Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 2 - Evidence, April 12, 2016
OTTAWA, Tuesday, April 12, 2016
The Standing Senate Committee on Transport and Communications met this day at 9:30 a.m. to study the development of a strategy to facilitate the transport of crude oil to Eastern Canadian refineries and to ports on the East and West Coasts of Canada.
Senator Dennis Dawson (Chair) in the chair.
The Chair: Today the committee is beginning a review for the development of a strategy to facilitate the transport of crude oil to Eastern Canadian refineries and to ports on the East and West Coasts of Canada. Pipelines have been by far the main mode used for exporting crude oil. In the last few years, those exports by pipeline increased significantly, with rail also on the rise.
[Translation]
One of the objectives of our public meetings is to determine the best way to apportion risks and benefits throughout Canada.
[English]
Today we have two witnesses before us: Sean Speer, Senior Fellow at the Macdonald-Laurier Institute; and Mike Cleland, a former president of the Canadian Gas Association. Both individuals have recently published papers on this topic, and we are pleased to have them present their findings.
Mr. Speer, let's begin with you.
Sean Speer, Senior Fellow, Macdonald-Laurier Institute: Thank you, honourable senators, for inviting me to participate in today's meeting. I congratulate you for choosing this study and the willingness to set out an ambitious scope of inquiry. These are complicated, multifaceted issues, as you well know.
Thinking about resource development and the construction of pipelines covers topics as diverse as macro- economics, fiscal policy, federalism, environmental regulation, transportation infrastructure and the role of indigenous people. A study that sought to isolate one of these considerations at the expense of others would be incomplete and in turn have limited utility. This isn't a subject susceptible to simplistic solutions. It matters. It matters for the Canadian economy. It matters for Canada's public finances. It matters for millions of Canadians who work in the natural resource sector, and it matters for indigenous communities who see resource development as a game-changing opportunity.
So I commend the committee and its members for recognizing the need to think big about the myriad of public policy considerations that underpin resource development in general, the strategy to facilitate the transport of crude oil to Eastern Canadian refineries and to ports on the East and West Coasts in particular.
I'm sensitive about budgeting my speaking time today. I know you'll hear from several distinguished policy commentators and other stakeholders over the course of your study, so I propose to focus the rest of my comments on the potential that resource development offers to indigenous communities and the progress that is occurring to develop economic partnerships with resource companies.
If I could change one misperception in Canada, it would be that indigenous communities are hostile to resource development as a matter of principle and that companies are dismissive, contemptuous or neglectful of indigenous considerations. Yes, there have been historic problems. Of course one can find indigenous communities that oppose resource development and resource firms that have failed to properly engage and consult affected communities.
The unheralded story of the past several years is — as the news media has focused on confrontation, and governments have struggled to produce policy solution — something extraordinary is happening. Indigenous communities and resource companies have, through a bottom-up process of experimentation and cooperation, begun to develop economic partnerships.
There are plenty of recent examples. Suncor Energy reached an agreement with Aamjiwnaang First Nation in July 2015 on a 25 per cent equity stake in a wind project. First Nation equity partners in the prospective Northern Gateway project are now amongst its most powerful proponents.
A new joint venture between Encanto, a Vancouver-based company, and Muskowekwan First Nation in Saskatchewan will develop the first on-reserve potash mine in Canada that will generate 2.8 million tonnes of potash annually and create approximately 100,000 jobs. These are some examples of the types of partnerships we are witnessing across the country. Most Canadians simply aren't hearing about them.
Resource development is already a major source of direct and indirect employment for indigenous communities, but that only begins to scratch the surface for the potential benefits. It can be the centerpiece, as we have written extensively at the Macdonald-Laurier Institute, of an indigenous economic development and long-term self-sufficiency strategy.
There are now more than 300 impact and benefit agreements between Aboriginal communities and mining companies alone. These deals are producing win-win solutions for the communities and the developers. Consider that First Nations, Inuit and Metis communities now have more than 250 Aboriginal economic development organizations with several billions in assets. These entities will be among Canada's largest corporations within several years, yet we infrequently hear about them in the media or our newspapers.
Own-source revenues, monies that don't come from the federal government but from community-based economic activity, compose a growing share of First Nation's budgets. In 2013-14, First Nations communities recorded $3.3 billion in non-governmental revenues. To put that in perspective, that's more than the own-source revenues for Prince Edward Island, Northwest Territories, the Yukon and Nunavut combined. There is every reason to believe this is just the beginning.
Natural Resources Canada has identified prospective investment of $675 billion worth of resource projects across the country over the next decade. Every single one of these projects is located on or near traditional indigenous territories.
Economic partnerships with these communities, therefore, are not optional. It's the only way to unlock the economic benefits of Canada's rich natural resource endowment. It also has the potential to be transformative for the affected indigenous communities.
The question then for policymakers, for senators, is how to create the conditions for this bottom-up experimentation and cooperation, not only to continue, but to scale up and lead to more economic partnerships across the country.
The first is the Hippocratic oath to do no harm. Public policy should not become an obstacle to the slow and steady progress between indigenous communities and resource development.
The second is to consider options to facilitate these partnerships. Ottawa should play an enabling role rather than a micromanager. This includes establishing a national framework for revenue resource-sharing agreements, helping indigenous communities acquire equity stakes and resource projects and authorizing greater local decision making with respect to land management. These are the types of enabling measures that should be part of an overall strategy to the transport of crude oil to the Eastern Canadian refineries and to the ports on Canada's East and West Coasts.
There is a pessimistic strain in most commentary about the interaction between resource development and indigenous communities. I don't share it. First Nations do not want short-term deals. They want lasting benefits. Energy projects can and should be the foundation for a new Canadian partnership and the first real prosperity sharing in Canada's history.
Honourable senators, something exciting is happening. I hope that your study, as it covers a range of issues related to the development of Canada's natural resources and the construction of energy infrastructure, tells this powerful story and puts forward recommendations to realize further progress. Thank you very much.
Mike Cleland, Senior Fellow, Institute for Science, Society and Policy, University of Ottawa, as an individual: Thank you very much, Mr. Chairman, and thank you to your colleagues for inviting me to appear. I appreciate it.
I want to echo my colleague's point made at the outset and congratulate you for taking on this important and timely study. There is a lot that we're going to need to do over the next few years to get confidence back in our decision systems, and you can make an important contribution.
As it turns out, my colleagues and I at the University of Ottawa and the Canada West Foundation have just released an interim report on a study we are undertaking looking at community confidence in the energy decision and regulatory system. There is a deck that you have copies of. I'll be referring to that as I go through my remarks. I'll be mindful of the fact that we want to get on to discussion.
The research team is identified on Page 2: University of Ottawa's Positive Energy project and the Canada West Foundation's Centre for Natural Resources Policy. We have been working together now for about eight months on this project. We still have a ways to go, and I'll tell you where we stand.
On the next page, we have tried to understand the world in terms of four sets of actors that affect the development of energy and resources: public authorities, project proponents, local communities and civil society and non- governmental organizations.
Turning to page 4, this study or project looks specifically at the world of energy decisions — in other words, energy decisions by public authorities — through the eyes of local communities. To this date we have done an extensive review of the academic literature as well as interviews with a number of senior leaders across the spectrum and across Canada.
The next stage will involve a series of case studies. At the end of this deck we've listed the case studies. Those are now under way, and we anticipate they will provide us with interesting insights into what this is all about.
On the next page, "Understanding Communities,'' a few basic concepts emerge both from the literature and from the interviews we have undertaken. The foundational concept concerns fairness. The report we just issued is entitled Fair Enough, echoing the notion of what is fair enough to meet the needs of Canadians and to make them feel confident that the decision processes are reasonable. That is both substantive and procedural. I think that is important to keep in mind. How do perceptions of fairness influence, in turn, trust and confidence?
We think four basic propositions are important. One is context: what is the community all about? Is it a community that knows about energy and resource development? Is it familiar with it? Is it a community with lots of job opportunities or few? All of that is absolutely vital to understanding how a community is going to deal with this.
The next one is what are the values, interests and attitudes in those communities? How does the resource or energy decision process respond to that? What is negotiable and what is not? What is needed to make the community feel that this project is in their interests?
Regarding information and capacity, it is absolutely vital to have the information available. There is more that public policy can do in that regard. Capacity is equally important. How does the local community deal with that information?
Finally, are there opportunities for engagement and participation? There is a bit of a model there as to what might make the decision process work better.
The next page talks about the decision making system itself. We use the term "policy regulatory complex'' here. It isn't just about the NEB or about any one regulator or a bunch of regulators. It is about the policy system that sets the tone and the conditions under which regulators make their decisions. It's multijurisdictional, and there are a lot of different institutions involved. Sometimes they work well together and sometimes not. Sometimes they do their job extremely well — most of the time, in fact — but occasionally the ball is dropped. Sometimes they duplicate, overlap or contradict. Inevitably it confuses the public. I don't know that there is an easy solution to that. That is part of the complexity of modern life.
Let me take you through our tentative conclusions. On page 7, people talk about the system being broken and that the NEB is broken. Well, it's not, at least not on the evidence. There are a lot of decisions that are made without undue cost and controversy. I note Sean's earlier comments about how effective the interactions are among project proponents in local communities. That is often mirrored in the way public authorities deal with these things. People are not standing still. They are learning. They are finding new ways of doing this, but there is work still to be done to meet those four notions I talked about earlier.
Next is also a tentative conclusion but probably the most important: Unresolved policy issues are standing in the way of most of this. The biggest one is with respect to climate change and, more generally, with respect to how indigenous Canadians benefit from and participate in the development of our resources. That is unresolved policy, both in substance and in procedure. Reforming the regulatory system is a necessary but far from sufficient condition for improving the way we make these decisions.
The next conclusion goes to the procedural point from the previous slide. There is a lack of adequate forums for community engagement and a lack of adequate and accessible information. A lot of the frustration that we see through the regulatory process plays out as a consequence of the lack of those forums and information upstream of the regulatory process. Again, it's at the policy end of things that we have to get at this.
Next is conclusion 4 on page 10. Again, it's part of life. The system is not well understood. It's not well understood by a lot of active participants in the debate. That's something we need to do some work on. There is indeed a need for rebuilding, including understanding the different institutional actors as to their appropriate roles. What is the role of regulators? What is the role of policy-makers? When do they interact? How do they interact? What do we do to restore public confidence that the regulatory processes where they are supposed to be independent truly are?
As I mentioned, a lot of progress has been made, but we are a long way from a real state of public trust and confidence. More needs to be done, including better understanding of the system, and none of this is going to come for free. It's going to require some public investment in order to make this come together.
Finally, communities themselves have work to do if they are going to participate and be effective contributors to the decision processes. They will have to invest in their own capacity to understand, engage and act in the public interest. More of them are probably going to have to learn to understand where, at some point, a higher level of government, if you will, needs to make the decision. At some point, in the national interest or provincial interest, as the case may be, it is time for individual communities, having had their say, to stand down. That's tough politically, but it's not going to work unless we can get back to an understanding of the way that the Canadian Confederation works.
I don't need to go through our next steps except to say that we have these six case studies now under way. We can talk about those, if you wish. We hope to have a final report out by late summer. Thank you, Mr. Chairman.
The Chair: Thank you. As our first witnesses, you have raised the bar. The following witnesses will have to live up to the quality of your presentation. I want to thank you for the great presentations.
Senator Black: May I start off by commending and thanking both of you and your organizations for the work not only that you have done today but also that you have done over the last number of years. Having worked closely with you, Mr. Cleland, for 10 years now, and with the McDonald-Laurier organization for the last three or four, I'm appreciative that you continue to offer thoughtful contributions on issues of national importance, particularly on the energy file. I wanted to start by thanking you very much.
As a senator from Alberta I approach this issue with a sense of urgency. Keeping that in mind, Mr. Cleland, and given the thoughtful presentation that you have provided, do you believe that the current proposals, system, process, which have been established by the Government of Canada to look at what — and one would hope approve — Energy East and Trans Mountain, meet your intended goals?
Mr. Cleland: I think it probably comes closer to the mark than most people think. I work pretty closely with colleagues at the National Energy Board and with the federal government. I know some of the reforms that they have undertaken. In fact, the system does a lot of what people wish it would.
I go back to the point regarding the controversy over those terms and, more than anything else, the fact that we have completely failed to resolve Canada's policy on climate change. Also, there is a set of objectives out there — not formal or official yet, but certainly floating around — that is very difficult to resolve in the face of growth in emissions from oil and gas. The Alberta government has clearly come out with a statement that gives some headroom for growth in oil and gas, but then what do you do? How do you get to -30 per cent by 2030 when you're doing that?
I think we need to be more realistic about what is actually achievable. Given that, not everyone will be happy with it. I think most Canadians would recognize that that's the reality of Canada. Given that, I think we could develop the necessary levels of public support.
Senator Black: Thank you very much. I have one question for Mr. Speer.
Mr. Speer, I was fascinated by your tremendous commentary in respect of the challenges but, more importantly, your proposed solution to resolve the issues involving First Nations in Canada on energy projects. Do you mind summarizing again quickly what you believe the solution is to this conundrum?
Mr. Speer: Yes, of course.
Before I directly address your question, with respect to your question to my colleague, the only thing I would say in addition is that the regulatory process is not the vehicle to address some of these broader issues. The regulatory process starts with the presumption that, all things being equal, resource development is positive. It's a desirable outcome.
For the past several years, because of an absence of other vehicles to have a policy debate about things like climate change and the involvement of indigenous communities, to even more fundamental questions about the desirability or utility of resource development, it has become the regulatory process that has served as the vehicle for those debates to play out. It is ill-equipped for those types of discussions.
Again, it starts from the premise that, all things being equal, resource development is in the national interest, and the process isn't confronting fundamental questions. It's confronting practical, technical questions about how to construct pipelines, design them safely and all the rest. Where I completely agree with my colleague is that some of these other issues that have become part of the policy debate need to be addressed on their own merits, outside the scope of the NEB, because otherwise it's just a recipe for delay and inaction.
With respect to the involvement of indigenous communities, no doubt there will be people who come here and tell you that the situation is hopeless, that it is all about confrontation and that there is very little progress being made. I think that provides an incomplete picture of what is actually happening on the ground. The role of public policy now, I believe, is to help move this progress along: progress that is happening at the local community level and not driven by Ottawa.
The first order of business is not to heap on new obstacles or barriers. The government, as you know, is talking about how to operationalize the concept of free, prior and informed consent, which was set out in the United Nations Declaration on the Rights of Indigenous Peoples. There are real questions about how that can be codified in Canadian policy without causing a new obstacle or barrier to progress. It is not to diminish or dismiss the intent behind that, but the government is going to have to think seriously about how to fulfil that promise without creating a new barrier.
In terms of practical things the government can do, there are real exciting things happening, senator, in your own province and in parts of British Columbia, on the question of equity. First Nations or indigenous communities are acquiring equity stakes in resource projects.
It has two benefits. The first is the economic benefits that will be derived for those communities. The second thing, of course, is it satisfies any reasonable expectation around duty to consult if the First Nations community is an economic partner in the project. Presumably, by definition, they have been consulted to any legal satisfaction.
I think there are real questions about the role the federal government can play, for instance, in helping those communities obtain the capital to purchase or acquire equity stakes. It can be through things like loan guarantees, which is increasingly a popular proposal here in Ottawa, and even direct capital infusions. I think if we're committed to getting these projects moving and ensuring that indigenous communities are real partners — not just obstacles along the way that need to be bought off — then helping them become real partners through an equity stake is something that Ottawa can and should consider doing.
Senator Black: Thank you very much.
Senator Unger: Thank you, gentlemen, for your very interesting and enlightening presentations. I'm from Edmonton, and I feel a glimmer of hope after listening to you both.
My question concerns critics of oil development. Should they be included in our witness list? For example, there may be critics who might appear before this committee and then go out and hold a press conference before we ever have a chance to do the study that we want to. I think of Alberta and the split that appears to have just happened from the convention. Will it hurt or help this committee's understanding of these issues of obtaining social licence? Right now, social licence seems to be a huge barrier. What other barriers might there be out there?
Mr. Speer: Thank you for your question, senator. I think on the question of social licence, my colleague's discussion about public trust and confidence in the regulatory process is a legitimate one. I draw distinction between those Canadians who need assurance that we have a transparent, robust system — and that's the work I think that Michael is talking about — and other Canadians who are opposed to resource development for ideological reasons. Those are the types of folks who probably can't be persuaded, irrespective of what policy changes the government makes. I would draw that distinction.
I hope that policy-makers are drawing that distinction as well.
The is one thing I would say about critics of resource development that I have never frankly fully understood, particularly those who are committed to the idea of reducing greenhouse gases emissions globally. Canada, as you know, has a wide array of natural resources ranging from crude to natural gas to renewables, et cetera. I have never understood why climate change supporters don't see that one of Canada's contributions to the question of global climate change is actually exporting our relatively clean resources to countries that, at present, are relying on dirtier energy sources.
I'm thinking particularly of China which, as you know, is now the largest emitter of carbon and relies disproportionately on coal. Canada's real contribution to global climate change isn't simply shutting down resource development here in Canada. It would have a marginal — basically indiscernible — impact on global emissions. A real, meaningful contribution would be exporting our relatively clean energy or resources to countries like China and helping them transition away from dirtier sources.
To the extent that you're engaging witnesses who have expressed opposition to resource development largely on environmental grounds, I think asking them questions about why they don't place Canada's resource sector in a broader global context would be an interesting exchange.
Mr. Cleland: Senator, if I may just add to that briefly on the social licence point — a term I don't particularly like. As you think your way through this, there are a couple of things to think about. First, this applies much more broadly than to pipelines. As you'll see in our study, we are looking at all sorts of energy development.
The question then is: what is it that makes people oppose some power lines, a gas-fired power plant or a wind power plant? That can't always just be about climate change, and it can't always just be about whether indigenous communities are being well looked after or not. Understanding what lies behind that at the local level is extremely important, and the extent to which it's about local impact, local benefit, local cost and local risk affects things. If we can parse that a bit, I think we will get a better sense of what the real and underlying issues are.
To your point about who you should invite, it's a very good question. I think you have to be open. I think you have to be prepared to have critics here and, in fact, welcome them, because that's part of the game and part of the conversation. The risk of being reasonable is that unreasonable people won't be reasonable back. I think perhaps Premier Notley is finding that this week. Indeed, that is true.
Lucien Bouchard might have characterized their climate change policy as a beau risque. It was the step to get people engaged and realizing that Alberta now, with a climate change policy as aggressive as almost any other in the world, is still not doing enough. That's tough, but I think you still need to have people and hear them out. If they act in the way you've described, so be it; they will do it anyway.
Senator Unger: It seems that the waters have been so muddied now, to come into the middle of it. I am so thankful for this study because of that, and maybe some good will come of it. Thank you both very much.
[Translation]
Senator Boisvenu: I thank our two witnesses for their very instructive presentations.
I will continue in the same vein as Senator Unger. The TransCanada Energy East Pipeline project is being debated very widely in Quebec. The debate is marked by a type of cleavage among various small factions and even among certain governments in Canada. The position of the Government of Quebec on the use of petroleum products seems a bit unrealistic to me.
Mr. Speer, in one of your presentations or documents, you mentioned that the federal government should promote things at the national level rather than being a simple observer when it comes to the exploitation of raw materials. We can see that there is an interrelationship between the provincial governments and the federal government, both for the use and transportation of these raw materials. How could the federal government play a role as promoter, while the Government of Quebec is practically doing the opposite? Quebec is not using the resources on its territory, and shows a certain reluctance with regard to the transportation of western resources toward the provinces, or offshore. How do you see the role of the federal government in such a high-risk context?
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Mr. Speer: You are correct, sir, to say that I have written in the past about the federal government becoming a champion for projects, but with one critical caveat. After a project goes through a regulatory process and is approved, I think there is a notice on the federal government to champion that project, if for no other reason than to send a signal to Canadians that they ought to have confidence and trust in the process.
It seems counterintuitive for the federal government to oversee the policy construction of a regulatory process, allow the project to go through the process, ultimately approve it because, as you know, it is the federal cabinet that is responsible for approving projects, and it only stands to reason that, after all is said and done, the federal government ought to champion the project. If it doesn't, it risks bringing into question the entire process. If it won't stand behind a decision it has taken, based on a process for which it is responsible, that would contribute to the issues around trust and confidence that my colleague has talked about. I don't think it is appropriate for politicians, generally speaking, to champion a project before it has gone through that process. That would risk diminishing the same issues around trust and confidence.
If we are to establish trust and confidence we need to advance these projects, governments will have to — at the risk of speaking in political terms — expend some capital. After a project has satisfied the regulatory process, it seems to me that it ought to become a promotor or a champion.
I understand that one of the consequences would be the risk of jurisdictional friction, and I don't diminish that risk at all. However, as you know, it is the federal government that is responsible for the process and, in turn, has the responsibility for decision making.
Mr. Cleland: I couldn't have said it better than my colleague. This may seem a little old-fashioned, but I think all of us should go back and re-read Canada's 1867 Constitution and think about not only the division of powers as set out, but also in what I like to think of as a guarantee of a common market in Canada and the free passage of goods from one province to another. We seem to have lost sight of that, as well as by several premiers and mayors who think that section 121 is no longer operative. Whatever happened to the bargain of Canadian Confederation?
Senator Mercer: Thank you very much for being here. I did want to take some exception to Senator Black's initial intervention where he talked about this being an urgent matter for Alberta. It's an urgent matter for Canadians. Sometimes it gets boiled down to being an Alberta, Saskatchewan or Newfoundland and Labrador issue. It is not. It is an important issue that we all share.
One of the things I noticed that neither one of you mentioned when you talked about the process particularly with First Nations, you didn't talk about the practical terms that politicians and Canadians really understand — jobs. That is, how many jobs would be created in building a pipeline going east, how many jobs would be created when the oil gets there, the sustainability of that over a long period of time and the effect that has in the short term of building the pipeline.
Also, it would have a tremendous effect on the economy if, indeed, the end port is St. John's, Newfoundland. I am from Nova Scotia. We don't accept that it will end in St. John's. We like to take people to the Strait of Canso and show them the facilities that are already in place, however that is another argument. We need to start talking about the jobs that will be in place for a number of years that will help grow the economy in a region that desperately needs a boost.
Perhaps you could both make a comment on the job situation. As someone just said, the need for a free market between Canadian provinces is displayed on the front page of papers across the country when we talk about this issue. We have the Premier of Quebec and the Mayor of Montreal opposed, and no one is thinking about the common good. The common good is not just what is good for Montreal or the objections that may be heard in certain parts of rural Quebec, New Brunswick or Ontario. It is important that we look at the overall good of the nation, not just Alberta, Saskatchewan or Newfoundland and Labrador.
Mr. Speer: I specifically agree with respect to your comments about internal trade. I would encourage the committee to work with your colleagues on the Standing Senate Committee on Banking, Trade and Commerce which, as you know, is undertaking a study right now.
I had the good fortune of attending a meeting a couple of weeks ago with my colleague Brian Lee Crowley, and the questions that you are confronting and the question of interprovincial trade are inextricable. They need to be considered in concert. I know that the committee is doing wonderful work, and I hope it helps to inform the work you are doing.
The honourable senator is right: The employment impacts of resource development shouldn't be understated. I didn't seek to diminish them, sir. I apologize if it appeared that I had.
My only point with respect to First Nations communities and their participation is that the type of partnerships that we are witnessing across the country is more than just jobs. In many ways, that is the most exciting part. Yes, indeed, these communities are becoming open to employment opportunities that previously weren't available. With that comes all of the economic and social benefits that stem from employment, but there is also the economic self-sufficiency and the governance consequences of resource development.
I talked a bit about these communities becoming more and more responsible for their finances because of own- source revenue stemming from resource development partnerships. That is an exciting thing. As I said, I don't understand this tendency, in the news media and in other places, to talk down the progress being made. Of course it's imperfect. However, addressing this issue of resource development and the participation of indigenous people must be done.
I hope, if anything, the committee's eventual report looks at this optimistically and at what is being accomplished with respect to employment and broader economic benefits, and starts from the premise that good things are happening. The question is how we build on those rather than looking at it the other way, which is that we are in a crisis, businesses are failing to properly engage communities, communities are obstinate and there is no hope.
Mr. Cleland: To add a couple of things, first, I welcome your comment related to thinking about the national interest, obviously, from my previous comments. I would be delighted if, among other things, your report emphasized that point. It is getting lost.
Some of you may recall a prime minister with a familiar name some years back who said something along the lines of, "Who speaks for Canada?'' These days there aren't many people speaking for Canada. There are a lot of people speaking for provinces, cities and local communities, but where is the big picture? Thank you for that.
With respect to jobs, I have a couple of observations. "Jobs'' is sometimes a tough one to make the case with, especially when you are dealing with skeptics because they won't believe you. One of the things that characterizes the energy industry in general is, for all that it is a huge part of capital investment and exports and an important part of our gross domestic product as a consequence, the jobs are extremely high productivity and the number of jobs is actually relatively small. They found that out, for example, in the debate about Keystone in the U.S., because the actual number of jobs involved was relatively modest. We have to be careful about overstating the jobs argument. It needs good analysis to underpin it.
I can't resist saying that in one of my incarnations I am chair of the board of the Canadian Energy Research Institute. CERI does a lot of work along these lines, including a recent report looking at what would be the economic impact of different oil price scenarios, including the jobs impact. I commend that to you and suggest that you may want to consider inviting my colleagues at CERI to talk about some of this, because there are big differences depending on how that plays out.
Senator Mercer: Mr. Speer, in your opening remarks you talked about an agreement between Suncor and a wind project with an Aboriginal community and made passing reference to the number of other good news stories that there are in the Aboriginal community. It would be really nice if The Globe and Mail or some other national newspaper would start to put a good news Aboriginal story on the front page of the paper on a regular basis. Yes, there are huge problems in our Aboriginal communities. Yes, there are embarrassing situations in many reserves across the country. But there are so many good stories, and our Aboriginal people take it in the ear because nobody bothers to tell anyone about it. Thank you for bringing it to our attention.
Senator Greene: It occurs to me that we have an awful lot of work to do in order to do what we intend to, which, from my point especially, is an Energy East Pipeline. We have to get the climate change policy right; we have to get a regulatory agreement in place, and one that all provinces accept; we have to build a consultation network, a very inclusive one; we have to get the revenue sharing right; and then we have to build the pipelines.
At your most optimistic, when do you expect that we will have an opening of the Energy East Pipeline? Would it be 10 years from now, is that about right, or 15?
Mr. Speer: Senator, I'm afraid I am probably not the right person to opine on that. I do take your point, though.
It is an interesting thing. We were talking earlier with some of your colleagues about fluctuations in global prices and where prices are going over time. I have seen some estimates that by 2022 prices will have returned somewhere closer to where they were before the precipitous drop.
The important thing generally for the committee's work is that it not fixate on current fluctuations and prices because, as you imply, projects like Energy East are not going to come on line for a considerable amount of time. Whether that is 10 years, I am afraid I am probably not the right person to estimate.
Mr. Cleland: Nor am I, senator. I would not want to venture a guess on that.
However, you make an extremely important point: It is a long list of very complex things that need to be dealt with over the next few years. But we can't wait until it's perfect before we get on with doing a bunch of these things. It is an imperfect world. The important point is we have regulatory processes that actually do and have worked extremely well for us for several decades. Let's build on that and improve them where we can in real time. Over the longer run, we have to get at some of these more fundamental issues, but we can't stand around waiting for 15 or 25 years to do that.
Senator Greene: I believe you are absolutely right about that. I worry that we will end up leaving a lot of value in the ground in Alberta and Saskatchewan.
The news story of the past couple of weeks has been about an electric car produced by Elon Musk that has a lot of people interested. I would suggest that should that come on line before the Energy East pipeline it makes the whole issue problematic.
You mentioned earlier that China has a carbon problem. We could solve a lot of that with the electric car. There is competition out there for fossil fuels that hasn't been there before. The landscape is changing.
I would suggest that time is of the essence and that this is a long list of issues that will take time to solve.
Mr. Cleland: If I may, the world is not waiting for us. We see that on the natural gas side with LNG in British Columbia, where opportunities may well pass us by as a consequence of regulatory processes that are not as expeditious as they could be.
On the demand side, I think you make an important point. It won't happen in a hurry, I don't think, but petroleum product demand in North America is set to decline. In Europe, it is already declining. It will probably not grow as fast in China and in other countries as we may have thought two or three years ago. Over time, other technologies will displace the demand for petroleum products. But that is time measured in decades, something that Canada and other resource-producing jurisdictions need to be mindful of, because the golden goose may not be quite as golden and may not be here 40 or 50 years from now.
Senator MacDonald: I have so many questions, but I will start with two. I will direct the first one to you, Mr. Cleland, because you mentioned it and it's something that is of concern to me. It is this concept of social licence. It seems to be an ephemeral concept: it doesn't seem to have any hard edges to what it is supposed to mean and how it is supposed to be applied.
If there are three people standing up at the back of the room of a hearing holding up a sign and hollering, is that an example of not having social licence? How do we measure this thing?
Mr. Cleland: You are putting your finger on the central issue that we are trying to get at in this work we are doing on public authorities, as well as some follow-on work we are doing looking more specifically at what the decision system will need to change in order to get there.
I don't like the term "social licence'' precisely because it implies that somehow somebody has to say "yes'' before you can move forward. The reason we have properly constituted public authorities is to resolve those issues through the rule of law and through properly constituted democratic processes. I think we have lost sight of that, as if somehow it is a bunch of local communities just because they feel like it, or nongovernment groups because they feel like it, can somehow hold out social licence.
We have turned the system on its head in the past few years from the days maybe 40 years ago where, as another former prime minister might have put it, the boys in the back room cutting up the cash made the decisions. We don't do it that way anymore, but we seem to have lost sight of the fact that ultimately properly constituted authorities need to make those decisions. I think we can get back to that, but right now we are in a very strange place.
Senator MacDonald: I find that arguments about social licence are somewhat artificial, particularly when it comes to municipalities and these different levels of government. If a municipality wants social licence every time they want to put a new sewage line in, what will we go back to, emptying chamber pots outside of second story windows? I don't understand some of these arguments, but I think we see eye to eye on that.
Second, when we talk about the transportation of bitumen, all of the concentration seems to be on pipelines, as if it doesn't matter what happens to the bitumen once it's put into a ship's bottom; that somehow all the risk is on land and none of the risk is in the water.
I live on the coastline. It is very important what tidewater is chosen. There is a big difference between exporting bitumen from the interior of the St. Lawrence Seaway or, for that matter, from the Bay of Fundy, as opposed to Prince Rupert or Point Tupper in Cape Breton. I am wondering what your thoughts are on that and if you think this has been addressed properly.
Mr. Cleland: You are into realms of expertise, senator, which I am not sure I want to claim. I will offer a couple of thoughts on the subject. I assume in the course of your study you will have people who are truly expert in these matters.
I suspect that probably the majority of the opposition to the Northern Gateway Pipeline has more to do with the effect on the marine environment from tankers than it has to do with the pipeline, as such. That is real. That is probably true with respect to Kinder Morgan as well. Certainly from what you hear, people are concerned about some despoliation of Vancouver harbor and that kind of thing.
As you undoubtedly know and will hear more about, the standards with respect to tankers, their construction, the way they are operated, the way they are handled with appropriate tethering of tugs and the emergency response procedures that go with that, are very different from the ones that led, for example, to the Exxon Valdez in 1990. It is a different world that I don't think people understand very well.
Once you have heard from the experts, you may find that the circumstances in which there is a truly big risk to the marine environment from the transportation of bitumen are probably very small and can be managed. But again, I am out of my depth.
Mr. Speer: I am afraid I have nothing to offer beyond that, sir.
Senator Eggleton: Mr. Speer, you mentioned that it could be 10 years before we actually get to the point of building or using the pipeline. Are you talking about pipelines going both east and west?
Mr. Speer: The specific question was with regard to Energy East.
Senator Eggleton: Okay. Mr. Cleland, you mentioned that in another 10 years we could be in quite a different picture in terms of the use of renewable resources, and who knows what the prices of commodities and oil will be further down the pipe.
How high is the risk that, by the time this all gets through the process, it will be redundant?
Mr. Speer: You are right, sir. Starting with a bit of humility about predicting the future is a good place for policy- makers. However, we do know, according to authorities on these matters, that demand for fossil fuel is not going to bottom out for the foreseeable future. The IEA estimates that it will remain the primary source of energy for decades to come. Whether growth and demand plateaus, as my colleague believes, that is not going to change the fact that for certainly my lifetime, and most of my child's lifetime presumably, fossil fuels will be an important part of the global energy mix.
I don't think we are at risk of an issue of redundancy on the specific pipelines that are in question today. It is conceivable down the road that that may change.
Mr. Cleland: I would agree with that last point. I am talking about a multi-decade horizon. I agree that referring to the International Energy Agency would be productive. Again, their view is that petroleum product demand — not coal, not natural gas — will be declining in the OECD economies in the next few decades. It doesn't mean disappearing by any means. It will be growing slowly in other economies for quite some time to come.
Perhaps electric vehicles will create a fast revolution in transportation. We don't get revolutions in energy very often. I'm not sure I would expect one here. There are still too many reasons why the internal combustion engine, which is getting increasingly efficient and being put in increasingly inherently efficient vehicles, will be the economic proposition for a long time to come. If the world is using petroleum products and Canada can develop them sustainably, I see no reason why we shouldn't continue to be in the game.
Colleagues I talk to in Alberta are seriously saying they are doing their numbers now on oil at $40 a barrel and saying, "How can we live with oil at $40 a barrel?'' These guys have some pretty sharp pencils. I would not be surprised if they come up with ways of living in that world as opposed to the fat world of $100 that we thought would stay for a while.
Senator Eggleton: Is there any timeframe that we should be saying this whole process should be done within to maximize the potential opportunity of the pipeline if it is to be built? There are other economic factors that come into play here, and it may not be feasible if it's 10 years down the road. Is it feasible to suggest a five- or six-year time frame? There are also the consultations and all the processes that have been put in place by the government. Is it better to leave that alone?
Mr. Cleland: What you probably want to do in your study is look at the time frames from past studies and recent or past projects, perhaps look at the time frames that are met by competing jurisdictions and consider that the time frames may not be the same as they were 20 years ago when it was a different kind of world. But neither do they have to be the time frames, for example, of the Mackenzie Valley process that went on and on. There is something in between that makes sense and is consistent with the expectations of the Canadian public today and with what our competitors are doing, and what investors will need before they just walk away.
Mr. Speer: This comes back to the point I made earlier about the purpose of the regulatory process. The regulatory process, as it is currently structured, is supposed to evaluate the technical characteristics of the project and safety provisions around the project. It is not to confront fundamental issues about the utility of resource development, for instance.
I don't want to diminish the importance of consultation or the importance of public trust and confidence, and I'm sincere about that. There are diminishing returns when the process becomes gamed by individuals and groups who want to have a more fundamental debate about resource development. It's not to diminish those concerns. That is the process of elections and of the work that you're doing, but it is not the NEB's job to confront those questions.
I would caution against a timeline for timeline's sake. The process should allow for the appropriate amount of consultation to make a judgment about the efficacy, the safety and the technical considerations of the project, and that's it. I think there is a real risk that the process becomes undone by trying to ask it to do things that it's not structured for or justified in doing.
Mr. Cleland: If I could add to that, the other thing that the regulatory process is intended to do is to assess the economic viability of the project. That is in the eyes of the shippers and the investors in the pipeline. It is the reason we have markets. We ask them to assess if this looks like a viable project over the next 20 or 30 or 40 years, based on certain assumptions, including the risk if Elon Musk really pulls it off. What does that risk look like in the context of this project? Again, they will be doing their economics on that. The regulator will be asking them what those economics are telling them.
Senator Eggleton: Thank you.
Senator Runciman: My question was really spurred by Senator MacDonald raising the issue of social licence and the comment about who speaks for Canada. In your slide presentation you talk about understanding the decision-making system and about how, in the process, decision makers inevitably confuse the public.
This is based on news stories that I have heard — allegations perhaps — but in terms of influencing the public, how significant is the influence of foreign funding for groups and individuals? This is not just in terms of the NEB process or regulatory process, but even at the municipal election level. I have seen stories with respect to some major municipalities that have indicated opposition to Kinder Morgan, for example. I'm wondering if you see that as a concern and, if so, how significant a concern and how could it be addressed?
Mr. Cleland: I'm not sure that I can give you a very good answer on that, senator. Let me go back to the point I was making earlier about distinguishing, if you will, the big picture issue — climate change and greenhouse gases — from the myriad of local concerns about spills, safety and all of those kinds of things, and getting to the point where we understand what communities really care about with respect to those issues, and that we have addressed those issues as well as possible.
In terms of the overlay of the big communications world, the Twitterverse, and the effects of, as you suggest, foreign funding with respect to Canada as a very convenient target for climate change activists, that's just part of the world in which we are going to have to operate. I don't think we're going to change it in a big hurry. I think it would help if our climate change policy were more credible. By that I mean reconciling our economic realities and our climate aspirations, but we will not change that in a hurry. This is why I think getting down to real Canadians in their communities and addressing those issues is at least productive and will help us get past that cloud of the Twitterverse. But it won't solve the problem.
Senator Runciman: I hope you're right, but if it is as significant as some people allege, it's like going into the battle with one hand tied behind your back. If there is no one there with the resources and funding to counter those positions and point out the fallacies behind many of the positions they take, it going to be uphill slog.
Mr. Speer: My colleague has shown his knowledge of Canadian prime ministerial history and made me look bad. Let me draw on U.S. presidential history. I do think that the current prime minister has the potential, the prospect, of what we have described at the Macdonald-Laurier Institute as a "Nixon goes to China'' moment.
Prime Minister Trudeau and this government's credibility on the environment and indigenous issues may be the ingredients to progress on resource development in a way that the previous government, which I served along with you, senator and others, for better or worse, didn't have. We may discover that that helps to create the conditions to push back on the misperceptions and environmental activists and make progress on these issues.
I think the elephant in the room today is the National Post piece from this morning by John Ivison about this government's commitment to pipeline construction. I think we're entering an interesting period of time where we may see progress driven by an unlikely champion. I think that's good for Canada.
Senator Runciman: Thank you.
Senator Doyle: I was reading a little bit about the environmental process that the federal and provincial governments might have to go through. Should the committee be looking at one environmental study? The federal and the provincial governments happen to be conducting separate studies on it. Is it a good idea for the committee to look at that as well?
Mr. Speer: Yes, senator. I think the idea of joint review panel processes has two upside benefits. First, of course, is timeliness: It's faster and more efficient.
Second, I think it helps to create the conditions for better public trust and confidence when we have two levels of government participating together in a process and reaching the same conclusions. I think that can't help but improve, in the public's eye, the robustness and the quality of the process. I think the joint review panel model is something we should definitely be looking at as part of the mix of solutions for this issue.
Mr. Cleland: I agree, but would add that you have to keep it focused. Your focus is pipelines, interprovincial works and undertakings by any definition, as far as I know, and therefore under federal jurisdiction in the first instance. The focus is the NEB process and, arguably, however that plays against the Canadian Environmental Assessment process.
Then a lot of other processes have ways of contributing to that. It could be through a more formal joint review, or it could be through other ways. It's not to deny the legitimacy of the concerns of the people of Montreal or Vancouver. It's a question of how those concerns are projected into the decision process and who ultimately has to take responsibility for the decisions, and that is clearly federal.
Senator Doyle: Yes. Government tends to be overly accommodating when it comes to communities and what have you. How much consultation is too much?
Mr. Cleland: I don't know that there is an answer to that. With respect to the ways attempts have been made to manage input to some of the regulatory processes — and we know this — at some point you're hearing the same thing over and over again and you're hearing one more version of the same opinion.
At some point these bodies have to be able to say, "Okay, we now understand what you think. We now have the information we need in order to move forward.'' Inevitably that causes friction, and we have seen that. There is no clear answer to that.
Again, it goes to the point Sean has made nicely a couple of times: The big questions about whether or not we should do this sort of thing at all are policy questions that belong upstream of that regulatory process. The regulatory process addresses itself to fundamental economics, safety, environmental integrity, and eventually comes up with what we call a certificate of public convenience and necessity. Those are the core questions that should be in front of the decision makers.
We have lost faith in our systems. I don't mean just the public; I think we all have in some respects. It's a question of getting them back in focus.
[Translation]
Senator Boisvenu: Thank you for your presence at our committee. Your presentation was very interesting. The use of raw materials everywhere in Canada is central to your concerns, in particular the transportation of fuel.
Mr. Cleland, I have examined all of your six projects. I am curious to know why you do not mention the controversial Energy East Pipeline in your research project.
[English]
Mr. Cleland: It was simply a matter of choice, senator. We had to boil it down. I can tell you about the process we went through.
These things take time and money to get done, so we could only do a certain number of them. We wanted to cover all types of projects. So we have pipelines, power lines, natural gas development, and power projects both natural gas- fired and wind, so we have covered the spectrum of renewable and nonrenewable. We wanted to get good regional coverage and we wanted to get different types of communities, including Aboriginal and non-Aboriginal communities. It finally came down to a somewhat subjective choice of these six.
This is important: we also wanted projects that had gotten to the end of the formal approval process. The concern was that if we intervened in something not yet done, we were becoming part of the process. Methodologically that was not a good thing to do. That's another reason why Energy East is not one of the case studies.
[Translation]
Senator Boisvenu: How could these projects be useful to our committee and its purposes?
[English]
Mr. Cleland: That depends on timing. I'm not sure what the timing of your study is, but we expect to have several of these case studies done by early summer. We expect to publish a report on the whole thing by late summer, and we would be pleased to make our results available to the committee whenever we can.
Without having done the case studies, it's hard to know what insights we are going to get. We have framed it along the lines that I have described in this deck. I guess the question in our minds is whether these case studies validate our framing. Will they give us different insights?
As I say, we talked to 20 experts, including senior regulators, government policy people, well-known national environmental groups and so on, who have given us some good insight. The question is when you get down to the level of local communities.
What we're doing here is qualitative research. We are going into the communities now, interviewing people and then doing a follow up with quantitative research in each one with our polling company. It's hard to anticipate what it's going to tell us, but we would be delighted to make this available to you when we have it in hand.
[Translation]
Senator Boisvenu: If I understand correctly, you have mostly focused on all of the consultation and integration processes of the people who are opposed to the project, or did you study those who are in favour of it? In short, you will examine all of the consultation process and make recommendations on possible improvements. Is that correct?
[English]
Mr. Cleland: I would say it's broader than the consultation process. The research question, if you will, is what it is that makes local communities have more or less trust and confidence in the process. Some of that is the consultation process, but some of it is also the way the project was developed.
Let me take, as an example, the Wuskwatim hydroelectric generating project; I know a little bit about that one. That was one where, in the process of consultation, they did a fundamental redesign on the project so that its capacity as it was built was half of what it was originally proposed. That is a substantial change in the project. In a lot of cases it had to do with local employment opportunities or local business opportunities. In other cases it may have had to do with equity participation in projects. It is a consultation process, but it is also what was done in substance to allow the community to believe that it was coming away a winner and that the costs and the risks were being properly managed.
The Chair: I would like to remind colleagues to stay afterwards, as we have a few housekeeping items that I would like to address.
Senator Unger: Mr. Cleland, you said you don't like the term "social licence.'' I've never liked it either. I wonder if you had a suggestion, either of you, as to something that would replace it.
Mr. Cleland: People keep trying out different terms. The one that we have come to settle on is "public trust and confidence.'' Again, "social licence'' seems to imply that somebody else makes the decisions outside the formal system, whereas "public trust and confidence'' I think speaks to believing that both the project proponents and the formal authorities know their jobs and will do their jobs in a way that is seen as legitimate by the public. That seems to work.
Senator Unger: Yes, it works for me.
Mr. Speer: I don't have anything better than that, senator.
Senator Mercer: Thank you, gentlemen, for being here. I have just a quick comment. The big elephant in the room for this whole process is people keep coming back to electric cars and the fact that the need for petroleum may be on the decline. I would suggest that the market for petroleum may be on the decline in North America and perhaps Western Europe, but worldwide the demand is still there.
That underscores our need to get our product to market, which underscores the need for pipelines — we're talking about the eastern one, but perhaps both pipelines. Would you agree with that statement?
Mr. Speer: Yes, sir. I'm reminded of an exchange that Derek Burney, the former ambassador to Washington, had with a Japanese official about the fact that providence had given Canada this rich natural resource endowment, and a country like Japan, for no fault of its own, wasn't as fortunate. This Japanese official looked at Mr. Burney like he had two heads when he described the challenges that the country faced in cultivating our natural resources.
I think we need the right policy framework and public trust and confidence. All of these things are important. Hopefully what the committee's work will do is to help educate the public and generate a public discussion about resource development more broadly.
Until we confront that fundamental question, policy changes, et cetera, won't sufficiently address the big question about whether this is something we ought to be doing. I commend you for your work, and I am grateful for the opportunity to be here. I look forward to eventually reading your report.
Mr. Cleland: It is a question of time frame, in my mind. The problem we have, and this is a worldwide problem as well as one in Canada — and I have said this publicly on a couple of occasions — is that the energy discussion and the climate change discussion appear as if they are occurring on different planets.
If you look at energy outlooks from credible authorities, and I would say the International Energy Agency is probably your best bet, what you see is slow growth in petroleum product demand worldwide, decline in Europe and probably decline in Northern America, albeit slow.
If you look at the objective of keeping warming to something under 2 degrees Celsius by 2050, then the work of Professor Ekins in the U.K. is what you should be turning to. That is a very different trajectory. The question is which of those trajectories is most likely to prevail.
Because what we do is pretty much irrelevant in the overall scheme of things, but depending on which trajectory prevails the question is should Canada be using its resource endowments to generate wealth for Canadians and provide cleanly produced resources for the rest of the world? You have those otherwise and, in some sense, irreconcilable numbers. I'm not sure where you go with that.
Senator Runciman: Is any Western country embracing Professor Ekins' findings?
Mr. Cleland: None that I know of. I think most of them are acting pragmatically and going about their business. I notice Norway is still producing oil, and they are among the most progressive with respect to climate change. The U.K. is still producing oil, though on a declining basis. Germany is still burning coal, notwithstanding all of their renewable investments. So, yes, people are acting pragmatically. I don't think anybody officially is coming even close.
Senator MacDonald: Mr. Speer, and I invite Mr. Cleland to respond to this, you mentioned earlier that in terms of being a champion for these projects, it is important that the federal government be a champion, but after the regulatory process. I'm not sure if I agree with that.
I'm wondering if perhaps the federal government should be setting down markers at the very start of all of this and be more of a champion from a leisure point of view in terms of these.
Mr. Speer: Senator, I would agree with you that the government ought to use the bully pulpit to make the case for resource development generally, to make the case for the economic and environmental benefits of Canada developing its resources.
Where I would respectfully disagree, and maybe it's not really a source of disagreement, is the role of the federal government on the matter of specific projects before the regulatory process is over. Even if well intended, the risk of government inserting itself in a process may actually create legal consequences down the road that undermine the very purpose of getting itself involved in the first place.
I agree that a national conversation about resource development, familiarizing Canadians with how the process is working, as my colleague has talked about, and how indigenous communities are increasingly partners in the process, all of those things are good things. I think the current Prime Minister and his team are as well placed as anyone to be out making that case.
Mr. Cleland: I can't add much to that. I think that's a fair assessment, establishing the broad policy frame, establishing the process and then respecting that process when you get to the end of it.
The Chair: Thank you. I would like to thank Mr. Speer and Mr. Cleland for their participation today. The committee appreciates the time you took to share your findings.
Honourable senators, tomorrow evening we will be hearing Professors Geoffrey Hale and Yale Belanger from the University of Lethbridge on the topic of community engagement in the energy sector.
I have two short items of housekeeping. At our last meeting, the committee adopted a budget for travel on the study in the amount of $331,000. There was an administrative error in the calculation, and the amount is $354,000. The committee agrees that we administratively correct the motion in the Senate.
There is another motion, but I will keep it for another time. I was told that the Conservative caucus had agreed to amputate the Transport and Communications Committee of all of its communications side. I hope that we could have an opportunity to discuss it here in committee. Not that I disagree, but I thought that when we discussed it here there seemed to be a debate on the issue.
Senator Greene: I don't recall that agreement.
The Chair: I received a letter from Senator Johnson. All of my Liberal colleagues received a letter saying you had unanimously agreed to amputate communications from Transport and Communications.
Some Hon. Senators: No.
The Chair: There is a motion in the Senate right now on that issue. I wanted to address it as chair of the committee, but I wanted some guidance. It doesn't seem to be the case. I will bring it back, and I will send you copies of the letter in case you haven't received it.
Senator MacDonald: I read the letter too.
The Chair: Surprised?
Senator MacDonald: A bit surprised.
The Chair: As deputy chair I was surprised that you hadn't told me.
Honourable senators, our next meeting is tomorrow night at 6:45. Thank you very much.
(The committee adjourned.)