovation and promoting energy efficiency.
6. $180B investment in infrastructure to build the cities and infrastructure of the 21^st century.
   • Includes investments in Green Infrastructure, Canada’s Infrastructure Bank, and Trade and Transportation Infrastructure.

Supply

7. World-class and diverse energy assets position Canada as a stable and reliable supplier of energy to the world.
   • Largest oil reserves open to free market investment, 4^th largest producer
   • 2^nd largest uranium producer
   • 4^th largest producer and 5^th largest exporter of natural gas
   • With LNG Canada under construction, poised to supply the cleanest LNG globally
8. A leader in clean energy
   • Affordable and plentiful electricity that is over 80% non-emitting - key for clean industrial investments.
     • 2^nd in hydropower (10%)
     • 6^th in nuclear (4%)
     • 9^th in wind power (2%)
   • Canada is 8^th in the world in liquid biofuel production.
   • Hydrogen: World leader in clean hydrogen production and technologies; Canadian IP used in more than 80% of fuel cell buses or trains globally; attracted more than $220M in direct foreign investment in 2018.
   • Nuclear: A Tier 1 nuclear nation with our own technology (CANDU). Positioned to lead on Small Modular Reactors (SMRs).

Market access

9. Free-trade agreements with 2/3 of the global economy and only G7 country that has free trade agreements with all G7 members.
10. Integrated system of coast-to-coast rail lines, an 840,000 km domestic pipeline network, 74 pipelines crossing the Canada-US boarder, 34 major international electricity transmission lines, and several expansion proposals – Canada’s energy is well connected to markets.
11. Close proximity to markets giving investors a significant cost advantage
    • Shipping times to Asia from western Canada are about half that from the U.S. Gulf Coast.
    • Canada has the shortest shipping distance to Europe of anywhere in North American.

Safety and security

12. Pipeline Safety Act and Energy Safety and Security Act to strengthen safety and security, prevent incidents and ensure a swift response in the unlikely event of an energy emergency. Measures include a $1B absolute liability for companies operating major pipelines or operating in the northern offshore, should there be an accident.
13. $1.5B Ocean Protection Plan to improve marine safety and support responsible commercial shipping.
14. Comprehensive, all-hazards approach to critical infrastructure security ensures that Canada’s energy sector is resilient to any potential threats. Canada is:
    • developing and strengthening energy sector preparedness capabilities;
    • establishing mechanisms to bolster response and recovery capacity;
    • offering training and intelligence to industry; and,
    • working to advance the development, testing and deployment of innovative security technologies and practices.

Innovation

15. World leader in energy innovation
    • Clean tech sector ranks 4^th in the world and 1^st in the G20 on potential to produce clean tech start-ups over the next decade.
    • Clean technology growing faster than rest of economy: 1.4% of GDP in 2017, 25% growth since 2007.
    • Generating patents: Clean tech firms hold more patents (21%) than all SMEs (2%).
    • Federal Investment: More than $3B in clean energy innovation (CCUS, Wind, Solar, Alternative Fuels and Energy Efficiency).
    • Industry Investment: Canadian companies investing to reduce emissions (e.g. Suncor $1.4B to low carbon co-generation, CNRL $90 to reduce venting).
    • EVOK: Cenovus, Suncor and the BC Cleantech CEO Alliance, are co-founders of Evok Innovations, a first-of-its-kind investment partnership to connect the energy industry and the global clean technology community.
    • COSIA: Canada’s Oil Sands companies are teaming up to reduce their environmental impact through collaborative action and innovation.
    • SMRs: 11 vendors are working with CNSC on pre-licensing vendor design reviews.
16. Energy efficiency
    • Investing billions to save industry and consumers money: In 2019, the government invested over $1B for energy efficiency in buildings and homes and to support innovative financing. Energy efficiency improvements have saved Canadians and businesses over $38B in a single year (2015).
    • Measures span sectors: Standards and management systems in place for high efficiency equipment and energy use. Ambitious targets set for zero emissions vehicles (all new vehicle sales zero emission by 2040).
    • EV and Alternative Fuel Infrastructure: coast-to-coast network in place for zero emission vehicles.
    • Skilled workforce: In 2018, the energy efficiency sector was home to 436,000 jobs, with projected growth of 8.3% in 2019.
    • Green freight: World-renowned Canadian green freight replicated in South Central America.

Examples of recent projects

• Infrastructure: TMX (BC); Line 3 replacement (AB) that will carry more than 700,000 barrels of crude oil from Alberta to Wisconsin; Northern Gas Transmission Line (AB); Watay Power Project (ON), Peace Region Project (BC)
• LNG/Propane: Woodfibre LNG (BC); LNG Canada (BC); Ridley Island Propane Terminal (BC)
• Oil: Several existing oil sands facilities looking at expansion, including Christina Lake (AB) and Long Lake (AB)
• Renewables: Deployed first of a kind geothermal, tidal, and solar tech projects across Canada including Haligonia Tidal (NS), DEEP Geothermal (SK), and Canadian Solar bifacial solar
• Offshore: Bay du Nord (NL), White Rose extension (NL)
• Nuclear: Licensing and EA for first of a kind small modular reactor (SMR) underway at Chalk River Labs; $26B refurbishment project underway in Ontario—Darlington and Bruce.
• Petrochemical Facilities: Nauticol (methanol in AB), Nova (polyethylene in ON), Canada Kuwait Petrochemical (propane-to-propylene in AB), Inter Pipeline (propylene in AB)

Canada’s energy investment narrative

1. Strong fundamentals make a top performing economy for businesses to grow, innovate and succeed.
   • Strong macroeconomic stability
   • Competitive tax and royalty regimes - lowest corporate tax rate on new business investment in G7
   • Predictable and fair regulatory regime with concrete legislated timelines
   • A clear climate plan, including a price on carbon that provides long-term certainty
   • Safe and secure system ensures Canadians and the environment are a priority
   • Strong intellectual property protections
2. Unparalleled energy assets position Canada as a sustainable and reliable supplier of energy to the world.
   • Largest oil reserves open to free market investment (4^th in production)
   • 17^th largest gas reserves (4^th in production)
   • Electrification of facilities positioning us to supply the cleanest LNG (LNG Canada)
   • 3^rd largest uranium reserves (2^nd in production)
   • 4^th largest installed hydropower capacity (2^nd in production)
   • 6^th largest nuclear generation
   • Massive solar and wind potential
   • Abundant, clean and affordable energy to power the industrial sector
3. Canada has free trade agreements covering two-thirds of the global economy, providing businesses market access to over 1.5 billion consumers.
   • 14 trade agreements with 51 countries, worth almost $50 Trillion USD
   • Close proximity to Asia/Europe and an integrated North American network
4. Our workforce is globally competitive and outperforms our peers in many areas.
   • Highly skilled and most educated workforce
   • World-class universities and research institutions
   • Highest employment rate for newcomers
5. We are a leader in developing technologies to reduce pollution while creating opportunity.
   • 1^st in G20/4^th globally on potential for clean tech start-ups over next decade
   • 13 clean tech firms made list of Global Cleantech 100 companies in 2018
   • COSIA - companies teaming up to reduce their environmental impact
   • CCUS tech demo leader with projects in Saskatchewan (Boundary Dam), Alberta (Shell Quest) and BC (CMC Research Institutes, Carbon Engineering and Svante)
   • Becoming a world leader in collaborative R&D in the renewable energy sector
   • Pioneering Smart Grid deployment across the country with world-leading knowledge and expertise in Ontario

Hot issue: Transforming petroleum sector key facts

1 Global energy demand

The global energy mix is becoming cleaner, but fossil fuels will still provide more than three-quarters of the world’s energy by 2040. Canada is the 5^th largest oil and gas producer and production is expected to increase over the same period.

• Global demand by 2040: oil expected to grow by 10% and natural gas to grow by 45%.
  • Energy demand growth will be concentrated in fast-growing Asian economies (China/India). Asia will account for two-thirds of the increase in global demand.
• Canada is the 5^th largest oil and gas producer behind the US, Russia, Saudi Arabia, Iran.
• Canada has global opportunity to be world’s most reliable, sustainable producer of oil and gas, reaching new markets and supporting domestic clean technology innovation.

2 Canadian energy demand

While global energy demand is on the rise, Canadian energy use is set to flatline.

• Canada’s energy mix shifting over next decade; natural gas/renewables replacing coal.
  • Moderate economic growth and improving efficiency mean Canada will not need much more energy than it consumes today.
• To maintain or expand Canada’s 4% share of global energy production, we have to focus on expanding foreign markets for our oil and natural gas exports.

3 Winners and losers

Canada's oil/gas industry is national in scope, active in 12 of 13 provinces and territories.

• Diverse petroleum sector: of ~7.7MBOE of Canadian oil and gas production, 38% is from oil sands (bitumen). Remaining is 21% conventional oil (heavy/medium/light) and 41% natural gas.
  • Offshore production represents approximately 4%.
  • Montney basin, overlapping BC/AB, is responsible for 40% of gas production.
• Revenue, operating costs and cash flow differs greatly by subsector (see slides 7-11).
• Production is predominant in BC, AB, SK, ON, NS and NFLD.

4 Canadian oil and gas industry players

The sector includes over 1000 producer companies that comprise major, vertically integrated firms down to smaller, independently operated firms.

• The sector is dominated by a few major companies:
  • Oil – Suncor, CNRL, Imperial, Cenovus, Husky
  • Natural Gas – CRNL, Encana, Husky
• 20 largest companies account for 77% of production: out of over 1000 operators in the oil sector.
• Vast majority of operators (96%) are small, producing <10,000 bbl/d.

5 Economic contributions from the petroleum sector

The sector is an important contributor to Canada’s economy, accounting for 8% of GDP and about $120B in exports (largest export sector).

• The industry has contributed nearly $200 billion to FPT coffers since 2008 (about 10% of what Canada spent on health care over that period).
• Provincial royalties represent the largest share of revenue.

6 Emissions

Canada’s oil and gas sector represents about 25% of the country’s emissions. The emissions count represents a very small proportion of global emissions – less than ½ of 1%.

• The sector is making significant strides to improve environmental performance:
  • Oil sands emissions intensity decreased 28% from 2000-2016.
  • Petroleum a leading clean tech investor - among largest industry investors at $1.4B in 2018.
  • Efficiency gains crucial in limiting emissions from further production growth.
  • There is potential to further reduce the emissions intensity and displace higher emitting fuel alternatives (e.g., coal/diesel) used in other countries.

7 Canada’s workforce

The sector is a source of well paying jobs for workers across the country, including Indigenous communities.

• The sector is the source of 564,000 direct and indirect Canadian jobs in 2018. Sub-sector direct employment estimates for 2018 are:
  • 63,200 – oil/gas services, incl. exploration, drilling (29.4K lost jobs 2014-2018)
  • 51,500 – non oil sands, including onshore/offshore conventional and unconventional reserves and refining (9K lost jobs 2014-2018)
  • 33,000 – oil sands, incl. extraction, production, upgrading (6.3K lost jobs 2014-2018)
  • 22,600 – pipelines, incl. storage, transmission, distribution (800 lost jobs 2014-2018)
• 300,000+ indirect jobs: engineering, construction, wholesale trade, accounting, legal, finance, insurance, real estate, IMIT, metal/machinery manufacturing, transportation.
• Sector is an important employer of Indigenous peoples at 10,000 jobs, and contributed $50M to Indigenous communities in 2015/2016.
• Regional picture: 153K direct jobs in AB, 11K in SK, 10K in BC, and 12K in the rest of Canada (including offshore).
  • BC is the only province to project an increase in direct oil and gas employment from 2018-2019 (up 200 jobs from natural gas activity).

8 Conditions affecting oil and gas sector

Canada’s oil/gas sector is facing significant headwinds in maintaining its competitiveness. Primary factors relate to transportation, market conditions and climate change.

• Lack of pipeline capacity and market access
  • Affecting confidence in Canadian investments, contributing to price differential.
  • In a low-price environment, additional uncertainty and increased transportation costs (i.e., rail) matter a lot.
• Market conditions – led by low global prices
  • Global oil prices expected to be “low for long” – $100/barrel not returning.
  • Global investment shifted to shorter life cycle projects and fast pay-back.
  • Global Investment in oil production has decreased globally from a peak of $550B in 2014 to ~$300B in 2018.
  • Canadian investment dropped more than average. Represented 9% of global expenditure from 2009-2013 and dropped to about 7% in 2018.
  • Divestment of oil sands assets of $45B since 2014. Capital spending in the oil sector has declined by ½ since 2014 with continued declines expected.
• Climate change
  • Climate change has had an impact on capital availability for oilsands projects.
  • Global supermajors are under pressure to reduce their climate change risks. Oilsands have become symbolic of high carbon fuels.

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