Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 29 - Evidence - May 28, 2015
OTTAWA, Thursday, May 28, 2015
The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill C- 46, An Act to amend the National Energy Board Act and the Canada Oil and Gas Operations Act, met this day at 8:01 a.m. to give consideration to the bill.
Senator Richard Neufeld (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld. I represent the province of British Columbia in the Senate, and I am chair of the committee.
I would like to welcome honourable senators, any members of the public with us in the room, and viewers all across the country who are watching this on television. As a reminder to those watching, these committee meeting hearings are open to the public and also available via webcast on the sen.parl.gc.ca website. You may also find more information on the schedule of witnesses on the website under "Senate Committees."
I will now ask senators around the table to introduce themselves, and I will begin by introducing a senator from Quebec, Senator Paul Massicotte.
Senator Massicotte: Good morning.
Senator Mitchell: Grant Mitchell, Alberta.
Senator MacDonald: Michael MacDonald from Nova Scotia.
Senator Ringuette: Pierrette Ringuette from New Brunswick.
Senator Wallace: John Wallace, New Brunswick.
Senator Seidman: Judith Seidman from Montreal, Quebec.
Senator Black: I'm sorry I'm late. Doug Black, Alberta. I'm on Alberta time.
The Chair: I would also like to introduce our staff, beginning with the clerk, Lynn Gordon, on my left, and Library of Parliament Analyst Sam Banks, on my right.
Bill C-46, An Act to amend the National Energy Board Act and the Canada Oil and Gas Operations Act, with the short title "Pipeline Safety Act," was amended in the House of Commons and passed third reading on May 6, 2015. This bill was read a first time in the Senate on May 7, 2015, and referred to the committee on May 14.
Today is our second meeting examining this legislation. I am pleased to welcome in the first portion of our meeting, in person, from Canada's Building Trades Unions, Robert Blakely, Canadian Operating Officer; and by video conference from Calgary, the Canadian Energy Pipeline Association, Brenda Kenny, President and Chief Executive Officer; and Jim Donihee, Chief Operating Officer.
Thank you for meeting with us today. We look forward to your presentations, and then we'll go to some questions and answers. Mr. Blakely, the floor is yours.
Robert Blakely, Canadian Operating Officer, Canada's Building Trades Unions: Thank you. I took my jacket off because I'm simply melting. I'm from Alberta. If you took all the humidity there was here and put it there, the place would absolutely turn green. It's amazing to me sometimes.
I'd like to thank you very much for the opportunity to be here. The pipeline business is really important to us in the construction industry. We represent roughly 500,000 men and women who make their living building things. If you looked at our pipeline membership, it is a small sliver of that 5,000. But at the end of the day, if you take the pipeline business away, it is one of the most significant enablers to support construction work everywhere else in this country.
If you looked at a proposed project like Energy East, Energy East proposes to connect thousands of high-paying, high-killed jobs in Alberta, Saskatchewan and Manitoba — Manitoba is also an oil-producing province — with thousands of high-skilled, high-paying jobs in Irving Oil in New Brunswick.
The pipeline really is a conduit between those jobs. Absent the pipeline and the ability to move the commodity, there is no reason for us to build the facilities on either end of the pipeline. Pipelines are transmission systems. They transmit materials from the place of extraction to the place of process, but what they do for us is they move jobs from the area of extraction to the area of process. Those are trades jobs and are high-skilled jobs. Building the pipeline is only a portion of what this does for us.
I think it is clear from what we have seen over the course of the last five or six years that a failure to build a significant pipeline infrastructure restrains growth in Alberta. The inability to get the product to British Columbia, to the Ultramar refinery in Lévis or to Canaport in New Brunswick means that significant numbers of jobs which otherwise would occur wouldn't occur. If you go to the Petro-Canada refinery in Montreal, you will find all of the pieces to build a coker. They are looking to do a job which is roughly $2 billion worth of construction work. It will employ somewhere in the range of 7,000 people for two years, and it will hire thousands of other people to keep it serviced, on a regular maintenance basis, and lots of people to come in every time that coker needs to be concerned around, roughly every 16 months. They aren't building the coker because they can't make money buying oil in the tanker load at the world price. They can make money by using western crude.
We're supportive of the bill. We might quibble with one or two of the points, but we are supportive of the idea of polluter pay. We understand and we would like you to understand that the safest way to transport hydrocarbons, volatile liquid, is through pipelines.
I live in Alberta, my children live in Alberta, and my grandchildren live in Alberta. When you look around at where I live, there is a pipeline within three or four miles of me in any given direction. We are not swamped in a sea of black goo because pipelines are inefficient or unsafe. If you look at the fact that there is a railroad going through every major city in this country and you look at the number of incidents there are with railroads, particularly in respect to the transport of hydrocarbon, the danger is more significant. Most people living in a major Canadian city near a railroad will likely be in the blast zone if something goes wrong.
This is about our jobs. We're not prepared to sell the environment for a few paycheques. We want a rigorous and enabled set of regulations that work for Canadians.
On the issue of clarity on the bill, I was privileged to be able to speak to this at the House of Commons committee. A number of people from a couple of law institutes and a couple of professors talked about clarity, and "please parse this sentence and move this comma." Overall, we're satisfied with the bill. As you parse this, if you're going to move a comma or something around, fine, but generally speaking, we're satisfied with the bill.
We think one of the things you need to recommend is that the National Energy Board get the best technical support available, the best technical support money can buy. They do a good job, but their budgets are somewhat constrained. They need support to get the right people.
There are issues that arise out of the communications system that will take place if there is an incident. We think that needs a little look.
The issue of the billion dollars, as well as the common-law principle of fault and the polluter-pays principle, is absolutely admirable. I'm going to stop there before you stop me.
I have one small comment on a completely different matter that I would like to make sooner or later, I think, in this session. You're going to be called to vote on Bill C-377. That is a bill that materially affects us.
Senator Black: Mr. Chairman, I would just want to register that I don't think this is appropriate. I don't think this intervention on Bill C-377 at this committee is appropriate.
The Chair: I think that is fair.
Mr. Blakely: I'll shut up, then. Thank you.
The Chair: Thank you. I will ask Dr. Kenny to give her presentation, and then we'll go to questions.
Brenda Kenny, President and Chief Executive Officer, Canadian Energy Pipeline Association: Thank you very much. We appreciate the opportunity to appear. Jim and I would love to be there with you in person except for some strategy meetings this week about getting safer, but we appreciate the opportunity to teleconference in.
The Canadian Energy Pipeline Association is pleased to be here today to discuss this bill to amend the National Energy Board Act and the Canada Oil and Gas Operations Act. CEPA members are the major companies in Canada that transport the lion's share of oil and all natural gas across 115,000 kilometres of transmission pipelines in this country, of which over 66,000 fall under the jurisdiction of the National Energy Board. We deal with a number of different regulators across the national landscape, but clearly the national regulator is a critical component of that.
In 2014, we collectively transported 5.3 trillion cubic feet of natural gas and 1.3 billion barrels of liquid petroleum products. That's a gigantic amount of energy, and it was delivered extremely safely. Our reliability rating is second to none in the world. We are really focused on this. We can also improve. Our goal is zero incidents, but we do take very seriously the fact that we are custodians of critical national infrastructure and are fully aware of the commitment required and the importance of keeping these energy highways safe for the public and the environment and to accrue the social benefits that are there for Canada. This is a critically important duty in the public interest.
Obviously and importantly, effective and rigorous regulation is a component of what makes this work well for Canada. We support Bill C-46 and see this as an important step forward to instill further public confidence in the transmission pipeline industry and what it provides to Canadians.
The focus on emergency prevention, preparedness and response are activities we're very keen on, and we support the amendments being carried forward from the House of Commons, in addition to the inclusion of Aboriginal governments on the list of those who could be reimbursed to recover costs.
We do support the polluter-pay principle. We have for quite some time, regardless of legislative requirements, and we encourage the inclusion of that in this legislation.
We are also encouraged with the level of consultation that has occurred, and I think that speaks well to this process.
As I said, our members are focused first and foremost on pipeline safety and the prevention of all incidents. This attention to safety is applied throughout the entire life cycle of pipelines. Clearly, at this juncture in our nation's history, there's a lot of focus on new infrastructure, but we have been operating these systems for many decades, largely without incident. There have been a few, but we have, throughout the course of the last 50 years, delivered virtually all of the energy that has been used except for that through wires.
Our continuous focus on safety and advancing technologies and improving the way in which these systems are operated and maintained has resulted in a collective investment in 2013, for example, of over $1.4 billion to ensure the safety of this critical national infrastructure. In addition, as an industry, we have launched a collective, hard-hitting program called CEPA Integrity First.
Our board is comprised of leaders in the industry who have the delegated accountability to commit companies to action, usually the president of the actual company itself. This goal of zero is accomplished with a clear focus on major priorities, and we have completed national and industry-wide guidance on critical issues such as pipe integrity, emergency management, control room management and moving out this year into damage prevention.
It's not enough just to have these guidance documents in place. They must be verified by the companies that are using them and by third parties. Our board has recently committed to third-party verification on that critical guidance, as well as the requirement for any member of the Canadian Energy Pipeline Association to be verified to a level of absolute continuous improvement. This is beyond compliance, beyond regulatory requirements.
We are very pleased to be the custodians of that program, to move forward in lockstep with excellent regulation but even pushing beyond. To that end, we also have an external advisory panel that is comprised of a variety of folks from NGOs, First Nations, landowner groups, agricultural industry, small business and labour. We look forward to continued insight and critique from them.
I will raise later perhaps in more detail the critical aspect of human factors. Clearly safety culture is a very important context for moving forward on safety, and we're very complementary of the NEB's efforts on that in that, a year ago, they published a framework around safety culture to which our industry has responded vigorously. I'll tell you about that in more detail later.
In these opening remarks, I would like to focus on spill response. Clearly prevention is job one, but we know that across the country there is a lot of interest in looking at emergency response. To that end, within our industry, that was one of the first guidance documents completed, as well as incident command at an international best practice level. We now have a mutual emergency assistance agreement in place across the industry, so, if you will, rather than a one-alarm fire, should there ever be — and we're doing everything to avoid this, but should there be — a larger incident, we can pull in assets, experience and expertise from across the industry rapidly, and we have done an exercise to test that.
In 2013, our pipeline companies independently conducted over 313 emergency response exercises across the country. There is a huge amount of focus on that particular aspect, and that's just one part of safety, obviously.
In closing, I would like to reinforce that we are complimentary of most of the changes in this bill. Superb regulation requires good structure of legislation and good structure of regulatory tools, and those clearly go well beyond just compliance tools. They need to enhance and encourage the leadership from within industry and have verification ability for that continuous improvement.
We recognize that the NEB will be moving forward on a best available technologies use in federally regulated pipelines this year, and we have a number of actions under way to lead on technology that we can speak to if you're interested.
These companies are sophisticated, well-capitalized firms, and that I believe should give Canadians some comfort because operating the scale of these assets for the Canadian public interest requires significant investments and expertise. We do have an incredible safety record that as I said is second to none on the planet. But we need to continue to invest, in the billions of dollars, and we need to be able to raise that capital, and that's what our companies have continued to do over 50 years.
With respect to the NEB, though, we do believe that a more appropriate funding model is needed. They require a high level of expertise to execute effectively, and we're very supportive of more flexibility in terms of, for example, their ability to attract and retain staff at a fully competitive salary level for these specialized jobs that they undertake.
Finally, any regulatory requirements that stem from this legislation should be focused on specific outcomes sought and be risk-based. In our view, you cannot go bottom-up compliance and achieve global-level leadership in these complex systems. We are pleased that the structure of the legislation enables an outcome-oriented, risk-based approach that will serve Canadians well going forward in the interests that they hold dear.
With that, I will close and look forward to the discussion.
The Chair: Thank you, Dr. Kenny. We will now go to questions. I'll begin with the deputy chair, Senator Massicotte.
Senator Massicotte: Thank you to all of you for being with us this morning. It's very useful.
Both of you are very much in favour of the proposed act and the amendments to the existing acts. I wonder if I could, while I have you here, as you are most informed, make use of your knowledge to help us with some possible criticism that we have heard or will be hearing shortly.
Later on this morning, we will have the UPA, the agricultural union, talk to us about their comments. We already have a written copy of their comments. It's highly technical, and I will need your help, Ms. Kenny, if you don't mind. Basically they are saying that the proposed revisions, such as that you cannot have a disturbance more than 30 centimetres below the ground or you're held liable — and certain plants will go deeper than 30 centimetres, and so why is the change being made? This will affect agricultural output, the choice of plants we can use and so on. Are you aware of this? Is this an issue for the pipeline companies?
Ms. Kenny: I have not read the UPA's submission, and I will look forward to seeing their testimony today. I think they are a very important group in this discussion.
What you're referring to I believe is related to the depth of cultivation, after which consultation is required. There are many ways to facilitate effective agriculture without strict limits, but what is important is if a routine approach to cultivation would entail any risk whatsoever to those assets. It's important to look at the crossing requirements and the plans. We have guidance in place that allows basically a carte blanche for crossing pipelines, if it is of a low-level cultivation, but we're very conscious of the fact that it is important to keep people working on their own land safely. I would point to, for example, the natural gas pipelines in Canada. Our records going back 50 years are not as complete as we would like, but to the best of our knowledge, in over 50 years of operating these natural gas pipelines across the country, there have only ever been two instances where a member of the public was killed.
Unfortunately, in each of those incidents it was damage from a third party with a backhoe that struck a gas pipeline and sadly caused a rupture that killed that individual. Our focus on safety is not meant to intrude on land use but to say, if for instance a farmer wishes to put in drainage tile that will require a deeper intrusion on that landscape, then let's have a conversation first to mark where that pipeline is exactly and make sure it's well supervised so that there is not an accident like that.
Jim, do you have anything to add to that?
Jim Donihee, Chief Operating Officer, Canadian Energy Pipeline Association: No, I think that covers the concerns very well.
Senator Massicotte: This is not an amendment that the association requested, is it?
Ms. Kenny: No, I don't believe we requested that amendment. I know that there's been an interest in how best to allow for, say, above that cover that you don't have to talk to us. I think it's almost working in the other direction. Previously there were fairly arduous crossing regulations that even for the most trivial crossing it required some regulatory intervention, which we think should be removed. We like the ability to have some guidance insofar as above a certain level of cover, just please use your landscape as you see fit. We really want to keep people safe and collaborate on that.
Senator Massicotte: Another point they've raised is the fact that the current practice, the current agreement that is signed with your association members is a hold harmless; unless they're grossly negligent, they are not held accountable for such damage. But the legislation is such, if you interpret it correctly, that they will now be held responsible for any damage caused to the pipeline, contrary to the standard practice of hold harmless subject to gross negligence. Is that an amendment you're aware of? Is that an amendment you've asked for?
Ms. Kenny: We have not asked for that amendment. I am somewhat aware of it, but not in detail. I think what is important is with respect to moving to damage prevention on these major systems that there is some accountability for people to call before they dig. I mentioned in my opening remarks that that is our fourth guidance document, which will be completed in 2015, and we look forward to consulting with UPA and others on that. I think it's rooted in a direction where many governments across the country have recognized that there's been an absence of attention to that. In fact, until recently when Ontario created new legislation, there was absolutely no legal requirement for people to call before they dig around these assets which, as I said before, although extremely rare, is one avenue sadly for an individual to inadvertently cause a major rupture, which can lead to serious harm or death.
It is important within any legislation in Canada, including the National Energy Board Act, that there is some recourse for the requirement to then perhaps administer a modest fine rather than going straight to court. The big gap right now in damage prevention and this is directed here, which is to say that I can give you a letter or I can pursue criminal negligence proceedings. Regulatory tools in the middle are important to say, "I warned you three times to call before you dig. Every time you've come close to that pipeline. I'm now going to fine you $2,000 and hope that gets your attention." With the introduction of the administrative monetary penalties, a broader suite of tools and actions that the NEB can enforce is very important, and I believe that's where this falls.
Senator Black: Good morning, Dr. Kenny, Mr. Donihee. It's good that you're there, and I recognize it's a little after six in the morning in Calgary. Thank you very much for being here.
I have a couple of questions for you, if I may. Would you please comment for us on the $1 billion threshold?
Ms. Kenny: Certainly. We are quite comfortable with that. I think that it is important that the public have assurance that the financial wherewithal of any significant operator is sufficient to ensure that the commitment to stay on the ground and be fully accountable until remediation is complete is there. I'm not sure where that number derived from, but we're not aware of any incident in North America on pipelines that has surpassed that. We're comfortable with it. It's a large number, but what's appropriate here is that there is robust confidence in the polluter-pay principle, and we support that.
Senator Black: Thank you very much, Dr. Kenny.
Can you talk to us please about the investments that either your organization or your members are making in innovation to get the 99 per cent safety record to 100 per cent?
Ms. Kenny: Yes. Let me say, Senator Black, that of course to get to that zero incidents is going to take four things: leadership, first and foremost; excellent practices, which I have mentioned; technology, as you are pointing to; and safety culture. There is a lot work going on in each of those.
With respect to technology, our technology comes from a range of major suppliers who are globally expert in things like detailed internal line inspection or advanced pipeline manufacturing. For instance, in Canada, I point to the EVRAZ plant in Regina, which hosts the North American centre for research and development on advanced pipeline welding technology. There was a recent large announcement with one of our member companies, Enbridge, teaming up with EVRAZ on how to advance that pipeline manufacturing even further.
There are also major investments going into leak detection, for instance, working closely with an Alberta-based research hub called C-FER, and that is co-funded by Enbridge, TransCanada and Kinder to advance leak detection technology so that we can find the finest, smallest pinhole leak very quickly, which is difficult to do unless you are using advanced fibre optics or acoustics.
These are cutting-edge technologies, and our members are active. We are collaborating through an enterprise called the Canadian Pipeline Technology Collaborative, which is embracing 15 large Canadian universities on the academic side and right on through to deployment and activation of new technologies, new suppliers and SMEs that can provide those services.
We have been working with Sustainable Development Technology Canada, which is a billion-dollar technology advancement fund chaired by Jim Balsillie. They are doing with us a business case on which areas of technology advancement on pipelines would best serve the opportunities looking forward and how we might move forward on very focused challenges or technology advancements to address those.
I hope that has answered your question. Those are specific examples. The investments are significant, often company-specific, sometimes collaborative.
Senator Black: Dr. Kenny, you made an interesting comment that I might have misinterpreted, but I want to give you the opportunity to explain it. Do I understand that perhaps you consider that the NEB is impaired currently in performing its functions because of financial restrictions?
Ms. Kenny: Thank you for asking that. I wouldn't quite go so far as impaired. It is not just a question of how large the budget is but more to the point of the flexibility in which that enterprise, which is a separate employer under the federal act, can have greater latitude than a particular government department in terms of financing. I will turn to Mr. Donihee in a moment to respond more directly because he is an expert in this area. But we believe that the NEB needs more flexibility to be able to nimbly hire and contract the kinds of sophisticated, advanced expertise that it will require to keep pace with global world-class regulation and risk management, and right now, the challenge is the ability to attract and retain superb talent. Twenty junior engineers can't match two highly experienced integrity engineers, for example. It's not more bodies; it's an ability to attract and retain superb expertise. They have some, but we can see, if you look ahead on a trajectory of risk-based, outcome-oriented approaches, that it will become even more important.
Mr. Donihee: I had the privilege earlier in my career to serve as the chief operating officer at the National Energy Board, so I did have the occasion to work this challenge and to live it first-hand myself. I think Dr. Kenny has characterized it well in terms of indicating that the NEB is a separate employer. With great respect for the construct of the public service, I think the challenge they do have, as was mentioned, is not the total envelope of funds. It is how they are able to apply them, what sort of pay scales they can offer and how they attract and retain the quality of expertise necessary.
As you can imagine, as large as the industry is, it's at the same time a small industry when you look at those who hold great expertise in the engineering and the technology characteristics necessary to move it forward. At times, the NEB is challenged to retain the calibre of staff in terms of technical knowledge that is necessary to fully perform their role.
To that end, we are eager to find a way to collaborate more directly not only with the National Energy Board of Canada but also with all regulators to contribute the expertise resident within the industry while never expecting that the regulator would subordinate its role as the primary decision maker in terms of moving toward the safety of Canadians.
Senator Mitchell: Thanks to all of you. My question is a follow up to the last answer, but I will direct it to Mr. Blakely because you, too, said it was very important that the National Energy Board of Canada get the best people money can buy. Could you be specific about that?
Mr. Blakely: When you look at the sort of talent that the NEB is going to need, hiring a junior engineer will not cut it. You need to find people who have a significant degree of expertise. If they cannot be employed because they can make twice as much money working somewhere else, systemically the National Energy Board of Canada is always behind the power curve. Like Ms. Kenny and Mr. Donihee's point, we think that if the NEB is going to be a collaborative body and work with the provincial regulators, it should be the centre of expertise, and if that means spending more money on those people, let's do it.
Senator Mitchell: Thank you.
Dr. Kenny, you mentioned the call-before-you-dig issue. It's quickly becoming click before you dig, which is up to 75 per cent now. There is only one provincial jurisdiction that actually has legislation, and that's Ontario. I think you alluded to that. What kind of pressure can your organization put directly on provincial governments to begin to legislate in the way that Ontario has done, which seems to be the answer or part of it?
Ms. Kenny: Certainly, we are very encouraging of that. We collaborate with the Canadian Common Ground Alliance, which is a national organization specifically focused on this issue. We would advocate for any provincial government to institute that.
With respect to half of our assets being at the national level, the changes discussed with respect to the National Energy Board and their ability to use administrative monetary penalties to encourage attention, even at a small- business level, sometimes a light touch or a requirement of an alternative offence mechanism, such as go to training for three days while your backhoe sits in the yard, can get attention.
We think it needs to happen broadly, and this is one part of it.
Senator Mitchell: On page 3 of your May 26 letter to Senator Neufeld, you mentioned that there are 37,000 integrity management equipment inspections and 440 integrity management facility piping inspections. The name "integrity management inspection" implies something, but could you specify what exactly that means, because it sounds reassuring?
Ms. Kenny: There is a lot that goes into integrity management under the CEPA Integrity First program, which was the first guidance document out the gate in terms of what to look at. Specifically, it is not a lot different from going to a doctor for a checkup. Sometimes a visual inspection is necessary to look at things such as valves and the landscape.
What is really exciting are the advancements in internal line inspection where you can go inside of the pipeline with very advanced techniques and look into the wall of the steel to see if there is any thinning of that by way of corrosion or any minor cracks that might cause you to believe you should replace that section. Those techniques are getting more sophisticated all the time. I have been told that the types of technologies available today would have prevented accidents that we saw even just five years ago. This is really exciting, similar to advancements in MRIs, CT scans and exploratory surgery that save lives.
These numbers are related to specific actions in the field by these companies that are addressing some sort of indication that came to their attention that they better take a closer look.
Senator Mitchell: Thank you.
Senator Patterson: On this issue of allocation of funding and flexibility that Senator Black raised, it seems to me that the issue is budgetary and administrative and is outside the scope of this legislation. Mr. Donihee, would that be correct?
Mr. Donihee: It would be outside the actual scope of the legislation, but it's an observation that is important to the manner in which NEB is positioned to conduct its mandate.
Senator Patterson: What would the fix be, then? Would the solution lie within the NEB itself?
Mr. Donihee: While I had the opportunity to serve at the NEB, it was working closely with Treasury Board and planning mechanisms within the regulations — that is, the Financial Administration Act — that would permit the NEB to enjoy greater flexibility in terms of the manner in which it applies its funding. The real challenge is that for entry-level personnel the wages are attractive, but at the seven- to 10-year mark you reach a crossover point where things flatten out. That's the point where we see a great deal of attrition at the National Energy Board of Canada, as Mr. Blakely pointed out, and people leaving for higher wages, and so on, within the industry.
Senator Patterson: Thank you.
Ms. Kenny: If I might add briefly, that is absolutely correct. In addition, for a belts-and-suspenders approach to expertise — and Jim referred to this earlier — there are avenues where the NEB could collaborate more broadly with the pool of expertise in Canada, buttress with third-party verification and other means, to ensure that the contracting or the task force with industry or others is beyond reproach and is tapping into the best Canadian expertise available.
Senator Ringuette: My question is for Mr. Blakely. Mr. Blakely, I welcome your support and your being here in regard to this bill. It's unfortunate about the comments that we heard earlier, but, in a given year, how much training in safety measures would you provide to your membership?
Mr. Blakely: On any given day, if a pipeline is being built, we will have trained the pipeline welders who are going to do the work. We maintain a number of training facilities across the country, about 175. The bricks and sticks and mortar investment is three quarters of a billion dollars, and we spend about $300 million a year on training.
You may have seen in the paper recently that TransCanada gave us a number of sticks of pipe. They gave eight or nine lengths of it in British Columbia, Alberta, Saskatchewan — across the country, wherever Energy East is going to go. That might not seem like much of a donation, but the pipe is worth about $10,000 a foot. It's not just a couple of pieces of steel that you gum together.
There was a time in the 1950s when we could have recruited a crew to go to work in the bar, and we would have done some gamma ray inspections that close enough is good enough. It doesn't work like that anymore. Our welders are highly skilled. First, they are proper welders, journeymen welders. They get a pressure certificate and a licence to be able to weld — they call it a ticket, but it is a licence to weld — under either the ASME code or the pipeline code, whatever code from Canadian standards. Before they get to go on the pipeline, they have to weld an appropriate joint and have it tested. Every weld they do is tested.
We are now at a point where the testing process is as complicated as the MRI that you might get, with the multi- phased array, dye penetrants, magnetic particle inspection and the ultrasonics that Brenda referred to. When they do a dig up, it's our members who inspect the line and do the smart pig technology that works internally. To be able to make sure that the people who are in the pipeline business get people who can do what they require is an enormous investment for us.
For example, we will cut up the lengths of pipe that TransCanada gave us into coupons that are about this big — the pipe is 40 feet long — and we will train a new generation of welders on that donation. It's a big deal.
Senator Ringuette: What would be your average cost per member for training?
Mr. Blakely: It depends on a lot. If you look at a pipeline welder, the last numbers I have — and I will verify and let you know — it cost us about $18,000 a pipeline welder when we run a course for six welders. That's the maximum you can do at one time.
Senator Ringuette: That's quite an investment on the part of your organization for not only the future of your members but the future of the industry.
Mr. Blakely: We live here, too. We don't want something to go boom in the middle of the night.
Senator Ringuette: Regarding issues that have been discussed earlier in regard to speaking on issues outside of the scope of the legislation and the qualification of the personnel at the National Energy Board, would you participate in any kind of forum that would enhance the human resource capability at the National Energy Board?
Mr. Blakely: The short answer to that is yes. I think this was summed up really well from CEPA. Getting people in the door is not the issue. It's retaining them when their degree of competency is starting to reach into the heights. That's the point at which they become attractive on another market. Unfortunately, the Treasury Board regulations won't let the NEB and a couple of other regulators such as nuclear safety, et cetera, keep them beyond that because there is more money out there from somebody else. When we try to find a way to do this, you bet.
Senator Seidman: Thank you both very much.
Ms. Kenny, you referred a couple of times in your presentation, and otherwise in responding to questions, to safety culture and large things happening among your members with regard to safety culture. We did, in our hearings, already discuss — with the NEB and NRCan — audits and inspections, for example. You referred to under-preparedness and emergency response exercises.
You kind of promised you would elaborate on safety culture for us. Can you do that?
Ms. Kenny: Yes. I'll lead up briefly and then turn it to Mr. Donihee, who is leading that effort for us.
Just to set the context, I think safety culture is one of those examples where, as good and as important as legislation and regulation are, ultimately it comes down to the judgment calls day by day and the hundreds and thousands things that are done in the field or in those office towers related to driving safety forward.
Just one other key issue on this is the issue of regulatory competency. Gone are the days when we should assume for one second that the role of a good regulator is to replicate or replace the expertise and depth across the industry. What you want to do in excellent regulation is to support, encourage, vet and verify that there is leadership, strong safety culture and excellence that will drive forward on performance and outcomes.
Mr. Donihee: When it comes to safety culture, it really is all about coming from the top, commitment from the leaders that must find its way through the organization in terms of how that plays out. Last June, the NEB published its safety culture framework, a way of setting out the defences and kind of threats that would affect that culture. CEPA has undertaken to construct a survey, to begin with, that every one of our member companies will be subject to this year, and that will allow us to look at every single employee within the entire industry to take a diagnostic of exactly how the tone from the top is being pushed through the entire organization. That will allow, as Dr. Kenny said, the CEOs who sit at the board table to look each other in the eye and to understand where there may be strengths and weaknesses across the entire industry, to learn from each other and to make sure that the very best practices are replicated and pervasive throughout the entire industry that, as Mr. Blakely said, is absolutely committed to making sure that we do not endanger Canadians but that we serve Canadians very safely, with a sustainable industry.
Senator Seidman: I appreciate that. You responded to Senator Black's question about the role of R&D and how much R&D you do on innovation related to prevention. Could you give us examples of that as it relates to, for example, emergency response and preparedness?
Ms. Kenny: I'll answer this one.
First of all, start with good science, and, to that end, we have been working with upstream producers whose product is moving through our pipelines. We have reached out to the rigorously independent Royal Society of Canada that now has a panel under way to look at what is known in science about oil should there be a spill. That will be very important input into advancing our practices further.
There are also new techniques in remediation. One example would be that if oil gets into soil, you remove it from that site temporarily and bioremediate it, like a big compost heap, if you will, and test the science around that. New techniques of how to do that better continue to advance.
On spill response, it's recovery. It's quickness of leak detection. It's control room technologies. It's on-the-ground practices, but coupled with the technologies and science, that let you know that you're doing the right thing as quickly as possible.
The Royal Society of Canada, as I said, is doing a thorough study. We expect those results later this year. It is completely closed off from us, as it should be. I think you probably already know how the Royal Society operates, very cloistered and independent. I think that's an example of industry leading, to say to an august group, "Please gives us answers, warts and all, so that we can then respond."
The Chair: I just have a couple of quick questions, and then Senator Massicotte has some. We have just five minutes left.
Dr. Kenny, when we had the NEB here, they said that last year they completed six audits, which was, I believe, a doubling of audits, and 230 inspections, which was similar. In your estimation, with about 99 or 100 companies, are six audits sufficient? If you divide the number, it's about every 17 years that some company is going to get audited. What about 230 inspections, when I think about 73,000 kilometres of pipe and all of the facilities that go with it? I don't know what would be, but is that sufficient?
Ms. Kenny: That's an excellent question. First of all, CEPA is only 12 large companies. We comprise 115,000 kilometres of pipeline in Canada, and our members have been subjected to some of those very comprehensive audits.
You would have to ask the NEB this, senator, as to the range of numbers of companies. They regulate many companies that are, frankly, an accident of geography and just have the unfortunate circumstance of crossing a border, and what's regulated is literally a kilometre in length. I don't think the Canadian public interest needs to be concerned over whether there's a detailed audit of that kilometre. I think what people are focused on are these big transmission systems, and they are well audited.
I would also say, back to moving to a more performance-based, progressive approach to leadership in regulation on a world-class level, that you need to count on third-party verification. You need to count on the auditing going on in those companies, much like a securities regulator will require regular audits and executive sign-off on those but count on the fact that there are KPMGs and Deloittes and others helping those companies to make sure that their financial books are in order. A financial securities regulator doesn't go in every time and own the accountability of all of those audits.
It's a compilation of how you look at verification, and they have to be risk-based. When they go and audit, it is comprehensive, and it should be driven on where they believe they can provide the most learning.
The Chair: Thank you. My next question — and I'll be quick — is this: I can appreciate that hiring people and paying enough money to keep them is an issue. I'm aware of that in the oil and gas industry. The Oil and Gas Commission, at least when I left British Columbia, was funded by fees from the industry, and, in fact, we made special representation within union contracts that they could pay the going rate that the industry was paying so that they could keep the professionals. Would you be willing to have fees attached to the pipelines that you represent that would actually enable the NEB to hire the people that are required and retain them?
Ms. Kenny: Senator, yes, we would, and, in fact, we are. Currently, the lion's share of the NEB's budget is fully cost- recovered from the pipeline industry through a single vote, and it's an arm's-length arrangement. We are not involved with choosing the number or arguing about how it is spent at all. We support cost recovery and, even with those monies coming from our company pockets, are supportive of more investment. As I said, ideally, it is not carte blanche. It is targeted: Do you have the competency that you need, and is it performance-based? You don't need 1,000 engineers. You need 50 or 100 experts, and rely on a systematic approach to risk management that is going to support expertise across the country.
Senator Massicotte: If I can get the pipeline association to comment on a technical point: Proposed section 48.12(12) basically says that proceedings for damages should occur within three years but in no case after six years from the date on which the release occurred. Pipelines cover a lot of territory. I can imagine a lot of farmers' fields that are vast. A leak could occur where it may not be noted within the six-year period.
Why the introduction of this new limitation? Usually, it's from the time of notice or the time damage was incurred. Why this limitation? I know the Quebec Farmers' Association is worried about that. Can you comment on that?
Ms. Kenny: I'm not familiar with the rationale behind that limitation. I think we would be supportive if the change was to point of recognition of that leak as opposed to commencement of that leak. I think that's probably the intent in any event. It's appropriate to have some limitations, but we would be comfortable with some adjustments to that to make sure that it's fully addressing the consequences.
Mr. Blakely: As a normal matter of law, your limitation period is determined by discoverability. It's at the point at which you knew or reasonably ought to have known that the damage took place.
The Chair: Thank you very much to all of you for your great presentations and some very good questions and answers. Thank you for taking time out of your busy lives. You have a good early start in Calgary this morning. Have a good rest of the day.
[Translation]
Senator Paul J. Massicotte (Deputy Chair) in the chair.
The Deputy Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. We are continuing our study of Bill C-46, An Act to amend the National Energy Board Act and the Canada Oil and Gas Operations Act.
[English]
We now welcome our next witnesses. By video conference from Calgary, we have Martin Olszynski.
[Translation]
Also present with us today, from the Union des producteurs agricoles, we have Martin Caron, Second Vice- president, Corporate, Stéphane Forest, Counsel, Legal Affairs Branch, and Isabelle Bouffard, Economic and Trade Coordinator, Agriculture Policy and Research Branch.
Thank you all for being with us today. We will start with Mr. Olszynski and then we will have time for questions.
[English]
Martin Olszynski, as an individual: Thank you very much, Mr. Chair and members of the committee. The focus of my presentation today is on what is referred to in some of the background documents from the government as the environmental damages provisions of Bill C-46. I will begin with a brief primer with respect to environmental damages, what they are and how they are assessed. I will then describe the role and treatment under Bill C-46. Finally, I make two recommendations for improving the bill. My notes and presentation today loosely follow the brief I submitted to the committee last week.
Most simply, environmental damages can be understood as the financial compensation awarded for the loss of some public environmental asset and the ecosystem services, such as clean water or flood mitigation, that it provided, for example, the negligent burning of a tract of forest that stores carbon. You might have degradation of a wet land that purified water and moderated extreme flows, or you might see the polluting of a coastal area, such as the Gulf of Mexico following the Deepwater Horizon blowout, that supports all manner of economic activity, including fisheries and tourism.
Resource economists divide such harms into the loss of two kinds of values: use value and non-use value. Use values are associated with the direct use of the environment, such as fishing and swimming in a lake, hiking in a forest, or commercial uses such as logging or farming. Non-use values are related to the knowledge of the continued existence of the environment or the need to leave environmental resources for future generations.
As the committee members might imagine, environmental damages assessment, or what I refer to throughout as EDA, can be a complex and difficult task. Various scientific disciplines, including ecology, toxicology and hydrology, are required to first determine the extent of the harm done, while economics and environmental valuation in particular are then used to convert this harm into monetary terms. Committee members should note, however, that direct environmental valuation is increasingly being done less frequently and, rather, environmental damages are being determined as the cost of restoring damaged environments and the services they provided.
Turning now to Bill C-46, there are two different roles for environmental damages. They play a role in sentencing for an offence, and they also have a role in civil liability.
As to sentencing, when an operator commits an offence under the National Energy Board Act, the new section 132 will direct a sentencing judge to consider the damage or risk of damage to the environment, which subsection 132(4) defines as including the loss of use and non-use values. Through this amendment, the NEB joins the ranks of about 10 other federal environmental laws with similar sentencing provisions since 2009. Although light on details, the wording is both simple and comprehensive.
The other environmental damages provisions, which are decidedly more opaque, are found in the context of civil liability. New subsection 48.12(1) refers to three heads of damage: (a) all actual loss or damage incurred by any person; (b) the cost and expenses incurred for clean up; and finally (c) all loss of non-use values relating to a public resource.
In other words, "environmental damages" is not actually referred to in this part of the bill, rather their availability, at least partially, is implied by the reference in subparagraph (c) to "all loss of non-use value relating to a public resource."
So use values are not specifically referred to, although as I will explain in a moment, some of these may be captured by subparagraph (a).
My first recommendation is that the third category of loss under the civil liability section be amended to refer simply to "environmental damages," for example, all environmental damages resulting from the release, et cetera, coupled with an additional subsection defining "environmental damages" as the loss of use and non-use values, as is found in the sentencing provisions. This would not only simplify the section but would also ensure its comprehensiveness.
As this committee is probably aware, most of the provisions that I'm talking about today were borrowed almost verbatim from Bill C-22, the Energy Safety and Security Act. That bill amended COGOA, the Canada Oil and Gas Operations Act, along similar lines. That legislation however already had a definition of actual loss or damage. On my reading of Bill C-46, this definition has not been brought over, and even if it were to be, I submit there would still be a significant gap. I can provide some examples after my presentation, if the committee is interested.
My second recommendation is that the Governor-in-Council should be required within a certain amount of time — or perhaps more realistically should be authorized — to make regulations setting out a process for EDA. Reliance on this process should result in a rebuttable presumption of validity in any action before a court or the Pipelines Claims Tribunal.
As noted above, EDA is a difficult and complex exercise. Regulations would bring certainty to all parties and reduce needless litigation. It is for these very reasons that the equivalent American legislation, the Comprehensive Environmental Response, Compensation and Liability Act and the Oil Pollution Act, contain such provisions and that processes have been prescribed for what in the U.S. is referred to as Natural Resource Damage Assessment or NRDA.
My second reason tracks the preventive spirit of the bill. As I mentioned, there are now roughly 10 federal laws with some kind of environmental damages provisions, and it has been 10 years since governments have been able to sue for such damages following a decision of the Supreme Court of Canada. Yet I am not aware of a single instance where the federal Crown has actually sought to recover such damages. Perhaps some future government witness could shed light on this issue, but whatever the case, this reality greatly undermines the deterrent effect that statutory liability regime's like C-46 are intended to create.
The development of regulations, which ideally would be made applicable to all of the federal EDA regimes that I have referred to, would go some way in remedying this. Those are my formal remarks.
[Translation]
Martin Caron, Second Vice-president, Corporate, Union des producteurs agricoles: The Union des producteurs agricoles wishes to thank the Standing Senate Committee on Energy, the Environment and Natural Resources for this opportunity to present some key aspects of Bill C-46.
I am the second vice-president of the Union des producteurs agricoles, but, more than anything else, I am a dairy, grain and forestry producer in the Louiseville region of La Mauricie. An oil pipeline, built in the 1980s, goes across my land.
We would like to remind you that the Union des producteurs agricoles represents 42,000 farmers in Quebec. Those farmers invested $717 million in Quebec's regional economy in 2013. We must also add that 35,000 forest producers harvest timber worth more than $250 million annually, generating $2.5 billion in revenue.
This bill makes substantial amendments to the National Energy Board Act and the Canada Oil and Gas Operations Act. In this brief, the Union des producteurs agricoles will focus on the proposed changes to the National Energy Board Act.
In recent years, several pipeline projects have been built in Quebec and others are planned. What these projects all have in common is that they affect agricultural and forestry businesses. Social acceptance is an unavoidable issue for pipeline companies. As a result, the views of individuals directly affected by such infrastructure should be carefully considered.
Our comments are divided into two parts. The first presents the amendments in the bill that are supported by the Union des producteurs agricoles. In the second, we will propose amendments.
I will continue with the new aspects of the bill that can be kept. In terms of company liability, the bill provides that, if an unintended or uncontrolled release of oil occurs, the companies will be liable for paying the first billion dollars in damages and will have to maintain the financial resources to cover this obligation. Furthermore, the bill provides that, if a release is due to a company's fault or negligence, the company will be liable for all damages, above and beyond the $1 billion. The UPA welcomes this new provision, and, I can also tell you that the UPA also applauds the board's new power to regulate an abandoned pipeline at the end of its life.
We now immediately move to the things we would like to see amended. The definition of ground disturbance in clause 2 is of great concern to agricultural and forest producers. A reading of paragraph (b) would suggest that any plant with a root system of a depth of greater than 45 cm could no longer be cultivated above a pipeline. Alfalfa has a strong taproot than can reach depths of over 6 m, with an average depth of two or three meters. The plant is cultivated in large areas of Quebec and in other Canadian provinces as feed for beef and dairy cattle and other ruminants. The proposed wording will therefore pose a major problem for agricultural producers where there really is no problem, since alfalfa has always been cultivated above pipelines. The UPA believes that this paragraph should be removed from the bill.
I am a farmer and we have been growing alfalfa since the 1980s, because we have a dairy herd.
Our principal request concerns paragraph (c) in clause 2 of the bill. The UPA does not understand why the depth of other activities — 30 centimetres — now appears in the bill. The UPA believes that the depth to which ground disturbance without leave is permitted should not be in either the act or the regulations, but should instead be determined by the board on a case-by-case basis at project approval, thereby recognizing the specifics of each region and each project.
Another aspect to be changed deals with liability related to operations. Section 48.12 is clear. In the event that an agricultural or forest producer's operations cause a pipeline rupture, the producer will be responsible for all loss or damage caused by this fault. The UPA believes that this new section conflicts with the current provisions of paragraph 86(2)(d), which states that the land acquisition agreement must specifically include a clause stating that the owner is indemnified from any action brought by the company except in the case of gross or intentional fault. However, this new section does not distinguish between the types of liability.
If there is now the added possibility of having to pay for damage caused by a pipeline leak, this unacceptably imposes more onerous obligations on agricultural and forest producers when a pipeline crosses their land. This will pose barriers to the acceptance of new pipeline projects. The UPA therefore recommends amending subsection 48.12(1) to provide an exception that precludes joint and several liability for the owner as set out in paragraph 86(2)(d).
Another aspect is the time required to obtain leave. Given that leave must now be obtained for agricultural operations within the easement or the safety zone, the UPA is calling for this additional time burden to be deemed compensable damages within the meaning of paragraph 86(2)(c) of the act. This will allow owners to recover damages for this additional workload and inconvenience, in the event that the ground disturbance depth permitted without leave is maintained at 30 cm.
As for the limitation period, the new subsection 48.12(12) causes some concern for the UPA, particularly in the case of an abandoned pipeline. If an agricultural producer discovered that an abandoned pipeline is broken and leaking contaminants, but that the break occurred several years earlier, the producer would have no recourse. The UPA believes that this subsection should be amended by adding the word "discovered". The section could read:
Proceedings in respect of claims under this section may be instituted within three years from the day on which the loss, damage or costs and expenses were discovered, but in no case after six years from the day on which the release was discovered.
In terms of financial obligations, under the new subsection 48.13(1), a company will be required to maintain financial resources totalling $1 billion. To ensure that the resources are readily available in the event of a spill, the UPA recommends limiting the number of financial tools available to companies for securing these amounts.
As well, the UPA would like to know the meaning of the word "company" in the new subsection 48.13(1). Is this the parent company, such as TransCanada, or one of its affiliates, such as Energy East Pipeline? If the word "company" refers to a subsidiary, then the UPA is fine with this. However, if it means "parent company," then this is clearly inadequate and will not protect agricultural and forest producers. The UPA calls on this aspect to be quickly clarified.
To conclude, on the subject of the timeframes for arbitration committees, the UPA finds that the timeframes for involving an arbitration committee is quite lengthy. In total, 30 months may pass from the time a notice of arbitration is served to the time the committee's decision is received. This could be shortened; the credibility of the process is at risk.
Thank you for your attention.
[English]
Senator Richard Neufeld (Chair) in the chair.
The Chair: Thank you very much, both of you, for your presentations. We will now go to questions, and the first questions will come from the deputy chair, Senator Massicotte.
Senator Massicotte: Maybe I will start with you, Mr. Olszynski, relative to your comment about how to improve the wording of the existing act related to environmental damages. Did you have a chance to hear the testimony of Mr. Labonté of Natural Resources when we asked him that specific question about why we did not stay with the broader words of environmental damages? Did you get a chance to hear his response?
Mr. Olszynski: Was that this morning?
Senator Massicotte: That was last Tuesday, I think it was.
Mr. Olszynski: No, I'm sorry, I didn't. I have been following the bill a bit, but I would be very interested to hear what his response was.
Senator Massicotte: I think there is a recording that is or will shortly be available. If you could take a look, I would appreciate it. His response was basically saying that we removed those kinds of words because that was the old way and we wanted to be coherent with the other acts and now chose this other wording, to answer your comment really, the second part of those paragraphs. Maybe you could take a look.
Mr. Olszynski: I will absolutely. I can follow up and take a look at what was suggested there. To be frank, I have a hard time understanding why you have these two different approaches, one under the sentencing provisions and one for civil liability. I think it's the same way that it's referred to and as mentioned in the backgrounders. The backgrounders speak about the availability of environmental damages. That's a plain-language way of saying what we are talking about here. I think when a person would come across this part of the act and see a reference to the loss of non-use values of a public resource, a lot of people would be left sort of scratching their heads. Certainly people who are familiar with the area will know what that means right away, but, as I said also, it's under-inclusive. There are about 10 statutes out there right now with sentencing provisions that say environmental damages or they simply say damages are available, but then they define them as use and non-use values. In the civil liability provisions here, all you have is a reference to non-use values. In my view, it would be very hard.
As I indicated in testimony before the house standing committee, I think part of the problem here might be that that wording was chosen because, in the context of ESSA, the Energy Safety and Security Act, there was already some reference or definition for actual losses, actual damage under CAGOA, and maybe the idea was that the two together would ensure comprehensiveness. But we don't have that same definition in the NEB Act. It wasn't brought over. It seems to me that it would make it much simpler and much more transparent to say these are environmental damages, and they include use and non-use values, recognizing most importantly I think that if there is a concern about anything, maybe it is double-counting or the idea that a certain head of damages might be counted twice. My response to that is that environmental damages will be limited to governments. Only governments can claim for these. In any case, whenever there is a private loss being suffered by a landowner or anyone else like that, those damages are separate. What we're talking about when we talk about use values and non-use values that are recoverable by the government are those kinds of public environmental values that no one else would be able to claim anyways.
[Translation]
Senator Massicotte: Mr. Caron, you make some very good comments. As for your concern about roots that go deeper than 30 cm, I don't think you were here, but we asked the Canadian Energy Pipeline Association about the reason, about whether it was something they had asked for. As for your other comments about clause 48.12, they are not aware of the request; they are flexible. So why this restriction of 30 cm for roots in the new bill? Is that something new?
Mr. Caron: I will ask Isabelle to answer.
Isabelle Bouffard, Economic and Trade Coordinator, Agriculture Policy and Research Branch, Union des producteurs agricoles: You are asking why this appears in the new bill. We do not know. I can tell you that it was a surprise, because the 30 cm referred to work of a general nature and it was something that was in the regulations. As for the requirement for 45 cm, I do not know where it came from, but, in our opinion, it is useless. You cannot grow anything you like on a pipeline right-of-way. We don't let trees grow. In the legal documents, the company stipulates some uses and non-uses for the easement. There cannot be any invasive plants that are going to rupture the pipeline.
That is a great concern for farmers, especially those who grow hay, because that is something that they have always grown on top of pipelines. We do not understand why that requirement was introduced at this stage. Perhaps they do not understand the root system of hay or alfalfa. That is the answer I can give you.
Mr. Caron: If I may, I told you that a pipeline passes through my land. It actually goes almost through the middle of my fields. I cannot imagine stopping growing alfalfa in order to leave a space and start again further on. It was laid in the 1980s and I have always grown alfalfa there with no problem.
Senator Massicotte: Your opinion about section 48.12 is very clear. It is true that the wording leads one to believe that, if a leak is discovered more than six years later, no recourse is possible. We recently received a legal opinion telling us that the Civil Code and common law indicate very clearly that the time is calculated from the time the damage as such was discovered. Is that your legal opinion?
Mr. Caron: I will let Mr. Forest answer that.
Stéphane Forest, Counsel, Legal Affairs Branch, Union des producteurs agricoles: There is certainly case law that determines when the limitation starts. This is a text of federal law that will take precedence over the usual provisions of the Civil Code in Quebec. An interpretation has to be issued, saying which of the two will apply, the usual determination of the start of the limitation or the hard law that will henceforth be set out in paragraph 12 of section 48.12. It creates a legal uncertainty that may result in the loss of a right; the addition of just one word, the observation of the damage, will mean that it covers only the time between the leak and the time the leak is noticed.
Forewarned is forearmed; often it is the farmers who are the victims of the unintended releases that this section refers to, because they are the ones with the pipelines on their land. That being the case, we do not want them to lose their rights because of a problem with the legal interpretation of this provision in federal legislation. This is about shared responsibility and the constitutional problems it may cause; it is also about enforcing the civil responsibility provisions that are usual in Quebec.
Senator Mitchell: Thank you very much for your presentation.
[English]
My question is to Mr. Olszynski. I'm quite interested in the line of questioning that Senator Massicotte pursued and his reference to Mr. Labonté's answer to what you've raised. I'm not convinced that Mr. Labonté actually got to exactly right. His point was that the wording is different because he thinks this bill needs to be brought up to date with the more current definitions; yet your point is that they didn't bring definitions over from Bill C-22.
Bill C-22 is not a very old bill; it's pretty current. It doesn't seem to wash that somehow the answer is that this new bill, Bill C-46, needs to be brought up to date if it is not being brought up to date with reference to Bill C-22.
Does that make any sense at all?
Mr. Olszynski: I understand your question. Both Bill C-22 and Bill C-46 represent a modernization of the spill liability provisions in the federal context. The key thing to understand is that before these two bills, COGOA had some spill liability provisions, but the National Energy Board Act did not. So when Bill C-22 was introduced, it was adding to and building on what were fairly outmoded and outdated provisions. Then that same architecture is applied here, but there is nothing to build off of.
It is perfectly understandable that there may have been an oversight in recognizing that you can't just tweak the National Energy Board Act in the same way you would tweak COGOA, because COGOA already had liability machinery in it.
As to the point — one that I make in my more formal brief — even if that weren't the case — so, my comments here refer to ESSA, as well. I don't understand why there would be this opaque reference simply to the non-use values of a public resource when what you would want is to be compensated for both use values and non-use values. To be clear, if you want to talk about most recent developments, non-use values are actually usually secondary; it's the use values that are usually the most important in terms of ensuring compensation.
If we think about the environment as a form of capital, and that along with human capital and all that kind of stuff gives rise to economic well-being, then the key is really to focus not on those more esoteric non-use values about how people feel about fish, whales or whatever but on the economic consequences of harming an environment that then degrades and impairs economic well-being.
Senator Mitchell: Thank you. I think it might have been in your comments but certainly it was in your longer written brief to us that either you're explicit or you imply that the hole that's left because of this failure of structuring the transition and definitions fully and properly could affect Aboriginal use rights, when you talk about hunting, fishing and others — not necessarily completely Aboriginal uses but certainly Aboriginal rights — that are provided for more explicitly in other legislation.
Mr. Olszynski: That's absolutely the case. Those are examples of use values. These are direct uses — fishing, harvesting, all those things — and are still captured, because they were previously referred to in COGOA. They were caught by the definition of actual use; they were referred to in the definition of "actual loss or damage." This is subsection 24(3) in COGOA:
. . . includes loss of income, including future income, and, with respect to any aboriginal peoples of Canada, includes loss of hunting, fishing and gathering opportunities.
To my reading — unless someone else is able to tell me where it is — I don't see that provision in the amendments to the National Energy Board Act. Therefore, those use values for Aboriginal peoples, and any Canadian who would be relying on engaging with fisheries, eco-tourism or any other kind of use of environment that generates economic activity — I don't see how those losses would be captured in this bill.
Senator Mitchell: Okay. Thank you. My next question would be to Mr. Caron.
[Translation]
Mr. Caron, I have a question about the compensation for the use of your land by pipeline companies. In the conversations you are having about this bill, is there any indication that you will be receiving financial compensation for this new use of your land?
[English]
I'm referring to the regulations concerning the depth of the roots. Is it possible that you will get compensation from pipeline companies that you haven't received because you have been able to farm over those pipelines before?
Mr. Caron: I will start with Mr. Forest and then I will complete the answer.
[Translation]
Mr. Forest: Yes, right now, in section 86, the legislation provides for the obligation of pipeline companies to compensate for all damages. The real problem with the alfalfa and the leave is the need to have to constantly call the pipeline company to tell them that we are going to plant alfalfa and that we are going to do subsoil work to a depth of 30 centimetres below the surface of the ground. For the older people in our midst, that is a few inches. In the past, we had greater leeway before we had to call the pipeline company. Imagine the number of times we will have to obtain leave, to chase around getting leave, while the current legislation requires none of that. It is the bill, through the NEB order, that determines that, or the agreements we sign under clause 86.
Ms. Bouffard: I can add to that. We need our land so that we can work. Farmers need land so that they can work. If they grow hay, it is so that they can feed their cattle. If I cannot grow hay, I have to buy it. Yes, the companies will provide compensation, but the problem remains. As a matter of social acceptability, it is becoming a huge issue in terms of pipeline construction and the relationships with the people whom the problems directly affect. Something like this could cause friction. We have always grown our crops. This is something that has to be removed. It is not enough to say that we will be compensated. The problem will then still be finding someone who wants to sell hay. It could get very complicated. We use the land, we are careful, but it is the work we do. The issue is not as simple as it seems; it is more complicated.
Senator Ringuette: Clearly, in Quebec, like in New Brunswick, the temperature is not like Texas. So I assume that, when it comes to burying the pipelines, the freeze factor has to be considered and they have to be buried at least six feet deep, unlike those that are above ground. Like you, I do not see the logic in asking you for a depth of 30 centimeters. From a technical standpoint, the people who drafted this bill have to go back to the drawing board.
I have two questions for you. I come from New Brunswick. Given the interest shown by a lot of people in the industry and in the public at large for building pipelines to the east and given that it will likely need the participation of a large number of your members — I know the country — have you been consulted about the bill? Not just in the sense of technical legal points, but in order to make your future participation in the project to the east richer? Have you been consulted?
Mr. Caron: The first answer that comes to mind is no, we have not been consulted.
Senator Ringuette: You have not been consulted. So if you put forward arguments later, people will point fingers at you and say that Quebec farmers are bad! Great.
The second point you raise deals with the financial obligations and the new responsibilities in the event of an incident caused by one of your members on his or her land. Have you looked at the costs of this new requirement in terms of liability insurance?
Ms. Bouffard: I can tell you that we have not looked at that in the light of paragraph 48.12(1). We would have to see, but it could be the case that eventually we would see our insurance costs increased. Am I wrong in saying that?
Mr. Forest: With insurance, there is the concept of insurability.
Senator Ringuette: And of risk.
Mr. Forest: And of risk. Each risk comes with a cost, and the wording of the new section now puts us at risk for all kinds of fault in Quebec civil law, from simple fault to intentional fault. So it is natural that, when insurers see this new risk, it will occur to them to increase our premiums. It could not work the other way around, because the risk is increasing. We have not assessed the costs, because we do not know how things will play out, but we are facing additional liability if the section is not amended. So there will be financial consequences for each farm that has to be insured.
Senator Ringuette: I hope that my colleagues around the table have genuinely understood the issues and your requests for clarifications and amendments to the bill, not only in terms of financial and production costs — which are nuts, in my view — but also in terms of the participatory process that will be necessary if we want to establish a viable and effective industry. Thank you for being here and I hope that the people from the department are listening.
[English]
Senator Patterson: Mr. Olszynski, with respect to the presentation you made on the environmental damages issue, you said that you could provide some examples of what a gap might be. Could you elaborate with some examples, please?
Mr. Olszynski: Yes. Thank you very much for the question. If I have not yet said, I appreciate very much appearing before the committee, and I appreciate the questions that have been asked. It's clear that you folks are giving this a lot of considered attention, and I do appreciate that very much.
On page 4 of my formal brief, I get into this in the second paragraph. An example would be wetlands. We're talking about farmers' fields today, so it's very appropriate. If there is a pipeline spill, obviously there will be damage to farmers' fields, and they will seek compensation. The bill would provide for any losses of income they would incur. Suppose there was an important wetland connected to a river system that, in the end, provided water for a municipality, for instance. It wouldn't necessarily show up on any formal or conventional economic ledger that there was a loss incurred there, but there was in fact. Wetlands provide services. They purify water and regulate flows. If such values or services were degraded as a result of a spill, on my reading of the bill as it currently stands, for those use values which are not captured in the private economic ledger of landowners, et cetera, you would not be able to seek compensation for them under this bill.
To give a sense of how important those things can be, in the state of New York a few years ago, after the EPA had increased water quality guidelines, the state was faced with a choice. Essentially, it thought it would have to build a new facility for $5 billion. Instead, someone did some creative work and recognized that the Catskill watershed that provided New York with its waters — even if there was a development of one fifth of that cost in terms of restoring wetlands and all that kind of stuff — that natural water factory did all the work at one fifth of the cost that a built infrastructure plant would. You can clearly see the benefits there for society and for communities, but these are not often caught in conventional economic accounting.
In my view, that's the gap that's currently existing in this bill, and it should be rectified.
Senator Patterson: Thank you.
Senator MacDonald: Mr. Caron, I have to confess this is the first time that I recall this being brought up. I do find it somewhat intriguing. I know that farmers are pretty practical people; they want to get things done practically. Have you discussed this with other agricultural organizations across the country? Has consensus been built on this across the country, because the proposed pipelines will go across the country?
Mr. Caron: That is a good question. Ms. Bouffard will start, and I will complete.
[Translation]
Ms. Bouffard: Just so that I am sure — you are talking about the bill. Have other farmers' organizations in Canada examined the bill? Was that your question?
[English]
Senator MacDonald: No, I'm talking about what you raised about the depth in growing over the pipelines.
[Translation]
Ms. Bouffard: For the plants and everything?
[English]
Senator MacDonald: Yes.
[Translation]
Ms. Bouffard: We are members of the Canadian Federation of Agriculture. Each province is represented and it has a pipeline committee. This aspect has been discussed. I cannot speak for them because I am not their representative, but when this kind of thing happens, it puts obstacles in the way and all farmers across Canada reflexively wonder why they are coming up now when they had not come up before. If you consulted farmers in other provinces, you would hear the same tune. When we discussed this at the committee — as I said, I do not represent the CFA — members did see it as a problem.
Mr. Caron: I would like to finish that answer, perhaps at the risk of repetition. The pipeline goes through my place and I have been growing alfalfa for a number of years. We are talking about 30 cm when cultivating. On occasion, we go deeper, and I have never had a problem using a subsoiler a little deeper on my land. Sometimes, you have to or you cause problems with the environment, with erosion or compaction of the soil. I am a farmer and the soil is my main tool that allows me to produce and make a living. I have to be able to use it, and that is the bottom line here.
Senator Massicotte: I have a technical question, even though perhaps the point was brought up at the start. I agree with paragraph 48.12(1), which is very broad, in defining the conditions under which you are held liable. I understand your concern with it because there may be new liability as a result.
However, when I read your comments about paragraph 86(2)(d), which stipulates that, when a pipeline company acquires your land, the agreement must clearly state that you are not responsible except in the case of gross fault, and so on. It would have been clearer if the word "notwithstanding" had been included in section 48: that is, notwithstanding it, section 86 applies. I feel that a pipeline company has no choice but to comply when there is an acquisition agreement. If the acquisition agreement stipulates clearly that you are not held liable for the damages, my assumption is that that would take on more significance than section 48. I know that it would have been better to include the word "notwithstanding," but it is highly likely that you are protected anyway. We might have hoped for more clarity. From a legal point of view, Mr. Forest, do you agree?
Mr. Forest: What you are saying is very interesting, because we have had that conversation. When you examine the contractual guarantee that a pipeline company must give under paragraph 86(2)(d), you could in fact come to your conclusion. You do so yourself by pointing out that the word "notwithstanding" is missing, establishing a link with the other section. Situations could happen where the unintentional release would be caused by the pipeline company and there would be a distinction between the provision in the contact — the one that "protects" us, in quotation marks — and the section in the bill that has just been passed, which is much broader, because it covers all faults. In this day and age in Canada, in terms of the social responsibility of pipelines, do we have to go through this legal problem that can be solved simply by changing a few words? You suggested a way of solving the problem when you asked your question.
[English]
The Chair: Thank you. That ends our questions. I want to thank both groups for their presentations. They were very good, as were the questions and the answers. Thank you for your time, and we will now adjourn.
(The committee adjourned).