Introduction

Natural resources make essential contributions to Canada’s society and economy. Canadian natural resources power our homes and vehicles, provide the raw materials for building materials, electronic goods and many other products, and generate hundreds of thousands of well-paying jobs. Given their importance, natural resources are the focus of many federal programs and initiatives.

The House of Commons Standing Committee on Natural Resources (the Committee) has undertaken a comparative study of the Government of Canada’s support for Canada’s natural resources sectors. Over four meetings between 15 November 2022 and 24 November 2022, the Committee heard testimony on this subject from a range of government witnesses, trade associations and experts. The Committee thanks all the witnesses for their contributions and is pleased to present its report and recommendations to the Government of Canada.

Overview of Canada’s Natural Resources Sectors

Canada has three major natural resources sectors: energy, forests and mining. Collectively, these three sectors contributed 21% to Canada’s nominal gross domestic product (GDP) in 2021.

The energy sector includes all the industries that extract and process the resources used to generate energy, including crude oil and natural gas as well as renewable sources like hydro, wind and solar power.[1] Altogether, the energy sector contributed approximately $216 billion, or 11%, to Canada’s nominal GDP in 2021.[2] The forest sector consists of three main industries: forest operations, pulp, paper and the bioeconomy, as well as wood product manufacturing. The sector contributed approximately $58 billion, or 3%, to Canada’s nominal GDP in 2021.[3] The mining sector—also known as the minerals and metals sector—also includes three main industries: mining, primary processing and metal product manufacturing. It contributed approximately $125 billion, or 7% to Canada’s nominal GDP in 2021.[4]

Many jobs in Canada depend on natural resources. In 2021, the three sectors directly or indirectly employed more than 1.6 million people in Canada. Of these people, approximately 609,000 were directly or indirectly employed in the energy sector, 351,000 in the forest sector, and 665,000 in the mining sector.[5]

Figures 1–4 illustrate how Canada’s natural resources sectors contribute to the country’s GDP and employment.

Figure 1—Natural Resource Sectors Contributions to Canada’s Nominal Gross Domestic Product (GDP) (billions of dollars)

Source: Natural Resources Canada, written response to Committee questions.

Figure 2—Employment in Canada’s Natural Resources Sectors, 2021 (thousands of jobs)

Source: Natural Resources Canada, written response to Committee questions.

Figure 3—Direct Employment in Canada’s Natural Resources Sectors by Province and Territory, 2020 (thousands of jobs)

Note:     Data provided by Natural Resources Canada including the distribution of jobs by province and territory only available for direct employment in 2020.

Source:  Natural Resources Canada, written response to Committee questions.

Figure 4—Direct Employment in Canada’s Natural Resources Sectors by Province, 2020 (% of employment in all industries)

Notes:    Data provided by Nautral Resources Canada including the distribution of jobs by province and territory only available for direct employment in 2020.

               Due to insufficient data for Prince Edward Island, Yukon, Northwest Territories and Nunavut, the province and three territories are excluded from this figure.

Source:  Natural Resources Canada, written response to Committee questions; and Statistics Canada, “Table 14-10-0023-01: Labour force characteristics by industry, annual (x 1,000),” Database accessed 13 June 2023.

Natural resources and their by-products are also among Canada’s most valuable exports. In 2021, the total value of energy sector exports was approximately $144 billion, while forest exports were worth roughly $45 billion and mining exports $127 billion. Figures 5–7 provide more detail on these numbers.

Figure 5—Domestic Exports of Natural Resources Products and By-products, 2021 (billions of dollars)

Source: Natural Resources Canada, written response to Committee questions.

Figure 6—Domestic Exports of Natural Resources Sectors by Province and Territory, 2021 (billions of dollars)

Source: Natural Resources Canada, written response to Committee questions.

Figure 7—Exports of Natural Resources Sectors by Province and Territory, 2021 (% of total product exports)

Source:  Natural Resources Canada, written response to Committee questions; and Statistics Canada, “Table 12-10-0133-01: Canadian international merchandise trade by province and country, and by product sections, customs-based, annual (x 1,000),” Database, accessed 14 June 2023.

During the Committee’s study, witnesses also referred to the growing size and importance of Canada’s clean technology sector.[6] The Government of Canada defines clean technology as those goods and services whose main purpose is to remediate or prevent environmental damage, or goods and services that are less polluting or more resource efficient than similar products.[7] While not all clean technologies are relevant to natural resources, some parts of this sector—such as renewable energy generation—overlap directly with natural resources sectors and the federal assistance for these clean technologies has eclipsed the support for other sectors like oil and gas.[8] For example, in its written response to the Committee, Export Development Canada remarked that in 2021, its business support for clean technologies, at $6.3 billion, exceeded that for oil and gas, at $4.4 billion.[9] In 2020, the clean technology sector contributed approximately $68 billion to Canada’s GDP and represented 323,000 direct and indirect jobs.[10]

Types of Federal Assistance to Natural Resources Sectors

Given the importance of Canada’s natural resources sectors, the federal government supports the development of each sector in various ways. Governments have a range of tools for assisting economic sectors, such as providing financial assistance, conducting trade negotiations, providing advice, and undertaking research.

The Committee’s study focused mainly on the Government of Canada’s financial assistance to natural resources sectors. This report also focuses on financial assistance, which can be organized into three categories: tax expenditures, program spending, and financing by crown corporations.

Tax Expenditures

While the main purpose of the tax system is to raise revenue, it can also be used to achieve certain economic or social objectives.[11] Among other things, the Government of Canada uses the tax system to support Canadian industries through preferential tax rates, exemptions, deductions, tax credits and other measures. These measures are known as “tax expenditures” because they lead the government to forgo tax revenue.

A tax expenditure is defined as a departure from the basic features of the tax system, known as the “benchmark” tax system.[12] For this reason, the Assistant Deputy Minister of the Tax Policy Branch at the Department of Finance, Miodrag Jovanovic, explained that tax expenditures “would typically be seen more as a kind of subsidy or special assistance, if you will.”

In recent years, the Government of Canada has modified tax provisions that apply to natural resources sectors, phasing out certain measures, such as the flow-through share for oil and gas and coal exploration, while introducing new ones.[13] According to Samuel Millar, Associate Assistant Deputy Minister of the Economic Development Branch at the Department of Finance, the Government of Canada’s current objective for tax expenditures that apply to natural resources sectors is “facilitating Canada’s transition to a net-zero economy.” With this goal in mind, the federal government has introduced the following:

• a new investment tax credit for carbon capture, utilization and storage;
• a reduction of 50% in the federal tax rate on income derived from the manufacturing of certain net-zero technologies and clean energy production;
• a new enhanced mineral exploration tax credit for critical minerals; and
• a new refundable investment tax credit for clean technologies.[14]

Along with other members of the G20, Canada has agreed to eliminate inefficient fossil fuel subsidies, committing to do so by the end of 2023. However, as this report will discuss later, the Government of Canada has not yet finalized a definition of “inefficient fossil fuel subsidies.”[15] Miodrag Jovanovic stated that this does not prevent the government from making decisions regarding tax provisions which are considered to be “inefficient subsidies,” such as the elimination of flow-through shares.

The Parliamentary Budget Officer provided some testimony about the public costs of federal tax expenditures on fossil fuel industries, namely oil, natural gas and coal. Yves Giroux noted that his office prepared a report in 2021 that estimated that these tax measures reduced federal revenues by $2.4 billion in 2019, with an average reduction of $1.8 billion between 2015 and 2019.[16]

While Canada’s natural resources sectors benefit from certain special treatments in the tax system, these sectors are also major sources of revenue for all orders of government in Canada. Heather Exner-Pirot, a Senior Fellow at the Macdonald-Laurier Institute, cited research from investment firm Peters & Co. finding that oil and gas companies would pay approximately $50 billion in tax and royalties to the federal and provincial governments in 2022.[17] Jean‑François Samray, the President and CEO of the Quebec Forest Industry Council, said that in Quebec alone, forest products generated an estimated $220 million in revenue for the federal and provincial governments in 2021.

Program Spending

Many federal programs provide financial assistance to Canada’s natural resources sectors. The Committee did not hear testimony that would allow it to make a comparative estimate of total federal program spending for each natural resources sector. However, witnesses representing federal departments offered various examples of programs that are specifically designed to support natural resources sectors, as well as some that are non-sector specific.

Natural resources sectors receive non-sector specific support from various departments and agencies. The Canada Growth Fund, to be capitalized with $15 billion over five years, represents a large potential source of federal assistance for natural resources: it will use investment instruments to catalyze private sector investment in low carbon projects and businesses and develop natural resources supply chains, among other goals. Jesse Fleming, Director General, Programs Directorate in the Department of the Environment highlighted two programs administered by Environment and Climate Change Canada that support projects aimed at reducing greenhouse gas (GHG) emissions:

• the Low-Carbon Economy Fund (LCEF), which received a commitment of $2 billion over five years under Budget 2017 and an additional $2.2 billion over seven years under Budget 2022; and
• the Output-Based Pricing System Proceeds Fund (OPBS Proceeds Fund), which collected approximately $161.1 million in 2019 and $230.9 million in 2020 through proceeds of the federal Output-Based Pricing System.

While LCEF applicants may be from any sector, OPBS Proceeds Fund spending is directed toward industrial emitters and electricity facilities.[18]

Witnesses also mentioned the following sector specific programs:

• Energy: the Smart Renewables and Electrification Pathways Program, administered by Natural Resources Canada (NRCan), funds projects that deploy renewable energy and modernize Canada’s electricity grid. At the time of the study, NRCan had signed agreements to fund 71 projects and five grants for engagement activities with Indigenous peoples.[19]
• Forest: the Government of Canada has committed $3.2 billion over ten years for the 2 Billion Trees program, also administered by NRCan. The trees planted by the program are intended to sequester carbon dioxide, helping Canada reduce its greenhouse gas emissions.[20]
• Mining: NRCan’s Green Mining Innovation is a research and development program to improve the environmental performance of mines. The program supports projects developed in collaboration with academics, provincial and territorial governments, non-governmental organizations and others.[21]

Canada’s seven regional development agencies also assist the country’s natural resource sectors, though they have a mandate to promote the economic development of their region rather than to support any specific economic sector. The Vice-President of Operations of Canada Economic Development for Quebec Regions, Marie-Claude Petit, explained:

We are interested in the natural resources sector because it is a solid driver of growth in some regions. Our intervention priorities address such cross-cutting economic issues as the competitiveness of [small and medium-sized enterprises], market access issues, the necessary transition to net zero and support for devitalized communities.

The financial assistance provided by these agencies is directed toward small and medium-sized enterprises and represents a relatively small amount of the federal government’s support for Canada’s natural resources sectors. Nevertheless, when interrogated on assessment criteria for primary processing companies in the forestry sector that are ineligible for assistance from Canada Economic Development, Ms. Petit claimed that the agency still supports a lot of projects in the sector. From 2018 to 2021 the regional development agencies provided a combined total of approximately $114 million in assistance to the energy sector, $26 million to the forest sector and $61 million to the mining sector.[22] Figure 8 breaks down this assistance by agency.

Figure 8—Regional Development Agency Assistance to Canada’s Natural Resources Sectors, 2018 to 2021 (millions of dollars)

Note:     Columns showing the same total may not be the same height due to rounding.

Source:  Written response to Committee questions from: Atlantic Canada Opportunities Agency (ACOA); Canada Economic Development for Quebec Regions (CED); Canadian Northern Economic Development Agency (CanNor); Federal Economic Development Agency for Southern Ontario (FedDev Ontario); Federal Economic Development Agency for Northern Ontario (FedNor); and Prairies Economic Development Canada (PrairiesCan). See also: Pacific Economic Development Canada (PacifiCan), The Standing Committee on Natural Resources – Federal Assistance for Various Natural Resources Industries, Brief submitted to RNNR, 28 November 2022.

Financing by Crown Corporations

Overview

Federal Crown corporations assist Canada’s natural resources sectors through loans, loan guarantees and other forms of financing. During its study, the Committee heard testimony about assistance provided by three Crown corporations: the Business Development Bank of Canada, Export Development Canada and the Canada Development Investment Corporation.

The Business Development Bank of Canada (BDC) is an arms-length lender and investor that exclusively supports entrepreneurs. Shannon Glenn, BDC’s Assistant Vice-President of Government Relations, explained that BDC assumes more risk than private sector lenders but provides financing on commercial terms so that does not undercut the private sector. Because BDC supports entrepreneurs, much of its lending related to natural resources is indirect, supporting small and medium-sized enterprises that provide goods and services to natural resources firms. Figure 9 illustrates these investments.

Figure 9—Business Development Bank of Canada Investments in Selected Subsectors, (millions of dollars)

Notes:    Approximately 99% of BDC’s 2021–2022 authorizations in the “mining and mining services” category were in mining services rather than in mining, while approximately 94% of its portfolio is in mining services.

               BDC’s total portfolio of oil and gas assets is smaller than the investments it authorized in fiscal year 2021–2022, because one client repaid a loan early and because one client did not draw down the full value of the investment that they received from BDC.

Source: RNNR, Evidence, 15 November 2022, 1540 (Shannon Glenn, Assistant Vice-President, Government Relations, Business Development Bank of Canada); and BDC, emailed response to questions.

Export Development Canada (EDC) supports Canadian exporters and Canadian companies operating abroad, providing credit and financial advice to grow the country’s international trade. Like BDC, EDC is intended to complement private sector lending and provide capital when private funding is scarce. Todd Winterhalt, the Senior Vice-President of Marketing, Communications and Corporate Strategy at EDC, explained that EDC provided additional support to Canadian oil and gas companies during the COVID‑19 pandemic, to aluminum and steel producers facing tariffs in 2018 and to softwood lumber producers in 2017.

Figure 10 shows the support that EDC has provided to natural resources subsectors in recent years.

Figure 10—Export Development Canada Support to Natural Resources Subsectors, 2018–2021 (billions of dollars)

Source: EDC, written response to Committee questions.

Finally, the Committee heard from Elizabeth Wademan, the CEO of the Canada Development Investment Corporation (CDEV). CDEV holds and manages commercial assets on behalf of the federal government. One of its subsidiaries is the Trans Mountain Corporation, responsible for the Trans Mountain Pipeline system and the Trans Mountain Expansion Project, which are discussed in the following section.

The Trans Mountain Pipeline System

In 2018, the Government of Canada purchased the entities that own and operate the Trans Mountain Pipeline system, which transports crude oil from Edmonton, Alberta to Burnaby, British Columbia. As part of the purchase, the federal government undertook to complete the Trans Mountain Expansion Project (TMX), which is a new pipeline that will run largely parallel to the original pipeline, tripling the system’s total capacity.

The cost of completing TMX has risen significantly over time. At the time of the purchase, the construction costs of TMX were estimated at $7.4 billion. However, in 2022, Trans Mountain Corporation estimated that the project would cost $21.4 billion.[23] Given the expected market value of the pipeline, the Parliamentary Budget Officer estimates that the purchase of the Trans Mountain Pipeline system will lead to a net loss of $600 million for the federal government.[24]

Moreover, the pipeline operator may be unable to charge high enough tolls to cover the costs of TMX. The Committee heard that the pipeline’s toll structure was only designed to cover TMX’s original cost estimate of $7.4 billion, plus 20-25% of any additional capital cost increases.[25]

Thomas Gunton, Professor and Founding Director of the Resource and Environmental Planning Program at Simon Fraser University, asserted that this arrangement would mean charging tolls “at roughly a 50% discount of what the economic tolls should be,” saying that this would leave the public subsidizing half the cost of each barrel shipped on the pipeline. He said the federal government should order the operator to propose a new toll structure.

A representative of the Canada Energy Regulator (CER) disputed this argument. Chief Economist Jean-Denis Charlebois emphasized that the exact tolls for the pipeline have yet to be decided. He said that while the calculation method for the tolls has already been set, this method allows some costs to be passed along to shippers, while other costs must be borne by the pipeline operator. The CER will review the final tolls to determine if they are “just and reasonable.”[26]

The Committee questioned what advice the CER may have given to the Government of Canada at the time of the purchase. Mr. Charlebois testified that as a regulator, the CER “had no specific role to play” in the transaction.[27] In a written response, the CER informed the Committee that the National Energy Board (NEB) issued a toll order alongside a decision in May 2013, which outlined the tolling methodology for the TMX expansion.[28] In 2016, the NEB also completed an economic feasibility study of the project as part of its review of TMX, which was included in its Recommendation Report to the Governor-in-Council.[29]

Other witnesses discouraged the Committee from focusing solely on the costs of the pipeline. Stewart Muir, the Executive Director of Resource Works, said it was more important to focus on TMX’s economic benefits, like the estimated $46 billion in public revenues that it is expected to generate in its first 20 years of operation, and the 28,000 people who have been employed on the project. Mr. Muir added that the costs of TMX would have been similar regardless of whether the pipeline was owned by the Government of Canada. Heather Exner-Pirot made a similar point:

I also want to iterate that in my opinion, the wrong lesson to draw from TMX cost overruns is that oil and gas is a money loser for Canadian taxpayers. The correct lesson, in my view, is that a pipeline that could have been built for $7 billion 10 years ago now takes well over $20 billion due to our political, legal and regulatory systems. This is a huge problem that needs to be addressed. We seem to be discussing only TMX because the federal government owns it, but project proponents in the private sector have to deal with cost overruns, regulatory burdens and legal delays all the time.

The report returns to this argument later by examining the relationship between federal assistance for natural resources sectors and Canada’s competitiveness.

Defining Subsidies

Some of the Government of Canada’s support for natural resources sectors comes in the form of subsidies. However, there is broad disagreement about what constitutes a subsidy and what is traditional assistance. Sometimes, the term “subsidies” is used synonymously with other forms of assistance offered by the government, such as tax credits. While there are many definitions of “subsidy,” the World Trade Organization’s definition is widely used and was cited by a few witnesses during the Committee’s study.[30] Miodrag Jovanovic summarized this definition for the Committee:

[It] generally means a financial assistance provided to a sector, or in the form of services. I have a quote here. It “includes financial benefits provided to businesses or industries, including direct transfers, foregone revenue, transfer of risk, and provision of goods and services.” That is one way to approach the notion of a subsidy.

The definition of a subsidy is particularly important when discussing natural resources sectors because of the Government of Canada’s commitment to phase out “inefficient fossil fuel subsidies” by 2023. However, the Committee heard disagreement about what constitutes a subsidy, about the cost of Canada’s fossil fuel subsidies, and about the appropriate path forward.

As this report has noted, the Government of Canada acknowledged that it does not currently have a definition of “inefficient fossil fuel subsidies.” Speaking for the Department of Finance, Miodrag Jovanovic said that the government is developing a definition and working actively to identify and phase out any such subsidies.

Representatives of Crown corporations asserted that their organizations do not provide subsidies.[31] However, while the representative of EDC emphasized that the corporation operates on commercial terms and does not provide subsidies, he did note that EDC acts as the agent for the Canada Account. The Canada Account is used to provide financing that would be considered too risky for a purely commercial transaction but which the Minister of Finance and the Minister for International Trade have deemed to be in the national interest. EDC’s investments in TMX are issued from the Canada Account.

The Government of Canada has also committed to end “new support for the international unabated fossil fuel energy sector,” and published guidelines for its approach in December 2022. Following from this commitment, Todd Winterhalt explained that EDC will end all funding for international oil and gas projects. However, he added that EDC would continue to provide financing to Canadian companies that help reduce the emissions footprint of international oil and gas projects.

For this reason, among others, some witnesses argued that EDC and other federal entities are continuing to provide fossil fuel subsidies. Environmental Defence Canada’s Programs Director, Keith Brooks, mentioned “monies allocated to support [research and development] for carbon capture and storage, money from the net-zero accelerator earmarked to reduce the emissions of oil and gas companies and other funds” as examples of current federal fossil fuel subsidies.

Witnesses gave various estimates for the total value of federal fossil fuel subsidies. Thomas Gunton cited a range of estimates for the value of these subsidies in 2020, running from $4 billion to $86 billion. Dr. Gunton argued that the lower end of the range reflected an incomplete accounting of subsidies, adding that the high end includes the estimated environmental costs of federal support for fossil fuels.[32] In contrast, Keith Brooks offered estimates of $18 billion in federal fossil fuel subsidies 2020, $8.6 billion in 2021 and $18.4 billion in 2022, with the last figure including approximately $12 billion for TMX.[33]

The Parliamentary Budget Officer commented that policy makers have a difficult task given the lack of clarity about the definition and magnitude of federal subsidies. “Without having a clear picture of the government resources or tax breaks allocated to each sector,” he said, “it is difficult to determine whether their level is too high or too low.” Given this lack of clarity, Thomas Gunton called for the Government of Canada to develop an inventory of fossil fuel subsidies, including those aimed at reducing emissions, develop a plan to eliminate these subsidies, and report publicly on its compliance with the plan.

Aims of Federal Assistance to Canada’s Natural Resources Sectors

The Government of Canada’s policy objectives shape its assistance to natural resources sectors. According to Daniel Dufour, Director General of the Innovation Branch at NRCan, the department’s overall aim is to:

advance the sustainability and competitiveness of our natural resource industries as part of the global transition to net-zero emissions by 2050. To achieve this goal, Natural Resources Canada is investing in sustainable energy, mining and forestry initiatives. We're ensuring a just transition by moving forward with comprehensive action, including legislation, to support workers across the country. We're also advancing economic reconciliation in partnership with Indigenous peoples, communities and businesses by ensuring their meaningful participation in Canada's net-zero future.

The themes of sustainability, competitiveness and reconciliation recurred throughout the Committee’s study. Accordingly, the following section of this report outlines how the Government of Canada is pursuing these ends and summarizes testimony about the results of the government’s approach.

Ensuring Sustainability

Canada’s natural resources sectors can contribute to a more sustainable future in many ways. Renewable energy and non-emitting power sources like uranium can replace energy needs that are currently served by fossil fuels. Well-managed forests can capture emissions and sustainably harvested timber can be used as a low-carbon building material. Certain minerals, known as critical minerals, are key inputs in clean technologies like electric vehicle batteries and solar panels.[34]

The Government of Canada has different tools to assess the sustainability of its assistance to natural resources sectors. Federal departments and agencies must include a strategic environmental assessment in funding requests to the Minister of Finance, and the government is developing a “climate lens” that it will apply to a wider range of funding decisions.[35]

However, the Committee also heard how the Government of Canada can do a better job of ensuring the sustainability of these sectors. Witnesses from forestry organizations argued that the forest sector receives less decarbonization funding compared to other sectors. They called on the Government of Canada to increase its spending on existing programs, particularly the Investments in Forest Industry Transformation program, saying that the latter is underfunded compared to other decarbonization initiatives.[36] Derek Nighbor, the President and CEO of the Forest Products Association of Canada, suggested that the federal government develop a decarbonization roadmap specifically for the forest sector.

Witnesses from the forest sector added that the Government of Canada can do more to encourage the use of low-carbon wood products. For instance, it can develop performance-based building codes that encourage the use of wood building materials such as mass timber.[37] Linda Coady, the President and CEO of the British Columbia Council of Forest Industries, added that the federal government can support the uptake of these products by consistently communicating about their benefits. Stéphane Renou, the President and CEO of FPInnovations, called for more generous, sustained federal research funding for the forest sector. He said that longer-term funding would help companies bridge the “valley of death” between research and commercialization.

One witness encouraged the federal government to consider how oil and gas could contribute to sustainability. Stewart Muir argued that Canadian liquefied natural gas could be used to reduce emissions if it is exported to other countries and used to replace coal-fired electricity. His testimony aligned with the Canadian government’s claim about how some of its spending on fossil fuel projects, like TMX, will generate returns that can be reinvested in low-carbon industries.

However, the Parliamentary Budget Officer questioned this argument, saying that TMX is likely to be a net cost to the government and will therefore not generate net returns that can be reinvested. Other witnesses commented that support for fossil fuel industries will divert capital away from lower-emitting industries that have more potential to grow in the future.[38]

Maintaining Competitiveness

Canada’s open, export-oriented economy depends on sectors that can compete in global markets. Witnesses told the Committee that Canada’s natural resources sectors have many competitive advantages, but that the federal government can do more to ensure that these sectors can continue to attract investment and compete with foreign companies.

As this Committee has noted in its other reports, investors want certainty. Witnesses said that uncertainty of various kinds continues to be a barrier to investment in Canada. They cited a lack of predictability in policy and long approval timelines for natural resources projects as disincentives to investors. To address these issues, the Government of Canada can give clearer signals about the future direction of its policies, simplify regulations and improve its coordination with provincial and territorial governments, businesses and other partners.[39]

Canada can become a more attractive investment environment in other ways. For instance, good environment, social and governance (ESG) practices represent a potential competitive advantage for Canada.[40] Andrea Hardie, the Director of Health and Safety at Enserva, summarized some of the best practices adopted by Canadian oil and gas companies, including reducing fugitive emissions from hydrogen production, exceeding soil remediation standards and funding air ambulance services in Western Canada. The Government of Canada aims to encourage good ESG practices. For example, BDC’s lending to oil and gas companies emphasizes GHG emissions transparency and investments in clean technology.[41]

Federal incentives can also support competitiveness. Witnesses cited tax measures like Canada’s flow-through share regime for mining expenditures and the proposed clean technology tax credit as examples of useful incentives.[42] However, the Committee also heard that these measures are not sufficient to ensure Canada’s competitiveness, especially since the passage of the United States Inflation Reduction Act of 2022. Witnesses said that incentives in this legislation offer natural resources investors a better return for their money than similar incentives in Canada. They called on the federal government to develop more expansive supports for natural resources sectors so that Canada retains a competitive edge with the United States.[43]

Canadian competitiveness is a security imperative as well as an economic one. Witnesses from the Macdonald-Laurier Institute emphasized that Canada is a key supplier of natural resources, particularly oil, gas and critical minerals. They expressed frustration, saying that the federal government is not acting sufficiently urgently to facilitate Canadian oil and gas exports given that our European allies are looking for alternatives to Russian energy.[44]

The Committee also observed that businesses in the forest sector may struggle to obtain federal support because of the ongoing softwood lumber dispute with the United States. When forestry companies apply to regional development agencies for funding, Global Affairs Canada may review these applications, assess their potential impact on the Canada’s relationship with the U.S., and make recommendations about whether the project should be funded.[45]

Advancing Reconciliation with Indigenous Peoples

Indigenous peoples play a prominent role in Canada’s natural resource sectors. For instance, an estimated 80% of First Nations communities in Canada live in forested areas, while there are more than 1,200 Indigenous-led forestry sector businesses, employing 15,000 people.[46] According to Lisa McDonald, Executive Director of the Prospectors and Developers Association of Canada, Canada’s mineral industry is the “largest private sector industrial employer of Indigenous people in Canada on a proportional basis and a key partner of Indigenous businesses across the country.”

However, Indigenous peoples also face significant negative impacts and barriers that prevent them from sharing fully in the benefits of Canada’s natural resource sectors. Colonization deprived Indigenous peoples of many of their traditional lands and resources, causing negative impacts including depleting their wealth and making it harder for Indigenous people to raise capital to this day.[47]

For this reason, some witnesses called on the Government of Canada to create opportunities for Indigenous people to secure equity stakes in natural resources projects. To this end, the federal government could issue low-interest loans or loan guarantees for Indigenous investments in natural resource projects.[48]

Bradley Young, the Executive Director of the National Aboriginal Forestry Association, said that Indigenous communities also need funding to collect information about the natural resources on their lands. He cautioned that any federal funding for this work must be high enough to support expensive, technical work across hundreds of Indigenous Nations.

Calvin Helin, the CEO of INDsight Advisers, exhorted the Government of Canada to support natural resource projects wherever Indigenous communities support them. He said the federal government appears to be sympathetic to groups that want to stop projects at the expense of communities that would benefit from natural resource development.

One way to support such development is by investing in the infrastructure that is needed to develop Canada’s resources. This is particularly relevant to Northern and remote regions, which have large Indigenous populations. Ms. McDonald explained that much of the economic potential of Canada’s mineral industry lies in Northern and remote regions, but that the region suffers from a serious infrastructure deficit. More than 75% of the known mineral deposits in Canada’s territories remain undeveloped because of high operating costs, a lack of infrastructure, and other hurdles.[49]

Recommendations

Based on the testimony collected during its study, the Committee makes the following recommendations to the Government of Canada:

Recommendation 1

That the Government of Canada renew its support for Canada’s natural resources sectors by:

• reviewing existing and announced incentives in light of the United States Inflation Reduction Act of 2022 and expanding those incentives as necessary;
• developing national standards and codes that encourage the uptake of low-carbon natural resources products and by-products;
• providing additional funding to consistently oversubscribed programs, such as Investments in Forest Industry Transformation;
• investing in public infrastructure necessary for assisting in the sustainable development of Canada’s natural resources ; and
• continuing to fund the research and development cycle for natural resources innovation, with an emphasis on supporting commercialization.

Recommendation 2

That the Government of Canada work to reduce uncertainty for investors in natural resources sectors by:

• working with other governments and regulators across Canada to streamline approval and permitting processes for natural resources projects; and
• deepening its engagement with Indigenous peoples, industry, workers and affected communities during the policy development process.

Recommendation 3

That the Government of Canada facilitate Indigenous equity ownership of natural resources projects by:

• creating a dedicated funding envelope to support Indigenous knowledge-gathering about natural resources on their lands;
• partnering with First Nations, Metis, and Inuit communities to draw on and integrate Indigenous expertise about responsible natural resource extraction on their lands into government supports for various natural resource projects;
• developing a new national benefits sharing framework to ensure that First Nations and Metis peoples directly benefit from major resource projects in their territories and Inuit communities benefit from major resource projects in Inuit Nunangat; and
• developing financing solutions tailored to the needs of Indigenous governments, businesses and communities, such as loan guarantees and low-interest loans for investments in natural resources projects.

Recommendation 4

That the Trans Mountain Corporation review the toll structure of the Trans Mountain Expansion Project and propose modifications to the toll structure as necessary to reduce the risk to taxpayers.

Recommendation 5

That the Government of Canada provide greater transparency about fossil fuel subsidies by:

• publishing its definition of fossil fuel subsidies;
• publishing its definition of what constitutes an inefficient fossil fuel subsidy;
• publishing annual data on Canada’s fossil fuel subsidies, including those subsidies that are considered inefficient and those that are aligned with the Government of Canada’s policy objectives; and
• publishing regular progress reports on the Government of Canada’s work to fulfil its commitments to eliminate inefficient fossil fuel subsidies and public support for the fossil fuel energy sector.