Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 15 - Evidence - November 30, 2010
OTTAWA, Tuesday, November 30, 2010
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 6:16 p.m. to study the current state and future of Canada's energy sector (including alternative energy).
Senator W. David Angus (Chair) in the chair.
[English]
The Chair: Good evening, ladies and gentlemen, colleagues and witnesses. I call to order this formal meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources as we continue our study on the energy sector with a view to developing a policy framework, hopefully, as we go forward in a world that is having exploding population, terrible threats from global warming and climate change, and economic pressures at all times. We are focused on the need to have a balanced interrelationship between energy, the environment and the economy.
This evening, we are being brought a new dimension. We have had a fairly full week in the nuclear industry. All of the colleagues who were present know it was quite something. For those of you who were not, you missed it, and I am willing to meet with you collectively or individually to debrief on what was a tremendously fascinating session.
Tonight, we will focus on a new area, the Canadian energy pipeline business. Dr. Brenda Kenny is not unfamiliar with this committee. It is a real joy to have you with us once again, with your colleague, Mr. Bloom. You are the head honchos of the pipeline association, as I understand it.
I want to tell our listeners on the CPAC network, on the World Wide Web and on our dedicated web for this study we are doing, www.canadianenergyfuture.ca, where we are starting to develop some followers, who are twittering and tweeting, that it is early days, and we are neophytes at it. However, we think we are putting our feet into the social media waters. This is the point for all who are sharing this with us, namely, to promote this dialogue, which we consider to be so important, if we are to understand. Canadians need to understand the real dynamics and the energy sources and what traditional ones may not be so good and the new ones that may be excellent alternatives and how we can perhaps re-engineer our energy system so that it is much more efficient and sustainable and a lot cleaner.
The transmission of power, or the transportation, either within or without our country or across provincial or national or even state lines, is important. It is important to move gas, oil and our other resources. We will hear more about that tonight.
I am David Angus, a senator from Montreal, Quebec. I am chair of this committee. To my immediate right is Senator Grant Mitchell, from Edmonton, Alberta. To his right are our able researchers from the Parliamentary Library, Marc Leblanc and Sam Banks. Next is my predecessor, another Alberta senator, Tommy Banks, no relation to Sam, as far as we are able to determine. To his right, from Saskatchewan, is Senator Robert Peterson. Just moving into the slot beside Senator Peterson is Senator Paul Massicotte, from Quebec. To my left is our able clerk, Lynn Gordon. To her left is Senator Richard Neufeld, from British Columbia; Senator Judith Seidman, from Montreal, Quebec; Senator Bert Brown from Alberta; Senator Linda Frum from Toronto; and, last, but not least, senator Daniel Lang from the Yukon.
I apologize, witnesses, for the late hour. We are under some constraints of not sitting in the committee while the Senate is sitting, unless special permission is granted. It was not either sought or granted tonight because there is a convention that it is usually only granted when we have ministers here who have to be away from their busy time and portfolios.
You have been patient, Ms. Kenny and Mr. Bloom. I would like to tell the audience and my colleagues a bit about you.
Most senators have seen you before. Brenda Kenny is President and CEO of the Canadian Energy Pipeline Association, where she works with industry partners to develop industry positions and advocacy related to a wide range of issues, including safety, climate change, regulatory efficiency and financial competitiveness. Dr. Kenny has extensive experience in energy regulation, sustainable development and strategy. Prior to joining CEPA — can we call it that?
Brenda Kenny, President and CEO, Canadian Energy Pipeline Association: Yes.
The Chair: Senator Banks had a rule that any witness who used an acronym at this committee without first telling us what it meant had to put 25 cents in a pot. With inflation, it is now up to $1. However, we mentioned it.
Dr. Kenny spent a number of years with the National Energy Board, where she provided executive leadership in policy, regulatory reviews and finance.
Colleagues, you may recall that in August, under the direction of Senator McCoy, we had a focus group day where we had leading experts from the fields, and Dr. Kenny was one who gave her time. I was sitting beside her, and she was an active participant — hopefully not because I needled her a lot but because she was stimulated and interested in the topic.
We now have another senator from Alberta, Senator Elaine McCoy. Welcome.
Dr. Kenny last appeared before this committee on May 14, 2009, when we were examining elements contained in Bill C- 10 and were dealing with the Navigable Waters Protection Act.
With her today is Douglas Bloom, President of Spectra Energy Transmission West, responsible for four of the company's Western divisions: B.C. pipeline, B.C. field services, midstream; and natural gas liquids, NGL.
Dr. Kenny, I believe you have opening remarks, and then we will proceed to the usual period of questions and answers. If you see senators slipping away, it is no reflection on your excellent presentation but, rather, because we are running an hour and a half late and they have other committees and other commitments. They do not usually dare leave until I do, but if they do, you will understand.
Ms. Kenny: We understand. Thank you very much.
We do have a few opening remarks. Given that some people need to slip out, I would invite any senators who have questions as we go to feel free to go ahead and ask them. These are fairly brief remarks, but if there is a burning question, it is sometimes easier to get it out in the early stages.
We appreciate your invitation to appear. The Canadian Energy Pipeline Association is here representing all of the major oil and gas pipeline companies in Canada, one of which is Spectra. Mr. Bloom will be incoming chair for us in a year's time.
If you can imagine in Canada a network of energy moving from where it is produced to where it is used, we are the highways. We transport about 97 per cent of all the oil and natural gas that is produced and used in Canada. Truly, the interests of CEPA's member companies are critical to the country's national interest. Together, we own and operate over 100,000 kilometres of major pipelines in Canada and into the United States. Pipelines are the only feasible and the safest means of transporting large volumes of crude oil and natural gas over land.
The Chair: Is it true to say that the pipelines are all regulated by the National Energy Board?
Ms. Kenny: The major pipelines that cross a provincial or national boundary are regulated by the National Energy Board; that is correct. A few major systems held within a given province would be regulated within that province.
The Chair: And by that province?
Ms. Kenny: Correct.
This standing committee has embarked on a compelling and important path: to explore key energy themes related to the goal of moving toward a broadly based, sustainable energy strategy for Canada. CEPA commends you for this important work. There are many energy and environmental conversations happening in Canada today. We believe the Senate study is one Canadians can look to as providing some convergence and is long-term, neutral and thoroughly engaging.
The Chair: Could you repeat that N word? N-E-U-T-R-A-L? What was that again?
Ms. Kenny: Thank you. Is it "thoroughly engaging?"
The Chair: Neutral.
Ms. Kenny: Neutral, I am sorry. Yes, long-term, neutral and thoroughly engaging.
The public interest in getting energy, environment and the economy right for Canadians both now and in the future is one of this country's most profound opportunities and challenges.
My remarks today are from the perspective of a major sector rooted in a strong sense of duty with regard to enabling the meeting of energy needs, the duty to do so with a clear and strong sense of responsibility for safety and environmental performance and risk management, and the duty to speak out when we see danger signs that could put Canada's interests at risk as they relate to pipeline infrastructure.
Today I will look through the lens of pipelines and focus on three key areas: markets and trade, safety and risk, and regulation and decision making.
For markets and trade, you have before you a number of visuals, particularly maps at the beginning of those documents. I know that you are well aware of the scale of Canada's energy sector, so I will not present that in detail. However, I will highlight that Canada has over 170 billion barrels of oil in the oil sands, not taking into account Atlantic offshore. In fact, as a nation, Canada accounts for over 51 per cent of the world's accessible oil reserves. In 2010 alone, investments in the oil and gas sector are estimated to be nearly $42 billion, including the resource's exploration and development throughout the country. That accounts for about 20 per cent of the investment spending in 2009. Over the next 25 years, those investments will spur the creation of 500,000 jobs, bringing nearly $491 billion in government revenues, including $188 billion in taxes by the federal government alone.
For the part of pipelines, none of Canada's success in energy is possible without the ability to move energy to where it is needed. That is why we exist. You can see from those maps how broadly interconnected that backbone for Canadian success is.
Canada decided a long time ago to structure her pipeline transmission systems as regulated private undertakings. The tolls and tariffs are regulated to ensure that these energy highways are open to all, and the fees charged are fair, reflecting actual costs to operate and a competitive return on capital invested.
I want to stress for this committee that CEPA's member companies see no increased profits when energy prices rise. Our duty is to reliably and safely deliver energy every day and to propose new projects where additional infrastructure is needed to address shifts in supply and market demand. Addressing these shifts requires an ongoing rebalancing. Projects must continually move forward and address that increased demand and be sensitive to getting the timing right.
It is critical to recognize that the pipeline industry operates within a competitive sector. Timing matters a lot to attract investment and put the pieces in place when the dynamics are right. The infrastructure provided to meet Canadian needs and to create Canadian opportunities cannot be taken for granted. Pipelines are very capital-intensive, investors have many choices, and capital is increasingly less patient. I will speak about that a little later with respect to regulations and decision making.
Right now, our oil pipelines are approaching the capacity needs. Newly accessible natural gas supplies mean more interconnects will become necessary. Most notably, those new supplies involve shale gas, which I am sure you have heard a lot about in past presentations. Looking ahead over the next 20 years — and there is a map looking at energy infrastructure investment forecasts — we have a number of major projects planned to meet Canadian needs. The total investment of those is over $80 billion. That constitutes tens of thousands of jobs in its own right. Without these sorts of projects, not only do we forego those benefits, but also the nation foregoes the benefits of all the related economic and social benefits upstream and downstream for the energy users in all of the regions that the pipelines serve.
It is important to get the timing right and to understand the importance of delivering energy and value to Canadians. Such infrastructure is fairly lumpy. Large projects are game-changers and can bring on significant new transport capacity all at once, just as if you were opening a new highway for the first time. Markets help us to ensure that we get that timing right, but also important is that pipeline shortages disrupt markets by squeezing supply in regions. That can cause price spikes or cause buyers to consider Canadian products unreliable and to devalue them.
While we always strive to get it right in terms of positioning new infrastructure and connecting new supplies and markets, we need to recognize that Canadians need to be slightly pipe-long rather than pipe-short. It is always a little better to absorb the cost of a little too much pipe than to see the market disruptions that arise when the pipe is not in the right place at the right time.
In conclusion on the markets and trade component, in considering new pipeline infrastructure from the perspective of policies that drive sustainable energy futures, we must acknowledge that the long-term national interest ripples across for decades, perhaps centuries, if we get it right or miss it. Imagine Canada today if there were no pipelines. By comparison in critical infrastructure, imagine what this nation would be like if we had failed to build the Canadian Pacific Railway or the St. Lawrence Seaway. Getting the right infrastructure in place has profound implications not only for today but also for generations.
Our number one duty is safety, absolutely, and the protection of the environment every day in our operations. Nothing else matters more. I must emphasize that for Canadian pipeline companies there is no financial incentive to hold back on safety. All pipeline integrity and maintenance costs flow through in the tolls charged to producers; so we are motivated to do the right thing all the time. There is no competitive advantage to quibbling about dollars or cutting corners on safety. Indeed, more than $1.6 billion is spent in this sector annually to promote those measures.
You will see in your packet a few examples of things we do around safety. We are proud to invest in measures and technologies that we believe are needed to ensure safety and environmental protection. We adapt our safety and environmental programs as best practices evolve.
Canadian companies are among the most sophisticated in the world. We have been leaders in developing and advancing technologies for many decades. We have control centres that operate 24 hours a day, 7 days a week and have sophisticated computerized sensing that can pinpoint leaks and usually shut them down quickly.
The Chair: Is your reference to a photograph in the packet with the maps?
Ms. Kenny: Yes. There is a control centre picture of a person sitting in front of a series of computer screens.
The Chair: I see; in the red sweater?
Ms. Kenny: Yes, that is correct.
Probably the most important advancement is on the next slide, which concerns internal inspection and detection technologies. Our major systems are routinely checked by running devices in through the pipeline. You can see that in the photos. They are called "pigs" because when they were first created, they squeaked as they went through the pipeline, and some people thought they sounded like a pig. The data we now retrieve from these is terrific. We have advanced technologies that can see issues developing. We can put that information into our integrity and management programs.
On the next graph, you will see that the historical result in the reduction of pipeline ruptures over the last 20 years is quite significant. We cannot and will not rest, though. Through continual improvement we are committed to developing even better practices and tools going forward.
Despite our best efforts, one other important element of safety is something we cannot control: damage from others. Although it is often unintended, someone touching the pipe or digging near the pipe can cause severe unintended consequences. Research has shown that a major risk to pipelines and therefore public safety is this third-party excavator damage. It is estimated in the U.S. that third-party incidents have caused 31 per cent of all pipeline fatalities. We have been extremely fortunate in Canada to avoid that so far, but we can see in the graph included in your package that the National Energy Board has reported that unauthorized access to pipeline rights-of-way has grown from 42 to 150 in the last decade. This is a dangerous situation.
The Chair: If I my interrupt, Ms. Kenny, I cannot remember reading much about breaches of or leaks from pipelines until recently. At least two incidents have received major media attention. I believe that Canadian companies were involved in both cases, although the breaches might have occurred in the U.S., where they certainly bring attention to it.
Am I right in that? Could you explain that, because it falls under this section.
Ms. Kenny: Yes, you are absolutely correct. There was a significant incident this past summer on a line in Michigan that is owned and operated by Enbridge, which is one of our Canadian members and a long-standing Canadian company that has significant operations in Canada as well. We are still awaiting determination of the cause of that incident. I can tell you that as an entire sector, we will be keen to find out exactly what happened, as is the company keen to know as well.
Occasionally, we miss something. We work hard to advance the technologies to ensure that in the future we see those things before they occur. The fact that you recall there have not been many incidents, as indicated by the results before you on the historical ruptures, is an indication that they are so unusual they attract our attention. It is a good thing because they deserve our attention. They are unusual, considering the scale of the operations in Canada and the United States.
The Chair: Following the first big Enbridge breach, where they stemmed the flow and constrained the pollution of the surrounding waters, there seemed to be another one elsewhere. The thought that went through my mind was that these pipelines have been in place for a goodly period of time. I remember being in my freshman year at university and working on the West Coast transmission line in Fort St. John and Buick Creek.
Ms. Kenny: Which Mr. Bloom now operates.
The Chair: I was wondering whether these lines are suddenly reaching a state of aging and if maybe we will see many breaches at the same time. Was it just a coincidence?
Ms. Kenny: That is an important question. With respect to the pipeline steel, nothing should cause us any concern that aging is a problem. There is no indication in the science we have today to suggest that that occurs. What does occur is attention to maintenance as you go forward, much as if you owned a house that was 10 years old as opposed to one that was 50 years old. Your attention to maintenance changes over time, and we build that into our maintenance programs. These technologies that allow us to check the pipe from the inside are an added element of safety. We do not know yet the causes of the summer incidents, and you are correct in recalling there was a second incident. I understand from early preliminary determinations that the second incident was quite a different situation and had nothing to do with the pipeline itself. There was some interference with another nearby facility, and that will be determined as we go forward.
A third incident, which I will acknowledge for the record and which was of even graver concern to all of us, was the terrible tragedy in California with the San Bruno incident. Again, that was not a CEPA member pipeline, but we are all keen to find out what happened on that one. Early indications are pointing to the distinct possibility that third-party damage was involved in that.
Finally, I will point to one other major Canadian incident about two years ago in the Burnaby area, which was absolutely third-party damage. A city contractor hit a pipeline without having called first to have it located, thought it was a rock and decided to try to move the rock. A dozen houses were doused with crude oil.
There are two classes of safety concerns. One class is whether the pipeline itself is being well maintained. Do we know everything we can about how to ensure its integrity, and are we doing everything possible to continue to operate it safely? That is the part we are accountable for, and we take it seriously. I will let Mr. Bloom speak to that because he actually lives that.
The second class is avoiding the other third, whereby a contractor of some sort chooses not to call before they dig and strikes the pipeline. The tragedy is that, inevitably, there is a human being nearby when that occurs, because they are sitting on a backhoe. The risk of loss of life is escalated severely. We want to see much more rigorous advertising, a requirement to call before you dig and the ability for regulators such as the National Energy Board to administer fines to help motivate a change in behaviour.
Douglas P. Bloom, President, Spectra Energy Transmission West: As an industry, our assets are, for the most part, buried four or five feet underground, and they will be there for decades and decades. It is very much in our interest to ensure that we maintain the integrity of the assets we have and focus on the safety of our own workers as well as the safety of the surrounding public. You can be assured that no sector will pay more attention to safety than we do. As Ms. Kenny described, we do focus on in-line inspection of our facilities. We experiment with advanced pigging technologies to try to get a better understanding of the condition of our lines, recognizing that those lines are buried underground and it is not easy to inspect them visually. We do put in place a great many practices to ensure that we protect the safety of the public at all times.
The one thing we need some help with is the risk that third parties, through expedience or ignorance or for some other reason, choose to start digging around pipelines and potentially put themselves and others at risk. That is that second class of safety protection Ms. Kenny was describing. As an industry we have been urging strongly for, frankly, more regulation. It is unusual for an industry to be urging for more regulation, and we recognize that is a little unusual, but it is only because we understand that the consequences of a ruptured pipeline can be serious, and we want to do everything we possibly can to prevent that from happening.
The Chair: What you are saying, sir, begs the question. Once you have the right-of-way cleared and then the line or the ditch excavated and then the pipe laid and wrapped and welded and covered over, I fail to see how there could be a risk of third-party damages if there were a fence along both sides of the pipeline. I am sure it is impractical or it would be done, or maybe it is done in some cases, but why is that not done?
Mr. Bloom: Typically, we try to ensure we can access our pipelines in the event we need to, for regular maintenance purposes, for repairs when we need to do them, or to make sure we can get at them in the event of an emergency condition. Typically, we do not put fences around the location of the buried pipeline. We will keep the right-of-way as clear as we can. That is not to say that there cannot be other uses of the right-of-way, for hiking or biking or other things, but we want to ensure that the pipelines are accessible in the event we need to get at them in an emergency, so we tend not to put extra barriers up.
Senator Massicotte: When you have a right-of-way, you do not own the land, so you do not have the right to put a fence up.
Mr. Bloom: That is right. That is typically the case. In many of the circumstances in British Columbia and elsewhere, but certainly in British Columbia, where the pipeline system I am responsible for is located, the majority of the pipe is on Crown land. We get a right-of-way agreement for it. In some cases, it is on private land, but again we get a right to use the land.
We try to ensure that the pipeline is clearly marked so that no one disturbs it inadvertently. At the same time, we do want to keep it clear for other uses and also keep it clear to ensure we can get at it if we need to.
The Chair: One of our senators has to leave. Senator Brown had a burning question. Can you see the steam coming out of his ears?
Senator Brown: You must have a fourth party, I call it, where people try to dig using backhoes or chain diggers or whatever, and they break the cathodic protection, but they do not report it. They do not rupture the line. Does that set off a chain reaction that, over a period of months or years, will eventually cause a leak? Do you run across many of those?
Mr. Bloom: That is a great question. I am happy to report that we do not run across a great many of those situations. Cathodic protection is important to try to prevent the corrosion of the pipe, so it is important that we have it in place.
Fortunately, we do not have many incidents like that. In our case, the potential for damage and potential for a really bad safety event is so significant that we do not want to have any of those circumstances. If anybody is digging around our pipelines, we want to ensure they have gone through the right practices, and the right practices include calling us so that we can go out and very precisely locate the position of our pipeline and ensure they are using safe practices to excavate around it, and not too close around it.
Senator Neufeld: Much of your pipeline crosses farmers' fields. Alberta is probably criss-crossed with more pipeline than any other province in Canada. If you fenced all those lands that you just leased to go across Saskatchewan, you would render them unable to be farmed. Is that correct?
Mr. Bloom: That is right. We try to ensure that we bury the pipe to a depth that allows other uses to continue as before. Farming is a great example, senator. One thing that we are proud of is that with the right practices, pipelines and other surface uses of the land can coexist quite well. That said, there are certainly some uses that are completely incompatible with pipelines.
Ms. Kenny: To close off on that, there are photos in your package showing the type of line indicator that would normally be present as well as someone actually locating a pipeline. I want to reinforce that, as Mr. Bloom indicated, the practices that coexist between agriculture and pipelines have worked very well for a long time.
Beyond safety, Canadians also want and need energy as well as the well-paying jobs, the tax revenue, the royalties, et cetera; and this leads to more infrastructure. Where pipelines are needed, it is important that regulation exists to influence positive outcomes and good decision making. At the front end of projects, Canadian companies are living with the vestiges of old-style regulation often across a plethora of segregated pieces of legislation. As a system, it is not working very well. I have spoken to this committee in the past about some of those concerns. Currently, we have in Canada about $100 billion in major resource projects awaiting decisions. Getting started on those projects, if they are in the public interest, would create a significant positive contribution to the economy and to jobs.
Following the pipeline debate in the 1950s, the National Energy Board Act was passed. That instrument of law has provided the federal government with a very useful arm's-length regulator for the past 50 years. It is industry's duty to prioritize the environment and safety above all other responsibilities; and it is the regulator's responsibility to hold us to those expectations. The regulator tests assumptions, devises and implements better practices and continually drives us to new heights to achieve what we need to achieve for Canadian public interest.
We are fully supportive of and committed to an open, transparent and inclusive regulatory process. We think it is equally important to be expeditious as well as effective. No one or any process is better served by delays. The Mackenzie pipeline regulatory process is still going on after more than five years. It is the most obvious example. However, in our experience, all regulatory decisions are taking significantly more time in Canada. That creates the risk of increased cost of capital and delays economic benefits of projects in the public interest.
It is important to bear in mind that no pipeline in the history of Canada has ever been found to have a significant environmental effect, despite very thorough environmental assessments in every case, even in tough terrain. In the North, an existing pipeline, the Norman Wells, has operated halfway up the Mackenzie Valley for more than 20 years. While northern terrain, for example, presents some unique design challenges, there is nothing magical about that or other proposed pipelines. There are no showstoppers. As for land use, as discussed in terms of safety and agriculture, the results of third-party surveys on the rights-of-way show that 91 per cent of landowners across this country who live with pipelines day in and day out are convinced that pipelines are essential; and 81 per cent say they can be trusted to move products safely. Three quarters, or the vast majority, of those directly affected think we do an excellent job protecting the environment.
Over the past year, events have occurred that have changed the public's view in North America about the energy industry and its regulators. As a result, we expect to see changes in regulation that can further assure the public that the risks are well managed. It is critical going forward that we have results-based governance of environmental performance that is both effective and efficient to get the best possible outcomes. The key goals must be better integration and alignment across various pieces of legislation, including the Canadian Environmental Assessment Act, the Species at Risk Act, the Migratory Birds Convention Act, the Navigable Waters Act and the Fisheries Act. The interests of all Canadians are better served by ensuring better integration, accountability and more knowledge-based decision making that focuses on results. We need to get the right decisions at the right time to have the infrastructure in the right place; it is critical.
Along with these events and potential regulatory changes, one other factor is looming. I am not in a position to comment on the validity of these reports, but I would note that recent newspaper articles show that apparently very large sums of money are being funnelled from the United States with the sole objective of disrupting Canadian due process. We also know that de facto trade barriers could be pending in the United States relative to pipeline exports, most recently with regard to the Keystone XL Pipeline. Canada's ability to make decisions in Canada's public interest must be upheld. When dealing with the country's energy supply and trade, Canadians absolutely deserve a voice. We must hear from key stakeholders about genuine and truthful concerns. We must do everything reasonably possible to address them so that decision makers know the facts when weighing decisions of national consequence on whether to proceed with these pipeline projects and, if so, under what conditions.
In conclusion, the pipeline industry has a duty to Canada. Not only must we provide the country with the energy highways needed to meet demands but we must also be diligent about safety and the state of the environment. Energy pipelines are critical to Canada's national interest, and Canadian companies are duty-oriented, responsible and world- class leaders in safety and damage prevention. For public safety, we need support in the introduction of a national call- before-you-dig number and effective enforcement tools.
For major projects in Canada, we need to make changes that provide an integrated framework, not a piecemeal approach, and more effective and efficient decision making.
That concludes our remarks.
The Chair: Thank you very much. I will proceed to questions.
Senator Mitchell: I was thinking that Dr. Kenny has been here often enough that she is probably worthy of being an honorary member of the committee.
In conversions from coal-fired electrical plants to natural gas, clearly the choice will be nuclear in some places but probably not in Alberta. That will affect the demand for your product. What is your impression of the rigidity of the government's statement that as of 2017 no new coal-fired plants for electricity will be allowed in Canada? What does that mean for extension-of-life possibilities for power plants in Alberta?
Ms. Kenny: That is a great question. I am not an expert in power generation with coal, and I cannot speak to either current or future government policy on power generation.
However, I will say that as a part of the natural gas value chain there is a lot of appeal to Canadian interests in considering better and more use of natural gas to meet our power needs going forward and as a benchmark to set a standard of what clean generation means.
High-efficiency, combined-cycle gas-fired generation is a very good choice that can be quickly installed and inexpensively operated, and it is very safe. It creates some good positives in terms of air quality. From a pipeline perspective, it is not difficult for us to provide for interconnections to fluidly meet changing market demands. It is, I think, a key part of our foundation going forward and for the future. Mr. Bloom's company is active on the natural gas side of the market, so I would turn to him for additional comments.
Mr. Bloom: The point of the natural gas standard that was announced in June by the Minister of the Environment is that beyond 2020 one would be allowed to continue operating coal-fired generating projects, but they would have to meet the standard established by an equivalent natural gas-fired generating unit.
I think the intent of it would be to allow operators to make the choice between whether they should continue to extend the life of their coal project but possibly have to retrofit some additional efficiency technologies to reduce emissions to the level consistent with a natural gas-fired unit, or should they move to a natural gas-fired unit or some other source of power, which could be renewable, hydro or whatever else was available.
It is hard for me to comment on what the outcome will be for coal-fired generation and whether that will allow those units to continue to operate or whether we will see a significant shift to gas.
Our sense is that there is a sizeable opportunity in Canada, and for that matter in the United States, with the vast new gas resources that we have been able to find during the last five years, especially. There is a good likelihood that we will see significant conversions from coal to gas over time and probably at a relatively measured pace.
As Ms. Kenny mentioned, we operate in a capital-intensive industry. We know you cannot just make wholesale changes overnight without imposing huge cost burdens on companies and ratepayers. Having some reasonably orderly process with a relatively long timeline on it and some clear transparency regarding what conditions a power generation operator would need to meet is a good way of handling an inherently costly and capital-intensive decision.
Senator Mitchell: It comes down to whether coal plus the cost of carbon capture is more expensive than converting to gas. The economics will drive that. That equals out any question about the relative greenhouse gas emissions of either one over the other.
My second question concerns Kitimat. There is much speculation that the line to Kitimat might be almost impossible to build when you start considering the Aboriginal communities, particularly in B.C., and apparently there is more intensity with the ones in Alberta now. It also raises the question of whether we will produce enough oil out of the oil sands, more than enough to sell to the United States. No matter what they are saying down there, although that is a question, that market seems to be insatiable. How likely is it that that pipeline will actually be built any time soon? Kinder Morgan could be doubled, and that might be less expensive.
Ms. Kenny: First, it is important to start with the fundamental policy question of whether or not Canada as a nation is well served with market diversification. Certainly the United States has been and will continue to be a positive trading partner for our country.
We have an option in Canada to find a way or maybe multiple ways to look for markets overseas for our products, in which case perhaps we would have a better bargaining position and some optionality, which, at the end of the day, could net back to Canadians, not just to companies but to those who are earning the royalty payments and the taxes, a better position for the future.
This is not CEPA's position, but I personally also think there is some merit in considering the geopolitical strength that can come from more trade overseas. We do have a good relationship with the U.S., and we should honour and continue that. However, there are other rising nations in the world that we would probably be well served to connect with more tightly, and energy trade is a great vehicle through which to do that.
If you are in agreement directionally with the view that Canada's national interests would be well served by allowing markets to access Asia, then the next question obviously is how you achieve that. There is more than one option to do that, but, for long-term, large-scale trade, pipelines are the means through which to access, in this case, the West Coast and to initiate more extensive trade.
It will be a question for the regulators. A joint panel is already struck on the Gateway Pipeline proposal. There have been incremental expansions on the Kinder Morgan line. It will be up to regulators, in reviewing and considering a number of factors, to make decisions about either or both of those options, and it will be up to markets to determine when and if they are ready to back those proposals economically with fixed terms.
My comments with respect to truthful, evidence-based, effective and efficient regulatory process goes to the heart of this, because we need to be respectful of concerns on any major project that arise, and also fact-based with respect to real or perceived impacts. It is early days yet to know exactly how these decisions will be taken or exactly which concerns and/or support is strong enough or based on fact and evaluation to contribute to those difficult and important decisions for the nation. However, particularly for this committee and elsewhere in this nation, we do need to strengthen our hold on what is right for this country directionally and then find fair, reasonable and effective ways to protect the environment and various interests and deliver on national interest first and foremost.
The Chair: Senator Lang, we understand you have a direct pipeline to these organizations in the United States. I hope you will question the witnesses on that.
Senator Lang: I appreciate your appearing here this evening. Like the others, I apologize for our tardiness. Like others, I have to go soon myself.
In your presentation, you mentioned, in part in response to this question, the public information that has been provided over the course of the last number of weeks about the money that is being paid primarily from the United States through foundations coming into Canada and providing the financial wherewithal for these organizations that are obviously anti-pipeline and anti-oil sands and anti-development, depending on where it is. Would you comment further on this? My understanding is that somewhere in the neighbourhood of $200 million, if not more, has come into this country. Are those facts true?
Ms. Kenny: As I said in my remarks, I cannot verify one thing or another. I have read in the papers, as have you, early reports on these issues, and there have been rumours, but I would not subscribe to rumours. Based on journalistic forensics, I think some of these issues are seeing the light of day. It is an important question for this committee when considering how, in Canada, we continue to make decisions that are in the public interest for Canadians in a balanced and fact-based way.
Looking at it from the viewpoint of infrastructure decisions, I am concerned. For over 50 years we have had what I would characterize as fairly honourable public hearings that have elicited fact and interests from a variety of people. When people appear, you trust that what they are telling you before a regulator is how they feel or, based on facts, what they perceive and know. I do not think it is helpful to the Canadian public interest to imagine those pipeline hearings or any other major project hearing having significant hidden agendas that might introduce a misalignment between Canadian interests and a misperception of fact.
That is why I made the observations today. It is increasingly difficult to have Canadian public interest decisions determined effectively and based on fact. These are complex and important issues, which is why this committee has decided to do this energy and environment study, which we applaud. There are many dichotomies involved with energy development as we meet needs and look for opportunities in Canada. I hope what we hear in public hearings, et cetera, is derived from a genuine expression of Canadian interests and is not tainted in some way.
The Chair: Did you say you had a point of clarification?
Senator Mitchell: Yes, I have a supplemental, if I may. I appreciate the issue, but is it not true that there is a huge amount of American investment on the other side of our energy industry and its development? On the one hand, you are saying that is okay, but on the other hand, you are saying that Canadian-based environmental groups funded by U.S. money are not okay. I do not see how you can have it both ways. I appreciate what you are saying about its having to be truthful, et cetera, and then that we have to believe in the science. That is true; we have to push for that. There are two sides to that. That is my question.
Ms. Kenny: That is an interesting question. Perhaps part of what raises that is worth talking about. Perhaps that is the sort of thing that this committee would want to pursue.
My own observation, senator, would be that this country has been built through the benefit of foreign direct investment that has brought a huge amount of capital to bear on projects of national interest to Canadians. Regardless of where that capital has come from, we have chosen to create an economic environment that invites and encourages foreign direct investment. I am referring to where and when we are making decisions about what is in the public interest in this country and letting us know that we are hearing about Canadian public interest.
Senator Lang: I want to pursue this further, if I could.
As a Canadian — and I do not know whether my good friend Senator Mitchell knew of this before — I had no idea that in the neighbourhood of $200 million is coming into this country, if that is the number, through various organizations to go before public hearings and, for the most part, is obviously not being publicly disclosed. I had no idea there was that massive number of dollars. It is troubling if it is not publicly disclosed. We are fully aware that this kind of investment in our country is influencing our politics, our environmental policy and, eventually, our trade policy for this country. I feel strongly about that.
The Chair: Do you have a question? I do not want to get into a debate.
Senator Lang: Yes. I am not that familiar with the United States, and I do not know whether you are.
This type of opposition to any of these developments, no matter what we put forward, is becoming more and more evident. There seems to be automatic opposition to building it. There is not a wait-and-see attitude on environmental, social and economic factors and on the decisions taken. Are you finding that with pipelines being built in the United States? Do they face the same kind of opposition that we face in Canada?
Mr. Bloom: Perhaps I can comment on that. Our company operates an extensive pipeline and storage network in the United States as well. It is fair to say that we are seeing a general increase in activism against projects. Certainly it is not confined to Canada. We see it in the United States as well.
As Ms. Kenny mentioned, the important point is not to snuff out opposition. That is certainly not in our interest, either. What is in our interest is to try to gain a clear understanding of the root concerns and the facts. If there are important facts that we, as project proponents, have failed to consider adequately, then we need to know about them. We need to have an efficient process for adjudicating on it at the end of the day.
As Ms. Kenny mentioned, a process that might be borne out of a host of pieces of legislation that were not designed at the outset to fit necessarily together can result in a process that is not able to handle in an efficient way vigorous opposition or activism or even a plain host of concerns raised about a project.
In our business, we strive for excellence, as do others in related businesses, whether they are producers or downstream customers. At the end of the day, if we are to get the maximum value out of the energy resources we have in Canada, we need to ensure that we have the best processes in place, whether in the private sector or in the public sector, to review and regulate these projects. That is what we must strive for. If we need to make tweaks or adjustments to regulatory processes in Canada, much as we might need to do in the United States if we encountered the same situation, let us strive for a process that gets to the facts in an efficient way and allows the regulators to make the public interest decisions as expediently as possible.
Senator Frum: I want to follow up on the conversation you were having with Senator Mitchell about Kitimat. You probably read in the Edmonton Journal that there was a conference yesterday. Bearing in mind what you said a moment ago about agreeing on the route and that there are many ways to get there, the vice-president of Canadian National Railway said the railway is in a position to ship as much oil as the conventional pipeline is able to ship. CN and CP are both taking the position that they can do the same job the pipelines do and that the infrastructure already exists. Do you have any comments on that?
Ms. Kenny: Certainly, in moving liquid energy there is a role for truck traffic, rail and pipelines. The statistics would show that for a large quantity over a long time, pipelines are the most efficient and by far the safest and most environmentally sound way to do that.
It is true that infrastructure exists. I am aware of oil movements to that effect, and that is helpful. However, from the viewpoint of establishing what is quite probably many decades of active trade, Canada's interests would be well served by considering the option of a pipeline. The markets will look at the question of cost, although cost is not the hurdle because of the scale of trade. With respect to safety and environment, we are in a better position to have an established buried infrastructure in place.
Senator Frum: The cost differential is enormous. Their argument would be that their safety record on this is as good as the pipelines. This is their argument. I just want to hear your response. I do not know. If there is a rail spill, their argument is that it is much smaller and more concentrated, and there would be only so much. The potential of spillage from any given tanker is very small.
Ms. Kenny: I would need to have an undertaking to analyze that more thoroughly without responding directly. However, the implication is that the movement interrupted would be extremely small as well. If you did face a derailment or something like that, I think you would have a problem as well. However, I do not want to speak out against rail. It is a valid and important component in the mix of transport. Generally speaking, in Canada today, we have established from long-term practice and results that safety and environmental sustainability is best served through pipelines. The capital question is one I would turn to markets to determine, and they may do just that, but if you are intending to trade for a long time, the capital investment in a pipeline is one we have seen through history serving the markets well.
Senator Frum: There is also the regulatory problem, as Senator Mitchell said. If the tracks are there, that is one thing. However, to get the permissions and the treaties to go through lands seems likes a potentially prohibitive process.
Ms. Kenny: Again, we have to separate and understand what the opposition on a given project is really about. I will not speak to that one directly, but I will say that observations of some recent projects are clearly questions related to a general off-oil panacea — that is, if we can block the pipeline, we can block the oil sands — rather than having an honest public policy conversation about national interests related to oil sands or natural gas and the role of infrastructure in safely delivering it.
For any opposition to any project, as Mr. Bloom said before, our desire is to be able to work collaboratively, to listen to the real concerns and have avenues through which we can parse real concerns from perceived concerns that might have nothing at all to do with the project being proposed and may be an end run on some other hidden objective.
Senator Banks: That is interesting stuff. The question of railroad safety is interesting. There are claims and claims and claims.
I am not an economist, but most countries, I think, would agree, and seem to have the attitude, that value-added is a good thing as opposed to a bad thing. The Enbridge proposal, if I understand it correctly, is to ship bitumen, unprocessed, as far as shipment to markets. Do I have that right?
Ms. Kenny: I believe the project is currently constituted as that, yes.
Senator Banks: We already have another pipeline that is sending raw, unprocessed bitumen from Alberta for processing in the United States.
What is your association's view, if you have one, on the benefits to Canadians of exporting raw materials for processing elsewhere as opposed to, in the interests of Canada's national economics, processing them here, creating the jobs here and having the plant and the investment here?
Ms. Kenny: The Canadian Energy Pipeline Association does not have a position on that issue. We recognize that it is one that has caused some debate, and I am sure it will continue to cause some debate.
With regard to the proposals and construction of new pipeline infrastructure, they are generally very adaptable. Should the market and/or policies move to a place where, instead of bitumen, it was sweet crude or gasoline or jet fuel, we could accommodate that. The key is whether or not you are initiating a trade link much like a new highway that would enable trade to proceed in a more expeditious and safe manner.
The Chair: Is that it for you?
Senator Banks: That is it.
The Chair: Senator Banks, I was expecting more.
Senator Banks: Pipelines do not have to do with those major policy things. Pipelines simply deliver stuff. Other people decide what it is they will deliver and how and under what circumstances. You want to own the distributor; you do not want to own the resource.
The Chair: But you have to get to be the distributor, and there are 80,000 roadblocks in their way; that is what I am hearing tonight.
Senator Neufeld: I wish to thank both of you for your presentations.
I did some quick math on rail car delivery. I think I am relatively close, though not right on; 400,000 barrels a day would require 1,000 rail cars a day, day after day. There is a difficulty with shipping 400,000 barrels of bitumen by rail car, and at CN, as I recall, that line needs a lot of upgrading. They have trouble enough keeping up to the coal shipments and the wood shipments or the finished product right now.
I want to go back to your first slide, where it says 57.9 trillion cubic feet of total reserves. Is that inclusive of any unconventional gas? It is the first slide, on the map, at the very top.
Ms. Kenny: The first slide on the map. No.
Mr. Bloom: No, senator. I am trying to find it.
Senator Neufeld: It is on the top right-hand corner of your first map.
Mr. Bloom: That would not include all the unconventional.
Senator Neufeld: I am not asking all, but that is proven reserves, I assume?
Mr. Bloom: That is likely proven reserves.
Senator Neufeld: Does that include any proven reserves of shale gas, or I should say unconventional?
Ms. Kenny: I believe there might be some early portions of Northeastern B.C. included. This dates from 2009, and much of the affected change has been since that time.
Mr. Bloom: There are two major unconventional gas plays in northeast B.C. right at the comment. One is the Montney play, and the other is the Horn River Basin. The Horn River Basin was just starting to see a lot of exploration activity back in 2008 and 2009. Right now we are seeing about 300 million cubic feet a day of production out of the Horn River Basin up in the Fort Nelson area, which is relatively modest in comparison to the estimates of total gas in place that are in the range of 500 trillion cubic feet. That would not be proven reserves.
Senator Neufeld: That would be Horn River, would it?
Mr. Bloom: Yes. Montney, which is also an unconventional play, not a pure shale gas play but an unconventional play nevertheless, largely in Northeastern B.C. but in parts of Northwestern Alberta as well, has been estimated at various levels from 250 trillion cubic feet to over 1,000 trillion cubic feet, according to some experts. We typically think of it at our company as around 450 trillion cubic feet. Again, that would be original gas in place, not a statement of proven reserves. The recoverable reserves would be some fraction of that.
All of that said, you need to add those resources to the base in Canada if you want an estimate of potentially recoverable resources. It would be over and above the proven reserves level that we have indicated here.
Senator Neufeld: Further to Senator Banks' question on the processing of either crude or natural gas, again I did the math, so this might be out a bit, but it shows on your first slide for natural gas that we export about 48 per cent, and in oil we export 75 per cent. Is the natural gas that we consume at home, the 52 per cent, used mostly for home heating or for manufacturing of products like fertilizer? Do you have a breakdown of the uses?
Mr. Bloom: Are you thinking of oil or gas?
Senator Neufeld: I am thinking of gas. We export 75 per cent of the oil, but only 48 per cent of the gas is exported.
Mr. Bloom: The oil is primarily transportation usage. The gas is a mixed use. We could supply a breakdown of the uses if that would be helpful.
Senator Neufeld: If you could do that, I would not mind.
Mr. Bloom: It would be a mix of residential uses, such as space heating and water heating; commercial uses, which would be much the same but in commercial structures; and industrial uses, which could be light and heavy industry. It would include manufacturing of fertilizers, pulp and paper products, and plastics.
Senator Neufeld: That would be useful for us to see.
On the slide you showed historical pipeline ruptures and Canadian cross-border pipeline ruptures. That does not include any in-province ruptures but only international cross-border ruptures. Is that correct?
Ms. Kenny: That is correct, yes.
Senator Neufeld: It is interesting that there was a gap when nothing happened between 2003 and 2006.
Ms. Kenny: The tricky thing about the statistics on ruptures is that happily there are very few of them. You can have these odd situations when for years nothing happens and then have a couple of years where there are three or four ruptures followed by nothing for a few years again. It does not mean that something awful happened in the year that three or four occurred or that there was something miraculous in between those years.
I take some comfort from the fact that decade on decade, things are obviously improving. We can never eliminate the risk of ruptures entirely. We strive to get to zero; that is our objective. There will be other accidents from time to time, just as in the airline industry there may be another tragedy. You learn everything you possibly can learn and you advance the integrity management tools and best practices. Part of CEPA's role is to be able to bring our members together to deploy that knowledge across the entire sector rather than within individual companies only.
Senator Neufeld: My last question has to do with safety. I appreciate all the work that you folks do on safety and so forth.
Some people want to see pipelines blow up without an accident. That means they are terrorists. I call them terrorists because they could kill people. They do not have any compunction about killing someone doing their regular work. Joe and Mary go off to work in the morning and some nutcase sets off some dynamite in the pipeline that could easily kill people. That has happened in Northeastern B.C. How do you deal with safety and terrorism in the pipeline industry? There are access areas above ground, for example where you pig the pipeline. What kind of procedures are in place to deal with those issues? I do not have the time of day for people who set those kinds of explosives off.
Mr. Bloom: We are aligned there, senator.
We do many things. When we have exposed facilities, we ensure that we design with materials that are as resilient as possible to the circumstances that they might be exposed to. Thankfully, the several bombings that have occurred in Northeastern British Columbia have not resulted in injuries or loss of life. I hope it will stay that way.
Designing the equipment is one thing we focus on. As well, we focus on the security of all our facilities, whether gas processing plants, compressor stations, pipelines or above ground valve sites. In all cases, we focus on designing appropriate security for each of those types of infrastructure. Obviously, for something like a gas processing plant, of which we have many in Canada, we have to focus on securing the site and ensuring that visitor access is secured and monitored. Any visitors are escorted around the site. We go through a host of procedures. The greater our concern is with the facility, the more significant the procedures are that we put in place to ensure its security. We do a host of things like that, right down to considering the soil conditions in which the pipelines are buried.
In many cases, the kinds of things we are trying to protect the public from are not terrorist incidents but things like shifts in the ground due to heavy runoff as the snow melts each year. We try to take into account a raft of different circumstances as we design, maintain and monitor facilities through their operation.
Senator Neufeld: That is standard across the system, not just for Spectra Energy.
Ms. Kenny: Yes. I would add that across the system there is active collaboration on threat assessments. People are engaged in that across the nation, including government officials. If there are any perceived threats, people are notified across the system so they can take additional due diligence. We can never prevent completely the risk of something untoward, but we have very good intelligence and very good design and operating factors, as Mr. Bloom outlined, to try to minimize the risk as much as possible.
Senator Peterson: Thank you for your presentations.
What capacity factor are you running at now?
Ms. Kenny: It depends on the system, senator. Many pipelines are close to full capacity. One or two are running below capacity or as low as 60 per cent capacity. It depends on the market dynamics and the use of that particular system at any given time.
Senator Peterson: There is some discussion that there might be overcapacity. Do you see that?
Ms. Kenny: In some parts of the country there is some modest overcapacity at this time. We are seeing adaptation around the markets and some conversions, such as the TransCanada Keystone Pipeline project that has moved some gas pipeline into oil service.
Senator Peterson: Do you transport refined product to the United States?
Ms. Kenny: I believe there is some modest trade in the eastern part of the country, yes. That is mainly where it occurs.
Mr. Bloom: Through the Enbridge system, they batch some refined product.
Senator Peterson: Would the ruptures that we talked about be caused by weld failures or aging pipes?
Ms. Kenny: There are a number of different potential causes. It is unusual at this time to see weld failures. It used to be that was one of the first suspect issues. I am a welding engineer, so I used to look at those things fairly closely.
Fortunately, we have learned from that, and over time we have tested most of those out. It depends on the situation. It could be an issue of slope instability that has caused a torquing of the pipe. We can detect most of those proactively. Occasionally, some thinning of the pipeline wall or some cracking has gone undetected. We then determine how that happened and try to remedy it throughout the system.
Senator Peterson: Can a landowner refuse you access on rights-of-way?
Ms. Kenny: Where we have an existing pipeline and there is a need to service that pipeline, of course our member companies would work proactively with the landowner to try to come to an agreement on how best to approach that and not disturb their land. It is unusual that there is actually an issue, but there can be an order allowing for entry if it is deemed to be in the public interest.
With respect to a brand new pipeline system, in Canada we do have, albeit it is rarely used, a right of domain. Should it be in the public interest that this new energy highway is needed, if there are one or two segments of lands that have not been negotiated and it is deemed by the Crown to be of fundamental national interest, that land can be expropriated, but that is highly unusual these days.
Senator Peterson: By and large, landowners feel they are being treated fairly? Is there a one-time fee or a yearly fee?
Ms. Kenny: It is negotiated, but generally it is a one-time fee. Our survey results certainly point to a fairly pleased group. There is always room for improvement, but our companies work hard to ensure the relationship is positive.
It is important to recall that when these lines — much of the backbone of this nation — were first laid down, the main social contract, if you will, was that everyone would be kept whole, so the value of the land was paid, any crop damage was paid, any inconvenience was paid; and that remains our policy. We never want to have anyone disadvantaged due to the need for this national infrastructure.
Senator McCoy: Listening to the conversation earlier, I was struck by a couple of things. One is that you are here with your CEPA hat on, and we very much appreciate that position. However, as you said, you are part of the value chain. We have not heard much about the system, if I could say that.
As Senator Banks pointed out, and you I think underlined, you as an organization can speak tonight only on a certain silo. I do not know quite how to phrase this question, but would you entertain an invitation from our committee to engage in a panel to enlighten us on a systemic basis so we could understand more the stresses and strains and relationships and regional differences of this very complex business?
Ms. Kenny: Yes, unequivocally we would be happy to participate in a panel, and I think that is an important observation, that it is often difficult to get to the root of an understanding of an energy system by looking at segregated components.
To that end, I will acknowledge that a few meetings Mr. Bloom and I participated in today were very much value- chain based with some people in Ottawa with regard to natural gas. That is an example of a very important fuel that is difficult to understand unless you can look at it across the value chain and understand what is going on in the dynamic of production. What about pipelines, and what about, as Mr. Bloom explained, the multiplicity of end use? Talking about those things at a value-chain level can be useful, understanding the impact of greenhouse gas, liquid fuels, mobility, all of those components. Yes, we would be happy to participate in that.
Senator McCoy: We have fallen into a 20th century trap in this committee, if I may say so, of endeavouring to understand a forest by looking at a tree at a time. You are representing a very valuable piece, and because of who you are and what you are purporting to do this evening and what we have asked you to do this evening, which is what you are responding to, you have encouraged us to think about the Canadian interest.
Are you in a position to speak to what you think might be the Canadian interest? If not, that is fine.
Ms. Kenny: I could venture a few observations from where I sit, and I expect that perhaps my colleague would as well, given his vast private sector direct experience.
I think Canada is at a turning point with respect to energy systems in a critically important time. We are faced with a true desire in this nation to address greenhouse gas emissions and to be responsible global leaders in energy development.
We are also, by luck of geography, custodians for enormous energy resources that are absolutely unparalleled in any other nation on this planet, and to divorce ourselves from the onus of what comes with stewardship of resources of that scale, to pretend in any way, shape or form that we can halt production because of a very limited view of what our responsibility is I think does a disservice to current Canadians and future generations and frankly does a disservice to our role in the world.
I believe we can and should and will arrive at a place that makes eminent sense for Canadians, in part through the work of this committee and other conversations; I think we will arrive at a unique Canadian energy strategy that speaks to our federation, involves our founding nations of all sorts, and emphasizes and understands our responsibility both to produce energy and to use energy in a conservative way and move forward to the best possible outcomes for Canadians.
The piecemeal approach that we currently live with is unlikely to yield maximum results for Canadians or for our partners around the world.
Mr. Bloom: I do not know whether I can improve on what Ms. Kenny has said. She has done a very good job. If there was something in particular, a question or a project or an issue that you had a particular public interest question about, I would be happy to try to respond to that.
Senator McCoy: Perhaps it is best to deal with it in a value-chain system. It is getting late.
I would like to ask you one further question. As an association, you participated of course in the Energy Framework Initiative, and you are continually active on the national and international scene. There is a growing call for a national energy strategy, and this committee mentioned that in its preliminary report.
Since we are going at this in this piecemeal, silo, fractured way, to satisfy our curiosity we would be wise to ask each association how it would see its business being different if there were a national energy strategy.
Ms. Kenny: That is a great question. Many of the topics we touched on in the discussion this evening are rooted in the fact that today our primary energy strategy in Canada is, firstly, market-based, which we do support and, secondly, regulated in sort of a step-wise fashion.
There is relatively little available to look to in the way of strategy for what the expected outcome is for Canada. I think an energy strategy would elicit a view of what is likely to be some hallmark components of Canada 2030, if you will, with respect to what the outcomes are from a policy level that people would like to have.
More practically for our industry, some of the anxiety around new infrastructure is born out of a lack of having had the policy conversation or direction. As a result, project by project, we are constantly pulled in to revisiting the impossible to answer questions about what matters to Canadians on a broader scale and looking at it in the microcosm of a given project. If we had an opportunity for a neutral, fact-based evaluation of the key elements of a strategy, that would be useful.
Even in decisions are taken, if we had a better viewpoint of energy strategy in Canada, the federal-provincial tensions would diminish rather than heighten. People look back at the National Energy Program and wonder whether a new energy strategy in Canada would not just highlight those anxieties again. I believe that it could be quite the opposite, that a modern, excited federation facing its one hundred and fiftieth birthday gets it. It is grown up and knows what it is about. That energy strategy reflects an appropriate balance of federal and provincial powers, an appropriate respect of the constitutional duties around that, and an appropriate means through which to make decisions more expeditiously that meet the public interest, rather than causing our energy outcomes to be a default of either non-decision or segregated decisions.
The Chair: That is very interesting.
Senator Dickson: Thank you for giving an effective presentation, particularly at the end. It highlighted the crux of the issue that has fallen to our chair, deputy chair and members of this committee with much more experience than me.
You had a discussion about process. From an ad hoc approach and a process point of view, what legislative or regulatory changes would you suggest that this committee could put forward in its report? It would be an ominous chore to have this major discussion. We have problems in having a discussion in relation to health care policy. When it comes to energy, I can imagine what would happen there. Can you answer that insofar as regulation and legislation are concerned? It is something we can look at specifically.
Ms. Kenny: With respect to Senator McCoy's earlier point, that may be a worthwhile question to a panel at a future date as well to really dive into it because there are many different components.
If you had a clear energy strategy, you could ask yourself about the means through which decisions are taken to meet that strategy. By "energy strategy," I very much mean entwined with environmental interests — absolutely wedded to that — economic interests and social interests, so a true sustainable development perspective on energy.
If you had that, then you would have to ask yourself whether the current ways in which we arrive at public interest decisions are well suited to that. My view is that the National Energy Board Act is a reasonably good vehicle on which to lean more heavily. It was by happenstance in the 1950s put together in a way that it reflects sustainable development. It says before you make a decision, reflect on the things people care about, gather the facts and make a decision.
I think that with respect to the issue of one project, one assessment, it is important to stabilize the legislation so that it actually occurs, is robust, transparent and engaging and has the ability to move towards decisions.
Right now, our legislation often has clawbacks that we trip over. For example, the Canadian Environmental Assessment Act, which was born out of an important need for good environmental assessment in this country, which we still fully support, has become a legal instrument caused by triggering. If you have to make a federal decision, you have to do an environmental assessment. If you have to give federal money, you have to do an environmental assessment. It is not rooted in the idea that if it is a big deal, you have to do an environmental assessment. It has nothing to do with that. We can do better in Canada, and if we started with what are we trying to accomplish in these decisions and then ask ourselves how to create an integrated approach to decision making, we would be much further ahead than right now asking how can we tweak this or another act. Try to collaborate across borders instead of saying, "We are doing the same thing. We are equivalent. I delegate to you. Go ahead and meet these standards." Have that ability to get to the guts of good decision making.
Senator Dickson: Comparing the United States to Canada, is it correct that the policy of the United States is not as fluent as Canada's when it comes to pipeline regulation?
Ms. Kenny: It depends in part on the commodities, and Mr. Bloom has experience on this front. Directionally, oil pipelines are regulated state by state even though they transit the country, and gas pipelines are regulated at the federal level.
Mr. Bloom: As a general comment, the nature of the regulation, the nature of the goals of the regulation and the drive to make a determination on whether a project or a pipeline is in the public interest are fundamentally the same in Canada and the United States. There are differences. That is a general comment. There are probably more similarities than there are differences.
Interstate natural gas pipelines in the United States are regulated under the Federal Energy Regulatory Commission, not dissimilar to interprovincial pipelines in Canada, which are regulated under the National Energy Board and regulated on substantially similar bases.
There are differences in agencies involved and in the way we treat some aspects of regulated business. As a general comment, in Canada we tend to focus more on outcomes and risk-based solutions, and that is something we advocate in the industry, as opposed to what we tend to see more in the United States, which are prescriptive solutions, where you will be directed to do the following nine tasks.
In Canada, we tend to take a little bit more of an outcomes-based and risk-based approach. We think that is wise and the right approach to take for the kinds of issues we deal with. Broadly speaking, it is similar to regulation of infrastructure.
Senator Dickson: Thank you very much for the succinct answers, and I look forward to the panel. When the panel is constituted, I am sure I will feel more comfortable in putting my vote in favour of the report that will be coming forward. You gave a very succinct and thorough presentation this evening, and I want to thank you both for the presentations.
The Chair: In that regard we have a supplementary from Senator Neufeld, and then we have Senator Banks, and then I think we can wrap it up.
Senator Neufeld: We talk about a national strategy, and I realize we have to have something. I am always a little hesitant when the federal government talks about these issues. All I have to do is point to your last slides, the Navigable Waters Protection Act, and I can recall us dealing with that. You would have thought we were going to kill every waterway in the whole country and no one would ever be able to get in a canoe again. I think to myself that we had better be careful here; we had better be sure of what we want before we ask for it.
We tend to think we are not so good here. Does the U.S. have a national strategy on energy? Can you point out to me anything and say, "Read that, senator, and that will tell you what the strategy is in the U.S."? I do not know, but I am guessing no. I look forward to your response.
As a sideline on equivalency, I have been trying since I got here to get equivalency in the Canadian Environmental Assessment Act with the provinces and have been unable to do so. I think we need to point out to everyone, not just the provinces, what needs to be done. However, I am nervous about a whole federal system saying that this is what your strategy is and this is what you will do to meet that end. I think education of the public is a huge part of it. I do not think many of the public know why we go out to the oil sands, for natural gas or for any of those things. There needs to be a larger understanding, coming from folks like yourselves and the industry, conveyed to Canadians about what we are actually trying to do. Would you agree? I would like a yes or no on it. I would like to see their strategy.
Senator McCoy: Would you take a yes and a no?
Mr. Bloom: If I said yes, I would have to come up with that document. I do not think I can, so I guess it is no.
Many of you have raised legitimate questions and concerns about what is the need for a national energy strategy and why would you do it. What is important here are many of the things that Ms. Kenny described earlier. I think we want to differentiate a plan or a program from a strategy and goals. That is awfully important.
I do not think there are many of us who believe that something as complex, integrated and dynamic that is subject to as many external forces beyond our control as energy is something that we could reduce to a national plan. If that is the kind of thing that is getting conjured up in your minds, —
Senator Neufeld: No, it is not getting conjured up in our minds — at least not in my mind.
Mr. Bloom: — let me assure you that is not something we are espousing.
All of that said, I think there are important questions that we need to ask ourselves here that are fundamental to our strategy. That is not to rewrite the Constitution of the country or anything like that, either. Let us recognize the resources that we have and think about what kind of goals we want to set for ourselves. What are the opportunities available to us? What markets do we want to serve? How best should we go about serving those markets? What kind of regulatory regime do we need to have in place to maximize the welfare of Canadians? I think all of those things can be dealt with in some fashion in either a national strategy or a country-wide strategy.
At the end of the day, I think most of us would subscribe to the view that it is government's role to set the rules of the road in place and establish the conditions under which the private sector, whether it is businesses or citizens, can operate. It is then up to those private sector players, the citizens and the businesses, to go about maximizing their own welfare within it.
We do not see any need to change our respective roles or to change some of the fundamentals that make this country what it is. At the same time, however, I think we are at an important crossroads here where, in this country, we are blessed with some abundant resources. We are not the only ones in the world who have abundant resources. It is a good time for us to think about what we really want to make of them, what we stand for and what strategies we might need to put in place in the country to take maximum advantage of the opportunities that we have.
The Chair: Very interesting. Senator Banks, I think you will have the last word this evening.
Senator Banks: Assuming that there must be some kind of policy, structure, strategy, whatever, the idea of starting with what are the objects and working back from that to find out how to achieve them is the best one. Dr. Kenny kind of referred to that when she said a "neutral, fact-based," and I think she said "policy," which would be easy if we could get everyone to agree on what the facts are. That is the problem.
I have two quick questions for you. Senator McCoy talked about the silos that we have and the fact that we are talking to a bunch of trees and trying to get a picture of the forest. Your interests cannot end and do not end simply at the beginning or end of a pipeline. You have to be concerned, one way or another, with what happens with what is going into the pipeline and what happens with what is coming out of the pipeline.
Going back to the Enbridge Northern Gateway again, there is considerable interest with respect to whether or not there ought to be tankers that would pick up something, whatever it is, out of the end of a pipeline at Kitimat and take it into places where many people say they ought not to go, namely, the north coast of British Columbia and the north end of Vancouver Island. You must be paying attention to that question and have a view on it because if there are not any tankers, there is no point in building a pipeline. I would ask you to comment on that to the extent that you can.
Second, we have heard representations from the landowners' association, with whom I am sure you are familiar, concerning some of your members' observations and the observations of others, or lack thereof, regarding the undertaking to remove pipes when the pipeline has been abandoned and, as you said, leaving no footprint. Some of those accusations have been fairly serious, and the evidence that has been presented to us has been fairly serious.
I would like you to comment on those two things, if you would, please.
Ms. Kenny: Let me start with the question of what happens when a pipeline is no longer used and is no longer useful.
The National Energy Board is accountable for regulation throughout the entire life cycle of a pipeline, including its retirement, which, given the ample commodity availability currently on both natural gas and crude oil, is by most forecasts a very long way away. The National Energy Board has determined through a public hearing, and we support this, that it is time to begin to save money for the eventual retirement of these pipelines.
For our part in this sector, we have been looking at this for a long time, at least a couple of decades. We have done some preliminary technical analysis looking at how one might best address the end of life of those pipelines. In some cases, the best thing for safety and for the environment is to leave that steel in the ground rather than go through disrupting that landscape just to take it out.
I have faith that, between open, fact-based dialogue, further field trials over the decades ahead, ongoing regulation and adaptation of what the right answer is, when the time comes we will be at the right answer. No fixed answer has been determined yet, but I am being honest with you that our initial assessment is that in some cases it is better to leave it in the ground. We welcome the opportunity to have open and practical discussions about what is best in all cases.
With respect to what happens at the end of a pipeline, it is certainly not our position one way or another to determine appropriate tankage or tankage routes. Again, that would appropriately be the subject of regulation and public hearings. I go back to the ultimate policy question of whether directionally this nation intends to build energy trade relations offshore North America.
On balance, there are many reasons to take that question very seriously, rather than looking at the first evidence of a "no" and turning our back on that potential opportunity. It requires an appropriate level of assessment and some honest dialogue and some honest, transparent discussion about the key underlying concerns and issues and how one might mitigate or address those.
Senator Banks: Backing up on that, I would assume that CEPA does not have a specific opinion as to whether or not the northern pipeline ought to be built.
Ms. Kenny: No, absolutely we do not have a specific opinion on that. As you can appreciate, senator, I have members who are direct competitors with respect to different visions of how to get oil off the west coast of B.C., so we have no opinion.
Senator Neufeld: For information, we have been exporting crude out of the Port of Vancouver for over 50 years. It is not new. That has been going on. I believe one to three large crude carrying vessels ply the coast of British Columbia on a daily basis from Alaska to Washington. The Douglas Channel is obviously different, but it is a large channel that has been used for all kinds of shipping of all kinds of products for a long time.
I agree totally with Dr. Kenny. I think there must be a realistic discussion about what these things are and what we want to do. Do we want to diversify our markets in Canada for the benefit of all Canadians and not just British Columbians? That is a bit of information so that people do not think that we have never shipped crude out of British Columbia.
The Chair: Dr. Kenny and Mr. Bloom, it has been a thought-provoking evening. I thank you both for your candid comments and your fine presentation at the outset. I believe the honest dialogue and the honest transparent discussion is under way. When you return on the panel, when we figure out how many trees and different species there are in the forest, I am sure we will be at the next level in a profound way.
Thank you, senators. We reconvene here at eight o'clock on Thursday morning.
(The committee adjourned.)