Timothy Egan, President and CEO, Canadian Gas Association: In Canada, natural gas meets approximately 35 per cent of the country’s energy needs and is the most affordable and fastest-growing energy end use. We have industrial, commercial and residential customers coming to us all the time asking how to get natural gas, if they don’t get it already, and some of your colleagues on the backbench saying to us, ‘What do we do to get [natural] gas into our ridings if we don’t already have it?’
In the context of COVID, our response is: what’s best for us to do to help generate the economic recovery quickly? That applies today as much as it does in October. What are your thoughts on that? What do you recommend to us in the downstream [natural] gas industry to help with the recovery?
Hon. Seamus O’Regan, Minister of Natural Resources: The most important message as we go through this period of transition – one of the things we’ve seen with COVID is - it seems to be in the business world and in the political world - really accelerating trends and exacerbating differences and inequities. It’s causing all of us – both in the energy industry and more largely in society - to confront things much more quickly than we thought we would have to. There are some things that don’t change. There will be no economic recovery without our oil and gas sector. And, that is a point that I was making in February and is a point that I make with even more vigour now. We are the fourth largest producer of gas in the world. We are the sixth largest exporter of natural gas. Energy is our family business, it’s what we do. It supports hundreds of thousands of jobs in this country. And, it is an export that is poised for more growth. We’re at $6.1 billion in exports in 2018. We’re poised to become one the world’s cleanest producers to supply both domestic and global markets for natural gas. It provides affordable power and heat to communities right across our country. So, we need this industry to power our economy and we need our economy powered in order to lower our emissions and do the things that we know that we will need to do for the future. You don’t transition an economy by pulling the plug out on it. We have to be methodical about this, but we understand the urgency of it. And, it’s an urgency that…is not only just about the climate anymore or combating climate change - it is where investments are going, it is how things are moving. I get my information on renewables, increasingly, not from renewables trade magazines but from the Economist and the Financial Times. This is going mainstream business now. This year is the first year that investments in renewables are beating out non-renewables. One thing that I know is that natural gas particularly is going to be an essential part of the mix. I spend a lot of the time with Fatih Birol and the International Energy Agency…and they’re forecasting that natural gas - the global demand - is going to continue to grow for decades to come, even as those renewable sources of energy increase their market shares. So, gas is in prime position to lead the clean energy transformation – you’ve got cleantech investments coming from the oil and gas sector at about a billion dollars a year in this country, that’s 75 per cent of the total coming from oil and gas. Per barrel emissions reductions - 30 per cent over the past 20 years – we know we’ve got to do better, but that is considerable. That is thanks, in part, to the electrification of natural gas production which we’ve seen and which we want to increase, as well as liquefied natural gas products on the West Coast. I think there is similar potential for the East Coast. I was reading the Financial Times a couple of weeks ago - like I said - increasingly you are seeing these articles and these editorials coming from them, a very pro-business periodical…they said that resisting the pathway towards renewables has been recognized as both futile and bad business. For anybody in the energy market, it’s something you have to look at, it’s something you have to take into account. Natural gas is poised to do that. We, as a major player but also a smart player, can foresee the products that people need and we see where investment is going and we know how to follow the money. I remember when I was at Globe – the cleantech conference in Vancouver, largest in North America – and I said that to them, ‘We’re the sixth biggest producers of natural gas, fourth of oil in the world, we’re not reaching net-zero without our oil and gas sector in this country, we’re not reaching it.’ The road to net-zero in Canada goes though Alberta, Saskatchewan, Newfoundland and Labrador and BC. The next day, as it happened by coincidence, I was co-hosting an innovation summit in Calgary with Sonya Savage (Alberta’s Minister of Energy), it was then that the decision on BlackRock had come down, and since then we have seen Deutsche Bank and other players, and it was kind hitting them that Canada’s energy industry was in some people’s crosshairs. My answer to them was that a prosperous oil and gas sector in Canada needs net-zero. My message was it’s not about just the environment anymore and the noble cause of combatting climate change - it is a noble cause - this is becoming a strategic economic imperative. This has become a competitive imperative for our country because it is where the money’s going. Our great concern is that for money managers around the world and for investors, whether they’re in New York or London or Zurich, they look for boxes to check. The picture I paint is a…portfolio manager sitting on the end of the boardroom table and looking down at his juniors and saying ‘What are we doing about climate change?’ And one puts up his hand and says ‘We’re not investing in Canadian energy.’ [It’s a] box to check. That is dangerous, and that cannot happen, but it is happening so we have to combat that. I say, look on the other side of the ledger, the box to check, in terms of - is this jurisdiction doing something about climate change – is [it] becoming net-zero? They’re looking for jurisdictions that have committed to net-zero emissions by 2050. I’m here in Newfoundland and Labrador, a month and a half ago, the legislature here unanimously passed a commitment to net-zero emissions by 2050. We are one of the three major oil and gas producing provinces in the country. That was a big deal. They see which way things are going and they’re moving. And that’s what we’ve got to do.
Egan: Minister, you called it, yourself, a “moon shot.” It’s an aggressive target that your government set. I take your point that there are other players who are calling for it, and yet you consistently, as you just have, make the point that the oil and gas sector needs to be working with them to pursue any targets that you do set. But there are lots who are keen on those targets who say that they cannot be pursued with this sector and I’d say frankly, there are lots who are supporters of yours and your government’s views - what do you say to them when they are looking at passing municipal bans on natural gas or doing other things like that? What’s your response to them?
Minister O’Regan: I’m here on a very nice day actually, 25 degrees and sunny, which doesn’t happen very often here in St. John’s. I’m zooming to you from the furthest eastern point of North America. A rock literally in the middle of the North Atlantic. I grew up here and I grew up in a community in Labrador, a fly-in-fly-out community in the North. You grow up in a community like this, you don’t have time, you can’t afford idealism. I deal with the world, people here deal with the world, as it is. The fact of the matter is we are the fourth-biggest producer of oil in the world. We are a major producer of natural gas. On the flip side of the ledger we are the second-biggest hydro-electric producers in the world too. We’re tier-one nuclear. We have a mix here, but the point being, that there are too many people unfortunately in this country - if you don’t have the proximity that I do or people that let’s say in Alberta and Saskatchewan do - to the number one wealth creator in this country. If I cross the street and look out at the harbor in St. John’s I see supply ships going out to those rigs all the time. I’m reminded of it every day. This is real. And what I say to those people – who you point out, say ‘you just [have] to turn it all off’ – I say that’s not dealing with reality. I’m ambitious. I’m an environmentalist. I believe in lowering emissions. I believe in net-zero by 2050 and because I believe it and I’m real about it, this is reality. This is what change looks like. It’s making tough decisions. You can’t indulge in just snappy speeches anymore that say we’re saying no to that and yes to this. Nope. That’s not how we get there. And it is particularly not how you get there in a democracy. You grow up in a marginal province – I grew up in Labrador too which is like the margin of the margin – and government is sometimes a faraway thing that is not in keeping with the reality as you see it on the ground. You don’t feel included. Labrador, for instance for years – some still don’t – doesn’t feel part of this province. St. John’s is like the other, similarly, this province doesn’t always feel like it is represented in Ottawa. [It] feels like it’s not heard. If we do not include people in lowering emissions, it will not happen because they will choose another government that will include them. Where they do feel included and that government maybe, either represents the status quo or may not be as ambitious as we are. Or worse, will pull things back as we’ve seen in the United States, in the Trump administration, when you look at the climate goals that the Obama administration put in. That is the fact of a democracy. People need to feel included in this change. I don’t even like saying transition because frankly, look, especially [with] COVID right now, people we’re dealing with enough change in the economy and enough churn, particularly in its industry. With COVID, the last thing that they want to hear is about more change. Or transition. I keep my eye on the prize which is lowering emissions and how do we do that? … In some spaces it is already starting to right itself but I think that’s what we have got to do…The…things that I keep repeating [are]: that we’ve got to be smart - in that we’ve got to use that ingenuity – frankly, that we used in order to get oil out of sand in the oil sands for instance. That is remarkable! That was an incredible feat and suddenly we find ourselves here a top five energy player in the world…Everybody is looking at us for those reasons. I’m very proud of where we are. I’m very proud of what we’ve been able to do. I’m very proud of the fact that we’re such a large player in gas and in oil. My argument now is that that ingenuity we had before to get to where we are - we’ve got to use that as well now in order to lower our emissions. It’s because we did this, [that] I think we can do that. I really do. We need to be very thorough as well. We can’t overlook stuff and I think one of the biggest things we overlook, and I’m really hot on this is and come back to my message on inclusivity - is efficiencies. Home efficiencies like retrofitting your home, retrofitting buildings, new building codes. That is almost our first fuel, as we’re looking at fuels that we can use…We can reach one-quarter to one-third of our Paris Accord targets through efficiencies, which is remarkable. And, as I said before, we’ve got to be thoughtful. We’ve got to make sure people are included. We’ve been doing good work here. On ESG (Environmental, Social and Corporate Governance) we’re ranked at the top with Yale. We’re seeing Europeans, particularly Total, I think most recently, coming out of the oil sands. A lot of them, I believe are going by information that just looks at – in the case of oil – is just looking at emissions per barrel and isn’t looking at what we’ve been able to do to lower those emissions over the past 20 years which has been remarkable. We need to build on that. I think that’s where we are.
Egan: I share your reservations about the word transition because it does suggest, I think, what some of those who are keen to stop using fuels altogether, want to suggest.
Minister O’Regan: And I would actually build on it Tim, and something that Jonathan Wilkinson (Minister of Environment and Climate Change) actually brought up to me (Minister of Environment and Climate Change) is that it’s not about the source of emissions, it’s about just lowering emissions. We’ve got to get out of this targeting industries. Our goal here is just to lower emissions. That’s our goal. Not lower their emissions, and their emissions, and their emissions. We’ve just got to lower emissions and that’s a very important point when you talk about net-zero by 2050. The important word to remember there is ‘net’. There will still be emissions and there will be other things that will offset those inevitable emissions. We’ll still emit, we’ve just got to emit a heck of a lot less in order to reach 2050 and in order to reach the goals we have set for 2030 as well.
Egan: Your department recently set up a Clean Fuels Branch. We were quite interested in this. We started to talk to some of your officials about it because it identifies renewable natural gases, it identifies hydrogen and we were thrilled by that. Minister, you noted electrification earlier. As you no doubt know, electrification is at times quite troubling for us, if it’s suggesting getting off of our infrastructure. We want to make sure there’s a competitive market and not picking favourites, and your Clean Fuels Branch has identified renewable natural gas as high on the priorities and we love that. If you say, okay you’ve got these targets if you can recognize that they can be pursued in a variety of ways including true gaseous fuels - I wonder if you might talk a little bit about what your thinking is on RNG and hydrogen and where you see them playing in the mix going forward.
Minister O’Regan: One of the things we want to do, I think right off the bat, is build on your Natural Gas Innovation Fund. I think that is very important in all of this - the funding that you’re helping to invest in cleantech right across the natural gas supply chain. I think it’s going to be game-changing in areas like methane reduction and sustainable production. The help that you’re providing producers and distributors to improve environmental performance, to maintain that competitive edge. I think that we have a strong relationship with you addressing all of those challenges through the Memorandum of Understanding that we have together. The creation of the new Clean Fuels Branch is within my department’s Low-Carbon Energy Sector [Group]. It’s kind of the next step in the progression of our relationship. The Branch builds on other existing work that we have: the National Hydrogen Strategy, out this Fall, our Emissions Reductions Fund, to Environment Canada and their development of the Clean Fuels Standard. The idea here, I think, is to specialize but not be myopic. There [are] certain areas where we know we’ve really got to drill down but at the same time we’ve got to make sure that everybody’s working together. You can’t do one at the expense of the other. As I said, we’ve got a huge competitive advantage with natural gas. We want to keep it and it will be integral to lowering emissions broadly but also the other things we are doing, whether it be in methane or in the clean fuels standard.
Egan: Just down a little bit deeper on hydrogen, you noted the strategy coming out this Fall. I know you’re in the midst of consultation on it so I appreciate that you don’t have a final view on some of the aspects of it. We see ourselves as front and center of that strategy because that’s about… fundamentally …moving a gas through a pipe and that’s what we’re really good at. In fact, as you know, natural gas 100 years ago had a significant component of hydrogen in it because it was town gas largely derived from coal. So, we feel we have a certain history and familiarity with hydrogen already. Can you tell us a little bit more where you want to go with that hydrogen strategy? Given that some provinces have already started to speak out on it quite strongly, like Alberta, and [other] provinces across the country are looking at it. Any thoughts you want to share on it?
Minister O’Regan: We have a great history in hydrogen dating back about 100 years in Canada. Some of us are old enough – me - I remember riding a hydrogen bus at Expo 86’ in Vancouver. And there were a fleet of hydrogen buses as well at the Vancouver Olympics. It’s a technology that’s been waiting for its moment. I think the moment has come and I think that we’re well positioned for it. We have expertise in batteries, we have expertise in transportation. I was speaking with the Danish Ambassador to Canada and she just brought up the fact that Ballard out of BC is powering buses at the University of Copenhagen. Companies like Ballard, the top 11 hydrogen companies, the benchmark companies, they’ve seen an increase of 300 per cent in share prices on average over the past year. If you ask me what success looks like, it would be obviously a globally competitive industry. It would be vehicles - a massive increase, particularly in 18-wheelers transportation - those vehicles where electrification is not as easy. For small cars, for passenger cars - it’s easier, [but] for 18-wheelers we’re looking at hydrogen. We want to get very aggressive on research and development in steel and domestic heating as well. Ten years ago, for instance, if you looked at off-shore wind, it was impossibly expensive. I think that ESG has had a big effect on that and the transparency that Canada has and the European market has, has opened the books. You’re seeing Europe now, they want 40GW of hydrogen power by 2030. They’re looking at green hydrogen made without fossil fuels and they’re up roughly €40 billion which is a huge amount of money – €9 billion from Germany alone. That’s good news for Canada. It will certainly cause us to be more ambitious, and I think that that’s a good thing on hydrogen…We have competitive advantage here. It expands the market. It will expand the demand. As you said, that strategy is coming out in the Fall and we’re going to keep working with partners like your membership on how we make sure we’ve got a solid regulatory framework. I have to say, as much we give red tape a bad name…we do regulatory fairly well. I think particularly in nuclear. It’s actually our competitive edge, the fact that our regulatory is so good and so trusted that the world looks up to it. We want to do the same thing with hydrogen.
Egan: You mentioned in [our] conversation the IEA, you mentioned the G20, the Danish conversations, a host of other international dimensions - I’m going to turn the conversation a bit to the international. My side of the gas industry is focused largely on the domestic market, but not exclusively. Several of our members are looking at export opportunities or own international assets. One of the big export opportunities, one of my members FortisBC, is already an LNG exporter and is looking to expand that. LNG exports present an enormous opportunity for Canada in general. What more do you think we can do as an industry to build on that message?... I think there’s common interest and a common vison on the global LNG opportunity that we have… can you talk a bit about that?
Minister O’Regan: I think 40 to 47 per cent of Canada’s natural gas is exported and almost all of that of course is to the United States, it’s kind of the natural trajectory. At the same time, the natural gas imports from the United States into eastern Canada have been on the rise. I’m happy that I’ve got a good relationship with the Energy Secretary in the US. We were introduced and bonded because of a pandemic. You can imagine early on we wanted to ensure that as borders were closing and such, we needed to ensure that right off the bat that essential workers in the industry were able to go back and forth. You can’t take any of the stuff for granted. In Secretary Brouillette, you’ve got a guy who’s been around the block and he understands how the industry works. He understands how interwoven our economies are, particularly in energy so that’s been very helpful. If you look at global forecasts for natural gas, natural gas is going to continue to grow in the decades ahead – especially as economies around the world move to reduce their dependency on higher-emitting fuels, such as coal. This is something that is going to be available to them. You’ve got $40 billion in the LNG Canada project, largest private sector investment in Canada’s history. It’s under construction, it’s on target, will begin exports to Asia by 2025. Suddenly that’s not so far away. Proponents of the industry are actively working to advance I think five or six other LNG projects right across the country. My department is looking at several of them. A lot of those under consideration [propose] electrification of operation in natural gas and LNG production to lower those emission, we’ll lower them by up to 90 per cent below our global competitors. We are going to produce some of the lowest-emitting LNG in the world. That’s how we’ll get to net-zero. That’s what investors want. If you look at things like AltaGas’ Ridley Island Propane Export Terminal that’s an example of diversification as well, and they’re exporting to Japan. That’s a great new market for us. We’ll take advantage of our Pacific Coast and I would like us to take advantage of our East Coast as well, and proximity to the European Union market. A market of over 500 million people that is going to demand… extremely tight regulations on lowering emitting fuels.
Egan: Well, Minister a good way to come around to a final question for you, you’ve been around for what - about a year?
Minister O’Regan: For me? I’ve been Minister now for what was it now…November.
Egan: Right. So, an uneventful nine months in global events. We’ve seen resource markets turned upside down by all of this. [Any] reflections on the role, on the portfolio, and its future for our country?
Minister O’Regan: I am definitely somebody who is where he’s from. That a huge part of who I am. When I was 13 my dad got a job in Labrador and we moved up there and Happy Valley-Goose Bay was a fly-in-fly-out community. It was also the first time I had ever met First Nations people and Indigenous people. The neighbouring community to Happy Valley-Goose Bay were the few places you could drive, [like] Sheshatshiu, I did not know that anybody could live in that way. The inequity between my community and their community was stark. On a kid, it has a huge impact. It drove what I did. I did my undergraduate in political science. I did my thesis on what happens when Indigenous people are confronted with development they don’t want. How they mobilize against it. I worked as executive assistant to the Minister Justice. I worked on two land claims tables, we called them at the time, worked for a year with the Premier as his policy advisor, Premier Brian Tobin, back then. I continued work at those tables with the Inuit, Innu of Labrador, work on an impacts benefits agreement for Voisey's Bay. I went and did my graduate degree in Political Science and Philosophy. I did my dissertation in Indigenous participation in natural resource development. So here I am. I enjoyed a good 15 years in journalism and in between and now I’m kind of back to where I began, to something I feel very passionately about. One of those people I got to know during my career in journalism was Jim Prentice. Jim’s book, Triple Crown, sits here on my desk. He became a friend of mine. We enjoyed talking to one another. Little known fact about Jim is that he was a huge fan of Canadian Idol. When I was at CTV… he would show up in the audience so we got to know each other. He’d come to the Junos, and of course CTV loved having a prominent Minister like Jim Prentice there. He’d come with his family and I always enjoyed talking to him. We had similar passions in our energy sector, coming from energy-producing provinces, in Indigenous issues and in justice for Indigenous peoples, to end the marginalization that they feel and that they live, in fact…and the environment. He was a pragmatic guy and a guy who achieved results. I had a great deal of time for him. His death was an awful thing but he stays with me in the book. The other thing that I think is really important too, I felt and really was emboldened by him, is the pride that we should feel in what we do. The pride that we should feel in being one of the great…natural gas producers of this world. One of the great hydro-electric producers of this world…I think the challenge of our time and what’s happening right now with the pandemic is that not only are you seeing an acceleration of trends that we can see happening in the energy industry. We’re also seeing an exacerbation of the inequalities that are within our society but also amongst countries. What I’m heartened by is what we’ve seen in this country and how we’ve handled COVID-19. For the most part as hard as we are on ourselves - that seems to be the Canadian way - we’ve done a pretty good job. The collective will has been there to look after one another, by putting on a mask, by keeping social distance, everyday demonstrate that courtesy of looking after one another. We’ve got to move that over – that change - we’ve got to move that over. And move it over to places like doing what we know we need to do as proud, prominent global citizens. We’ve got to lower our emissions. It’s imperative that we do that for the sake of our planet and for the sake of future generations. We’ve got to look after one another within our country, the inequities that we see. Most prominently for me, because I grew up in the way is between Indigenous and non-Indigenous communities but we also know the Black Lives Matter movement happened here as well and for very good reason. For racialized people in this country the inequities are still too great…and who’s really feeling the brunt, most particularly you’re seeing this in the States but here as well, they feel the brunt of what’s with COVID-19. Our response to that has been so fantastic, I think. Not perfect but pretty good. We’ve got to move that over. We’ve got to transition that over to the other challenges that confront us right now. Not easy but we’ve done it. We’ve shown we can do it and I think there’s a willingness to take these challenges on.
Egan: Minister, we’ve taken a lot of your time and I really appreciate it. Any final words for our natural gas membership?
Minister O’Regan: Keep doing what you do. Be proud of what you do. And let’s lower some emissions.
Source: Canadian Gas Association