Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 4 - Evidence, June 7, 2016
OTTAWA, Tuesday, June 7, 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 Michael L. MacDonald (Deputy Chair) in the chair.
[English]
The Deputy Chair: Honourable senators, this morning the committee is continuing a study on 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.
We have two panels of officials. For the first hour, we will hear from Transport Canada. During the second hour, the panel will have officials from Natural Resources Canada.
For our first group, I would like to introduce officials from Transport Canada: Laureen Kinney, Assistant Deputy Minister, Safety and Security; Brigitte Diogo, Director General, Rail Safety; and Benoit Turcotte, Director, Regulatory Affairs, Transport of Dangerous Goods. Please begin your presentation. Afterwards, senators will have questions.
Laureen Kinney, Assistant Deputy Minister, Safety and Security, Transport Canada: Good morning, honourable senators. It is my pleasure to be here today and to have the opportunity to speak about rail safety and the transportation of dangerous goods by rail. As mentioned, I am accompanied by Brigitte Diogo, Director General, Rail Safety; and Benoit Turcotte, Acting Director General, Transportation of Dangerous Goods.
Transport Canada's mission is to serve the public interest through the promotion of a safe, secure, efficient and environmentally responsible transportation system. As the regulator, the department oversees the transportation of dangerous goods for all modes under the Transportation of Dangerous Goods Act, 1992, and the safety of federally regulated railways in accordance with the Railway Safety Act. Transport Canada has a rigorous and robust oversight regime in place to monitor compliance with rules, regulations and standards through audits and inspections and to manage safety issues on an ongoing basis.
I should note that railways are normally the most effective way of transporting heavy bulk goods across long distances; and in many cases the shipping of bulk goods is the only way to move them. Thus, access to safe and reliable rail service is critical for economic health and growth of industries, communities and cities across the country. The rail sector is a key factor in the economy and the safe transportation of dangerous goods helps to strengthen the economy further.
As rail traffic volumes continue to increase, we recognize that Canadians expect both industry and government to take further action to mitigate the risks associated with the movement of goods by rail through their neighbourhoods. Many municipalities in Canada were established because of the railroad, and our communities have grown around the railways over time.
Following the tragic events almost three years ago in Lac-Mégantic, the issue of rail safety has taken on greater meaning. Our recent initiatives build on numerous actions that we have taken since this tragedy and are designed to enhance safety and address the concerns of communities.
For example, Transport Canada has brought forward new classification requirements that require a shipper to provide proof of classification. In addition, the department has also launched research projects on crude oil, with a focus on its chemical composition and properties as well as its behaviour during fires.
Transport Canada has removed the least crash-resistant DOT-111 tank cars from dangerous goods service and has developed the TC-117 standard to make the next generation of tank cars for dangerous goods stronger and safer. The standard also provides a phase-out schedule for DOT-111 tank cars, with the first deadline for crude oil transport scheduled to be phased out May 1, 2017.
Transport Canada has extended the emergency response assistance program to include flammable liquids, such as crude oil, gasoline, diesel, aviation fuel and ethanol. This means that municipalities have access to additional industry resources to deal with an incident involving these dangerous goods.
As of April 28, railway companies are required to share even more data on dangerous goods movements with municipalities, their emergency planners and first responders to improve planning, risk assessments and training. This requirement, contained in Protective Direction No. 36, also provides that municipalities are given information that can be shared directly with the Canadian public and accelerates the frequency of sharing information from yearly, to semi- annually, to quarterly by the end of summer 2018. This protective direction will also require Canadian Class I railways to provide a top-10 list on their websites of dangerous goods transported through a province each year.
The Minister of Transport also released the 2016 Emergency Response Guidebook and a set of competency guidelines for first responders. These tools provide important safety information, including product and incident-specific competencies for first responders when responding to an incident involving the transport of flammable goods by rail. They also help trainers and curriculum developers identify specific training content.
We have also strengthened rules for securing trains to further reduce the risk of runaways and have introduced new rules for trains carrying dangerous goods. They impose new speed limits for trains carrying dangerous goods, require increased track inspections and establish more robust key route risk assessments with the incorporation of municipal and local government input. Transport Canada also continues to work with industry, municipal stakeholders and first responders to explore emergency response solutions for greater public safety for Canadians.
The department has taken numerous measures to improve our rail system over the past few years but, as our minister has stated, more must be done. We are committed to continuously improving railway safety for Canadians. Strengthening rail safety and the safe transportation of flammable liquids, such as crude oil, remains a top priority for Transport Canada.
I would also note that Budget 2016 supported this priority by providing $143 million relating to railway safety and the transportation of dangerous goods. This includes several measures to increase inspection capacity; improve training to strengthen oversight across the country; enhance systems used to test, classify, register and map dangerous goods and their movements; increase federal contributions for local investments in safer railway crossings; and provide first responders with additional tools and information to respond to accidents. More will come on that very soon.
I appreciate the invitation to speak with you today. Together we can strengthen our transportation system and maintain a safe, secure, efficient and environmentally responsible transportation system. I look forward to your questions.
The Deputy Chair: Thank you, Ms. Kinney. We will start with questions.
Senator Doyle: Thank you for your presentation. We have seen a lot of disagreements on the issue of what form of crude oil transport is safer. Is it safer by rail or by pipeline? We might be tempted to think that the pipeline mode is preferable, just on the sheer volume of the product moved. If we have to move the volumes of crude oil involved, say, in the oil sands, is not a pipeline the only way to go? Do you have any thoughts on that?
Ms. Kinney: Transport Canada is responsible for the movement of dangerous goods by railways and other modes of transportation, but not including pipelines. I don't have good information and analyses on the comparative assessment. Probably some of your other witnesses would be better placed to answer that.
I would note that, of course, as part of our work in monitoring the safe movement of oil by railways, we look at the movements and where they are going to and coming from. Certainly, there is an evolution where sources of petroleum are changing. Sometimes they change more rapidly, and some of the uses where refineries are being retrofitted to use new sources of crude as well have an impact on where the goods need to be transported. There is an element an immediacy that railways serve. We commit to and have in place a robust, safe system for transporting all dangerous goods and regular types of heavy goods by rail. We feel that we have a safe system.
Senator Doyle: Including crude?
Ms. Kinney: Including crude oil.
Senator Doyle: An individual who appeared here a couple of weeks ago from Teamsters Canada recommended to the committee that railway cars be crash-tested like cars, buses and airplanes. In particular, he recommended that rail cars be crash-tested with oil onboard. Is there any reason that railcars are not crash-tested at this time?
Ms. Kinney: That's an interesting question. A significant number of tests and requirements are place for the various elements of the tank cars. If you set up a crash-testing system, which we have for automobiles, for example, you're looking at the standards that you work to, what speeds, what volumes, what type of terrain, and there is considerable variation in railways for that.
To date, the focus has been on the elements of the car and where weaknesses have been demonstrated, so top fittings, bottom fittings and valves. Some of those areas are where history has shown us that there are weaknesses in the car, so the strength of the steel, et cetera, its susceptibility to penetration, et cetera.
Those are the elements that the North American industry and regulators, working with our U.S. colleagues, have focused on in improving the tank cars.
Setting up a formal crash-testing program would be a complex endeavour and the outcomes of that would perhaps not always be applicable to general set-up of tank cars. It is something to think about.
Part of the Canada-U.S. work that we will be doing in terms of research is to look at some of these elements in time through some experimentation and some demonstrations for first responders. Some elements of that will be addressed in some of the plans currently in place.
Senator Doyle: How many inspectors does Transport Canada currently have on staff? Is that number sufficient for the department to perform its oversight role?
Ms. Kinney: Each year Transport Canada assesses our needs and looks at our inspection programs, oversight and the types of follow-up that you need to do to make sure you're following up on areas where there were compliance issues or questions. We currently have 135 rail safety inspectors on staff and people who do oversight in that area.
That is what we feel is appropriate at this point in time. There is work under way to look at further and future needs. That will be addressed shortly, but at this point — since the terrible events at Lac-Mégantic — we have done this type of yearly adjustment and we recruited staff as needed.
Senator Doyle: Thank you.
Senator Eggleton: First, let me ask you about Protective Directive No. 36, which is now being put into place. I think it's important, in terms of developing public confidence, that this information be made available and you've recognized that. You're going to bring it down to a quarterly basis where it would be released to the public.
What about the information that goes to first responders? Will it go in a timely fashion? Will they know what's coming down the track or will they just have a generic list of possibilities?
Ms. Kinney: This has been a key issue for us all along, and we have worked closely with the Federation of Canadian Municipalities who has brought together some of the views from first responders. In addition, we set up an emergency task force that brought together the first responders and all of the other parties involved in the transportation of crude oil and have been working with them on how we can improve the system and what type of information is needed. Out of that, we have made continuous improvements to the previous protective direction that required certain specific timeliness of information to be shared.
I would say at this point in time we have a good system in place. It has been continuously improved as people have raised issues from municipalities and first responders. At this point in time there are two main forms of access to the actual contents of a particular tank car. One is through a railway application called AskRail. That has been made available to first responders so that if an accident were to occur they can go in and actually get information on the train consist, which is the overall manifest and the tank car individual components.
A second area of opportunity to obtain this information is through our CANUTEC, a 24-hour service, which has trained chemists sitting ready to answer calls from first responders. They also get information from the railways immediately after an accident — within minutes normally — and look at that and are able to provide information not only on individual cars but if, for example, a set of cars has been derailed and they may be having product mixing going on they can give advice on evacuation, distances and that type of thing.
From our information and our feedback at this point, we have good systems in place to provide the necessary information. With the further improvement of twice per year of that information when the railways have the database capability called for in PD 36, we should be able to address most known problems.
Senator Eggleton: Sounds good. The first responders, then, will know in a timely fashion. They get an alert that there has been a derailment, let's say, and they can immediately go online and find out what is there so they can respond in a timely manner?
Ms. Kinney: Yes.
Senator Eggleton: Okay. The public information, I take it, comes later. It's after all of this, and did you say it was going to move to a quarterly basis?
Ms. Kinney: There are two forms of information: the information for municipalities, first responders, and the planners for the first response. That information has much more detail and more volumes and types of dangerous goods. That will be made available to municipalities and their members twice a year by 2018.
The information to the public is currently being made available on the top 10 list of dangerous goods being moved through the community, but not necessarily broken down by specifics of when, where and by what volume.
Senator Eggleton: That sounds very good.
Let me ask you about fatigue management. Why isn't fatigue management dealt with for railways? We do it for airplane pilots and truck drivers. It's an issue that their union representatives have raised and given us all sorts of anecdotes of things that are rather unsettling because it could lead to further accidents.
Why don't you do fatigue management and put hours of restrictions?
Ms. Kinney: I will answer in general and, if you would like more details, we can turn to Brigitte Diogo, who is the director general responsible.
Right now we have in place two areas that particularly speak to this. We have work/rest rules in place that set limitations and requirements, and we can go into more detail if you like. The second area is in the new Railway Safety Management System Regulations that came into force last year. Under that there is a requirement for the railways to consider fatigue management science and fatigue management principles in developing the schedules for their workers. That is just coming into force as this new regulation has come into place and we will be looking at how it is being implemented, how well it's working and the effectiveness over the next year.
In general, as we've looked at the very many elements that go into making for safe transportation, we have looked at the physical issues, train securement, tank car standards and many other areas, as we've talked about and as you're aware of, but the areas of fatigue and the implications that that may have to the human factor is certainly an area of continued interest and an area we will be doing more work on and bringing focus to.
Senator Eggleton: I would like to know a bit more detail, because we found certainly in Lac-Mégantic that you can't always rely on the railway companies, on a volunteer basis, to get everything right. There have been other incidents as well. We regulate it, though, in terms of air pilots. Why wouldn't we regulate these as well?
Tell me what you are doing and how it helps, versus what we would be doing as a straight-out requirement?
Brigitte Diogo, Director General, Rail Safety, Transport Canada: Maybe I can talk about what we will be doing. We are indeed looking at this issue. It's a very complex issue and we need to gather some information to have evidence- based regulation or a policy.
In September we will be bringing the industry and the unions together under the Advisory Council on Railway Safety. One of the items on the agenda will be fatigue.
We've been trying to address this issue over the last year under that heading. There was a working group set up, but they could not agree on what recommendations needed to be brought forward.
Transport Canada will be going back in terms of the evidence, how we can gather that evidence and compare it with other industries: What is happening in other modes and what can we learn from that? As well, Transport Canada will look at how we compare with other jurisdictions or countries, so learning from all the work that is happening in the U.S.
In the meantime, the safety management system has a component on fatigue. Starting in the next few weeks, as part of our audits of the safety management system, we will be looking at the fatigue management plans.
Senator Eggleton: What other countries have fatigue management? What do the United States, the United Kingdom or some of the other European countries do?
Ms. Diogo: I don't know so much about the other countries yet, however we know there are studies happening in the U.S. Our counterpart in the U.S., the Federal Railroad Administration, has just issued a call for a proposal on sleep apnea, et cetera.
We will be taking a look. I think there are some institutions in Canada in terms of what is being done at certain universities. So how can we bring all that knowledge together and move forward in a constructive way?
Senator Eggleton: Please expedite this. I think it is important.
Senator Mercer: I was surprised at the answer to one of Senator Doyle's questions about the comparison between pipeline safety and rail. While pipelines are not regulated by Transport Canada, one would have thought there would have been a comparison of that, particularly following the tragedy at Lac-Mégantic. That is a comment more than a question.
I also want to talk about Senator Eggleton's first question. You talked about a system that is in place for first responders. How often is the system tested?
Ms. Kinney: That's a good question. The individual municipalities have their own emergency planning and exercise processes. We have worked with the first responders, through the Emergency Response Task Force, to look at how can we assist with some of those training and exercise opportunities. The railways have exercises as well.
I don't have a frequency, offhand. I am sure there is overlap between the different sources of exercises.
Senator Mercer: It would seem to me, though, that Transport Canada should be monitoring and making sure that they have been tested, that there is a minimum amount of testing going on and that there are first responders on the ground who are properly trained and aware of this system.
I can't think of an incident right now, but we know that there have been instances where good systems have been put in place. If the people haven't been trained and are not aware of how the system works, it doesn't matter.
Ms. Kinney: I hope it doesn't sound like moving off the issue, but one of the reasons that the Emergency Response Task Force was established was to bring forward and bring in the Federation of Canadian Municipalities, the Canadian Association of Chiefs of Police, Aboriginal volunteer firefighters and the people who do emergency response on behalf of the shippers, railways and many others, because many of these issues do not rest under the jurisdiction of Transport Canada.
Municipal first response capability is not part of what we regulate or require. However, it is an area where we can help and show leadership. By bringing everyone together, we would then propose this type of work be done. We help with it by developing exercise protocols and training standards with this larger group of people, but we need to bring everyone who has responsibility to the table.
Senator Mercer: I guarantee you that if another Lac-Mégantic happens and the local people have not been properly trained, Transport Canada will be in somebody's sights. I am just saying that. I think you need a better system of training.
I don't know if you are aware of a document called Canada's Top 10 Barriers to Competitiveness for 2016, produced by the Canadian Chamber of Commerce. In it they list a number of things that need to happen, but number 4 on their list of barriers is "Canadian resources cannot get to world markets."
I won't quote the whole document because it is a page and a half long. It says:
Canada's . . . future economic prosperity depends upon its ability to provide reliable infrastructure to allow Canadian energy resources to fuel Asian economic growth at world market prices.
The fundamental problem here is that Canadians sometimes think that we sell our gas and oil to the Americans. We do: at a discount. I'd like to sell it at full price to people elsewhere in the world. Let's get the true market value.
Are you aware of this document? It deals directly with the transportation of dangerous goods.
Ms. Kinney: I think the people best placed to speak to that particular issue would be Natural Resources Canada.
I would like to mention — and it goes back to your initial point when you opened your remarks — that Transport Canada is concerned and responsible for making sure that even if one crude oil tank car is moved on the tracks that there is a regime and training in place and that it is moved safety.
There were crude oil transports before 2012 and before the great increase that occurred at that point, and there would continue to be, likely, some level of crude oil transport regardless of how many pipelines there were and where they were. Our role is to focus on making sure that all of those are safe, and we are not implicated in the issue of how that energy gets to market.
Senator Mercer: Thank you very much. You have a tough job. I don't want to sound critical. I am trying to sound supportive.
Senator Black: Thank you for being here. As my colleague Senator Mercer indicated, thank you for the work you do. It is very important for Canadians.
As you know, we are looking at — and I am putting this for the purpose of the record — "a strategy to facilitate the transport of crude oil to eastern Canadian refineries and to ports on the East and West coasts of Canada." I would like to focus, please, on the availability of rail to get product from principally Fort McMurray to the West Coast and the East Coast of Canada.
If I have a carload of oil that I want to get to either the East or West Coast, can you confirm for me that that can be done today?
Ms. Kinney: It's a different way of looking at how we do this work. To be frank, it is more on our economic analysis side and policy side of the department. To my understanding, it is possible now. There are many routes that can be taken and many relationships between different carriers that can be connected.
It is my understanding that that may be possible, but I haven't looked at that question so I am not in a good position to answer that, sorry.
Senator Black: Fair enough. Would any of your colleagues be able to address that?
You are saying maybe we would be able to get it here, put it on another short line and somehow get it to the main line and get it there.
Ms. Kinney: If there is railway there, it should be able to be moved on the railway.
Senator Black: But you don't know whether that's possible today?
Ms. Kinney: No, I don't.
Senator Black: Whereas a pipeline from Fort McMurray to the East or West Coast, we know it would get there. You would agree with that?
Ms. Kinney: Pipelines go where they are going.
Senator Black: Absolutely. I am a little surprised that your department doesn't have a view on whether or not pipelines are a more efficient and safe way to transport crude oil rather than rail, because there is a great deal of data on that point. We have heard a great deal of data here. I would just observe that I'm surprised you don't have a view on that issue, but you don't.
Ms. Kinney: As I said, our role is to look at the transportation on the modes that we are responsible for: marine, aviation and rail, in this particular case. It is important to us that every carload be moved safely. That is really not an issue that particularly is addressed to Transport normally.
Senator Black: Very well. I can appreciate that.
As you know, we are hearing a lot of conversation in the public, and certainly through the media, about driverless cars. I am interested to know your department's thinking around the role that innovation can and should play in the transport of dangerous goods by rail.
Ms. Kinney: I think it would be generally held to go largely, without saying, that innovation is key. Technology and other innovations have made tremendous steps forward in the safety of movement of people and goods over the next number of decades, and there have been very significant improvements in that area.
Some of the improvements in safety have come from work we have done through regulations and other things, but some of those regulations require innovation and new technology. Certainly that is a key element that we need to go over in the future to continually improve the safety record.
Senator Black: Tell us specifically what your department is doing in respect of innovation. Let's take the excellent questions my colleague asked on fatigue.
If we had driverless trains, there would be no fatigue because there would be no drivers. One could argue that they could be safer. Tell us what you're doing specifically around innovation.
Ms. Kinney: There are various areas we're working on now. We have a small organization that focuses on research and development and works with the rail industry and others to look at future investigation of types of braking, wayside detectors and other types of new innovation in rail track management and rail operation, track assessment types of new ultrasound and radars, et cetera. That is one area of work going on with a number of projects under the research and development group.
There's research going on substantially both within the transportation of dangerous goods group that is looking at the properties of crude oils and volatility, as well as looking at some areas in terms of testing and ensuring that we have the right methods for testing and classification. There are bigger and broader studies we are working on with the United States on those areas. We work as well with universities and others doing more research.
Senator Black: That's great to hear. We've heard a fair bit of conversation here and in the public around the concept of a northern corridor. The concept is for an infrastructure corridor to be established likely 300 to 400 kilometres or miles north of the U.S. border. We have a corridor now that is about 150 miles from the U.S. border. Canada would establish a new corridor, where there would be a rail link from coast to coast. Do you have any view on that?
Ms. Kinney: It would be premature to express any views on that. It's something with a lot of study yet to do be done.
Senator Black: We have heard suggestions that a better way to regulate rail transport in Canada, rather than being so prescriptive — and you know what I mean by that — would be to change the tack altogether. An expectation that the following result will be achieved, and railways you figure out how you're going to get that done. What's your view on that?
Ms. Kinney: That's an important facet of how we need to look at the regulations and the appropriate steps to take. Transport Canada does use prescriptive or detailed requirements, such that you must do X or have fences this high; and in some areas we have a broader approach.
We also have management-based regulations where we set out a framework and you have to follow the framework. That's the technical name for Railway Safety Management System Regulations in place now. They say how to manage your safety, do risk assessments and do something about it. We do not say what to do but that you have to have a system in place to properly manage. Also, there are performance-based regulations where we talk about the outcome. We believe there are benefits to performance-based regulations. Where appropriate, that's an approach we take.
Senator Black: What do you think the preferable route would be?
Ms. Kinney: My view as a regulator, and through the work we've done across various modes, is that you have different kinds of regulations that are well-suited for different kinds of objectives. In some cases if, through experience of incidents, accident reporting and investigations, you know that this type of equipment is the essential piece to promoting safety, you can do a prescriptive regulation and say, "This is what you must do."
However, if there are a number ways to achieve that outcome, four or five different ways, and you want to leave flexibility to be the most effective and efficient for an operator, then you can use performance-based regulations. It goes to the kind of objective you're trying to achieve.
Senator Black: Is there a trend?
Ms. Kinney: There has been a trend to move toward more performance-based regulations and certainly the management-based regulations, which we call "safety management systems." Those are added to the base of prescriptive regulation. I wouldn't want to suggest that we would not need prescriptive regulations. It's typically a layering of types of regulations that get at different kinds of problems.
Senator Unger: I would like to go back to an earlier discussion with regard to first responders and whether they are being trained. I believe they are being trained, because a few months ago in Edmonton on talk radio there was a discussion about first responders being involved with new regulations. I listened because I was interested, and it sounded to me as if that process had started.
You also mentioned that an advisory council was established but that they couldn't agree. On what could they not agree?
Ms. Kinney: I'll just point out that, yes, a lot of work is being done in association with first responders and municipalities. The rail and shipping companies also do a lot of training and provide a lot of opportunity on that. The work of this task force that we set up has allowed the first responders to have a direct voice in the development of some of the regulations, some of the emergency assistance response program and how well that works, and what competencies are required. We had an Exercise Vulcan that brought together a large number of first responders, et cetera. That work is well under way and is incorporating the needs and views of first responders.
In terms of the advisory council, I can ask Ms. Diogo to respond.
Ms. Diogo: There is the Advisory Council on Railway Safety. The council established a working group on fatigue. That working group was to study the issue of fatigue and bring back recommendations on how we can address this issue in the industry going forward.
The group did some preliminary work but came to a stalemate because they could not come up with recommendations for considerations on how to address that fatigue.
Senator Unger: Do you know what that stalemate was about?
Ms. Diogo: There were a number of reasons they could not make further progress. As such, Transport Canada decided to dismantle the working group and bring forward its options on how to move forward.
Senator Unger: You then established the Emergency Response Task Force.
Ms. Diogo: These are two separate issues. The fatigue side is rail operations; and the emergency response side is transportation of dangerous goods and how to respond in the case of an emergency.
Senator Unger: Ms. Kinney, you talked about new flammability tests. However, do you agree that the crude carried in those rail cars in the Lac-Mégantic disaster were from the United States and known to be highly flammable and that cannot be said, for example, about Alberta crude?
Ms. Kinney: That's a very complicated question to answer.
I would say that at the time of the Lac-Mégantic incident, there was not the broad awareness of the level of volatility of crudes that come from the Bakken field, from this particular location. I would note that the Bakken fields and some of those types of crude do come from fields in Canada, so this is not limited to the U.S.
One question we had after Lac-Mégantic and some early work that was established was for the dangerous goods group to do a sampling survey and look at the components of the crude across Canadian sources, the volatility, how that worked and, in particular, how our testing methods capture the gases that may be present in those liquids. I won't go into the technicalities, but there is a significant question because the standards set were based on an international assumption that most crude oils are consistent and similar, like refined products.
In fact, however, crudes are highly variable, so our testing methods needed more work. That work has been done in conjunction with the U.S. We found that there are very different levels of volatility, levels of sulphur in some and some other areas of interest and concern in Canada. That research is now feeding into determining how we should approach that.
Senator Unger: But that train was carrying —
Ms. Kinney: North Dakota crude.
Senator Unger: Yes, thank you.
With regard to this study that has just been completed, is that information available?
Ms. Kinney: I believe the initial results of the sampling, which was a small number of samples, is available on our website. We could probably provide that link and, if not, we can provide the committee with a summary of that information.
Senator Unger: I would appreciate that.
Would you say there was a lack of communication with regard to first responders? Would that be one of the issues in the extensiveness of the Lac-Mégantic disaster? Was there a lack of coordination? Do you know that? Have you studied it?
Ms. Kinney: I would not necessarily draw that conclusion. I think the overall conclusion, based on the information that we found by bringing together all the parties in this, was that there was a significant amount of training being provided by both shippers of the oil products, for example, and the railways as well. There was a good amount of training being provided, and each municipality did their own training.
One issue that did come into play, looking at Lac-Mégantic and the incident at Plaster Rock, where you had, if I recall correctly, a volunteer fire department, was the level of the standard of training and how it was being provided.
We went at that from several different areas. One was to require emergency response assistant programs to say that the shippers of the goods need to bring in the specialists to help the first responders with very specialized areas that it wouldn't make sense to train them on. Then we established, through the emergency task force, the standards and competencies needed by first responders. That work has been forwarded to the North American body responsible for setting those standards. We hope to see those come out well.
The question of how support could be best given to these smaller organizations on a regional basis is one that has been addressed fairly significantly in the last two to three years, and certainly with the work of this task force.
Senator Unger: Thank you very much for being here, and thank you for your answers.
[Translation]
Senator Boisvenu: Welcome to our witnesses. I apologize for being late, Mr. Chair; I was on another committee this morning.
Mr. Turcotte, since your name is not on the list provided, please tell us what your role is at the department.
Benoit Turcotte, Director, Regulatory Affairs Branch, Transport Canada: I am the Director of Regulatory Affairs, Transport of Dangerous Goods Directorate.
Senator Boisvenu: Okay. Since I am a senator from Quebec, you can appreciate that the Lac-Mégantic file is very important to me, especially since I live in that area. I am very concerned about the tragedy that struck this region.
My question is for Ms. Kinney or Ms. Diogo. The Transportation Safety Board of Canada made five recommendations following the Lac-Mégantic disaster. We learned recently, from a media interview, that one of the recommendations had been implemented, that three were in the process of being implemented, and that one had not yet been examined.
Can you give us an update on where we are at with these five recommendations and tell us what the implementation schedule is for them?
[English]
Ms. Kinney: According to Transport Canada, we have responded immediately after those recommendations. The minister came out with a formal response and made specific commitments to those individual recommendations. All of those responses and the implementation of new items have been done and put into place. We have implemented the emergency response action plans for crude products, for example. That one is noted as complete by the Transportation Safety Board.
In terms of the other four recommendations, they have all been fully acted on and fully implemented, from putting into place a new regime, for example, for train securement, through an emergency directive very soon after the recommendation was made. It has been improved over time with new issues of the emergency directive as we learned more and as we understood better how to fine-tune a complex technical regulation that comes from high-level recommendation, which is completely appropriate.
In terms of evaluations of the Transportation Safety Board, those were put forward on their March 2016 evaluation. It is for them to speak to that, but in general what they are raising is that there are areas where the effectiveness of putting in place an entire new regime needs to be demonstrated. As you look at the evidence over the next year or two, for example, with train securement and as we see the examples that go on in terms of the industry, we will be able to see whether that's fully effective. Until they see that, there is not an ability, in their view, to say it is fully satisfactory or finished.
In some other areas, like the tank car standard recommendation, a new tank car standard was put into place and an aggressive schedule was put into place to phase out those tank cars. The point that the Transportation Safety Board refers to in its assessment is that itis still a lengthy period of time where the risk continues and that they think it's important — and we agree — that intermediate interim mitigation measures continue: things like the key routes, track assessments, train assessments and risk assessments that are being done. It's not a matter of whether Transport will take steps on those recommendations. We fully agreed and fully implemented them. Their effectiveness and whether all the risk has been completely reduced is a question that, in some cases, needs a little more time to deal with.
As we looked at the implementation of each of those, from the time the recommendations were made through these less-formal processes of emergency directives and protective directions, we worked closely with our inspectors to see what our inspection information tells us, with the Transportation Safety Board, to see what their more recent information from new incidents tells them. We have adapted all of those requirements and will continue to do that as the Transportation Safety Board or our information amends some of the information and we can do more, train securement being a good example.
One of the areas we found through our inspections is that some of the very small-level issues that we identified with the new train securement rules relate to the training and understanding of the railway employees. Part of what we're looking at is how they are trained and whether they have enough training. The regime may be appropriate and fully effective if the people completely understand it, so we're looking at that element to be 100 per cent sure that's addressed.
These are issues that will continue to be addressed over time.
[Translation]
Senator Boisvenu: With respect to the use of double-walled cars, which are safer for transporting dangerous goods in Canada, the risk level is very random and varies with railway geography. The rail cars that cross the Eastern Townships, in particular, between Maine and Montreal, for instance, go through mountainous terrain and have to climb very steep hills. That is what happened with the accident in Lac-Mégantic. The car broke loose down the hill between Nantes and Lac-Mégantic, where the slope is very steep. The rail line through the heart of Lac-Mégantic also has a very dangerous curve.
For the specific routes that have a very high risk of derailment or loss of control, are you thinking of planning safer routes, flat ones, such as the ones in Sherbooke, with very straight lines and a lower risk of derailment? For the short term, are you looking at using safer rail cars for high-risk routes than for lower-risk routes?
[English]
Ms. Kinney: That's a good question and an important part of how the elements of what we have done both in terms of dangerous goods and railway safety come together in a complete system.
There is a part about what the tank cars themselves need to be built to withstand and then there's the aspect of the rail operation to prevent a derailment in the first place. One of the elements put in place — and more work will be done as we monitor and see the effectiveness, which goes to your point — is the rule on key trains and key routes.
What was put in place on an initial basis and has been improved and expanded on, and which we will continue to monitor, is a requirement that each railway company that is moving high volumes of crude oil, for example, must do a risk assessment of the route. I believe there are 28 factors that they need to look at — exactly the points that you're raising: What is the curve? What are the slopes? What are the types of products? What are the local impacts? Important to the municipalities, as well, is the question of whether a curve of a railway track over a bridge is going through a wetland or a water supply source for a community.
These key route and key train risk assessments are an important part of this, and we will monitor that to ensure sufficient action is being taken. If that needs a different set of rules for particular high-risk areas, that's something we would be looking at.
[Translation]
Senator Boisvenu: A number of Lac-Mégantic citizens have called for a criminal investigation further to the release of the report on the accident in 2013. Is the Transportation Safety Board of Canada considering a criminal investigation?
[English]
Ms. Kinney: Normally at the beginning of an incident or accident investigation, the Transportation Safety Board makes those kinds of determinations of what kind of investigation they can do within their mandate. They would be the best placed to speak to that.
Transport Canada did immediately begin an investigation on regulatory compliance, from both the side of the Railway Safety Act and the Transportation of Dangerous Goods Regulations. Charges have been laid under the Railway Safety Act in that particular case, and we are considering that issue under the transportation of dangerous goods. Transport Canada has taken action to carry out an investigation and lay charges under the acts within our authority.
[Translation]
Senator Boisvenu: No criminal investigation is being considered.
[English]
Ms. Kinney: The Sûreté du Québec, as you know, has laid criminal charges, and I believe those are still working their way through the courts.
The Deputy Chair: I would like to thank the officials from Transport Canada for being with us this morning.
Our next panel is from Natural Resources Canada. I would like to introduce Terence Hubbard, Director General of the Petroleum Resources Branch; Lisanne Bazinet, Deputy Director of the Pipelines Gas and LNG Division in the Petroleum Resources Branch; and Timothy Gardiner, Director General of the Strategic Projects Secretariat in the Major Projects Management Office.
I invite the officials to begin their presentations. We will have questions from senators afterward.
Terence Hubbard, Director General, Petroleum Resources Branch, Natural Resources Canada: Thank you for the opportunity to appear before the committee. We have a short presentation that we will walk through quickly. I think copies have been distributed. The presentation is simply intended to outline some of the context we're dealing with around the development of energy infrastructure these days.
Canada is among the world's largest crude oil producers, with 3.9 million barrels per day of production in 2014. Canada has an extensive crude oil pipeline network, which is highly integrated with the United States. All told, there are almost 1 million kilometres of pipeline in Canada, with 73,000 kilometres regulated at the federal level. Federal responsibilities are largely the interprovincial and international pipelines, the large transnational pipelines.
Canada's pipeline network is generally operating at full capacity, with about 200,000 barrels per day of oil also transported by rail.
There has been a fundamental shift in recent years in global oil markets. The U.S. has been our primary export market; in 2014, 97 per cent of our crude oil exports and 100 per cent of gas exports went to the United States. While the U.S. will remain an important market, it has become increasingly self-sufficient in both oil and gas production as a result of the shale boom. To maintain our current production, let alone grow the oil and gas industry in Canada, Canada will need to diversify its markets, particularly to access growing markets in the Asia-Pacific region.
It is also worth noting that, even under the most optimistic climate change scenarios, our colleagues at the International Energy Agency expect global oil demand to continue to increase through to 2040. Canada has the potential to be a reliable, stable and sustainable supplier of energy in the global markets as we move forward over this time frame.
Turning to slide 5, recent pipeline capacity constraints have resulted in an oversupply of crude oil in North American markets. This has resulted in significant price discounts for Canadian crude oil over the past several years. Despite the recent decline in oil prices, Canada's oil production is expected to increase over the next five years, even if no new pipelines are built.
Without new pipeline infrastructure, reliance on rail will continue to grow. To keep up with production, approximately 1 million barrels a day of new pipeline capacity will be required by 2020, and 2 million barrels per day by 2030. In the current low-price oil environment, the difference between sending oil by rail or pipeline significantly impacts project economics. We're talking about the cost differential of about $5 dollars per barrel more to the West Coast, $6 per barrel to the East Coast and as much as $10 per barrel more to the Gulf of Mexico. We're talking about $30 per barrel for oil is a significant reduction for producers.
Turning to slide 6, building new pipeline capacity would reduce transportation costs and assist companies in advancing production projects under development. More broadly, the Conference Board of Canada has released some recent studies that estimate the broader economic benefits of proposed oil export projects, both the benefits of construction and operation of these projects.
The development of a pipeline to tidewater would improve access to markets for our Canadian oil producers and strengthen Canada's long-term energy security.
Turning to slide 7, private-sector proponents are advancing a number of proposals to develop new pipeline export capacity out of Western Canada. It includes a number of projects that the government will need to make regulatory decisions on in the coming year or two. This includes Kinder Morgan's Trans Mountain pipeline expansion, Enbridge's Line 3 Replacement Program, as well as the Energy East project that would run from Alberta to Eastern Canada, which the NEB is expected to start its regulatory review on in the coming weeks.
Turning to slide 8, pipeline development is at the nexus of public debate over the development of our natural resources and concerns around protection of the environment. The reality is that, as Minister Carr has noted on a number of occasions, it is not an either/or proposition: we can do both.
Turning to slide 9, a clean environment and a strong economy can go hand in hand. The Prime Minister's mandate letters to the Minister of Environment and the Minister of Natural Resources signal the government's commitment to developing our resources in a sustainable manner, respecting the rights of Indigenous peoples and supporting the development of a more resilient natural resources sector. Without public confidence in the regulatory environmental processes, proposed projects simply will not move forward.
That is why the government has announced its intent to modernize the National Energy Board and review federal environmental assessment processes.
On slide 10, while this work is underway the government has announced a transition strategy on how it will make decisions on projects currently under review. The strategy will enhance our engagement of Indigenous peoples, provide opportunities for Canadians to express their views and ensure that decisions are based on science and the facts.
There will also be an assessment of pipeline projects' upstream greenhouse gas emissions, which will be carried out by our colleagues at Environment Canada. These principles underscore the commitment to work in partnership with Indigenous peoples and ensure that the impacts on their rights and interests are understood and reflected in decision making.
Turning to slide 11, we are moving forward with changes now to improve the performance of our pipeline safety regime. The Pipeline Safety Act, which will come into force on June 19, will ensure that Canada maintains a high standard for pipelines across the country. The health and safety of Canadians and the protection of the environment are at the heart of this legislation. The act will further strengthen Canada's pipeline system in the areas of spill prevention, preparedness and response and liability and compensation. More specifically, it will enshrine the "polluter pays" principle in statute, holding companies absolutely liable, regardless of fault, up to $1 billion to respond in the event there is an incident.
On slide 12, in conclusion NRCan recognizes that pipeline development will support the development of a more sustainable, resilient oil and gas industry. The development of these resources would create jobs and support economic growth and can proceed in an environmentally sustainable manner. The government's commitment to modernize the National Energy Board and review environmental assessment processes will support and address some of the concerns that have been identified with respect to infrastructure development and ensure that any projects that proceed are safe for the environment and for the public.
The Chair: Thank you for your presentation. We will now move to questions.
Senator Mercer: Thank you very much for being here. We appreciate your time.
I will refer to a document you may or may not be aware of, but I recommend it to you. It is a document produced by the Canadian Chamber of Commerce called Canada's Top 10 Barriers to Competitiveness in 2016. Their number 4 barrier is "Canadian resources cannot get to world markets." I won't read the whole thing, but I will quote this. The government "should seek partnerships to establish a common fact base surrounding the options for market diversification so project risks can be properly and transparently evaluated."
First, are you familiar with the document and, second, how do you feel about what they have said in that one statement? They said a lot more.
Mr. Hubbard: I am familiar with the document. It has been some time since I have gone through the details of it, but I understand. It's not just the chamber, but a number of institutions have identified access to tidewater for our natural resources as being a significant opportunity to strengthen the competitiveness and the economy of Canada going forward.
Senator Mercer: They go on to say under their subheading, "The way forward," that we should: "Invest and develop key energy infrastructure, including the exploration of all responsible options to enable tidewater access for Canadian energy resources."
I think we are part of that process. They didn't suggest it, but we're part of the process in having this discussion.
Does the department have an opinion about whether pipelines, east or west, are the safest, fastest, most economical way of getting our petroleum to market?
Mr. Hubbard: Pipelines are recognized as one of the safest and most economically reliable means of moving large volumes of petroleum products or crude oil over long distances. That said, other modes of transportation also play an important role in our overall distribution network, whether it be rail or truck infrastructure as well. Pipelines are an important component of our energy industry.
Senator Mercer: Interesting. Transport officials who were here earlier didn't have an opinion on pipelines, but you have an opinion on transportation by rail, truck, et cetera. I find that interesting.
You mentioned a million barrels a day. I am sorry, I might have missed what you said about that. Could you refresh my memory on that?
Mr. Hubbard: Canada produced about 3.9 million barrels per day of oil in 2014. The National Energy Board's latest forecast predicts we will grow our resources by approximately a million barrels per day by 2020, 2021. Given that our crude oil pipeline network is already at full capacity and that we are already utilizing rail to move our oil, we will need to expand our pipeline network during that time frame or will increase our reliance on rail.
Senator Mercer: Have you done an economic analysis of the impact of the construction of pipelines? Obviously, that means that you are taking about pipelines east and west. In going west there are several options. Have you looked at the economic impact that would have? The other economic impact is the change in the price of crude oil if we go tidewater versus north-south. If we go south with our product, we are selling it at a discount to the Americans. If we go to the rest of the world, we are selling it at world prices.
Mr. Hubbard: On the first question, there have been a number of studies done by private-sector firms on the economic impact of pipeline infrastructure. It's essentially a private-sector decision to put forward these proposals, and the economics of whether or not they work are up to those private-sector investors. They have put forward a number of different proposals.
If you look at the magnitude of some of these investment decisions, as much as $15 billion for some of these infrastructure projects, it would have a significant impact on the economic development of the country going forward.
In terms of differential between Canadian crude oil production and global crude oil production, that differential has largely disappeared over the last year due to a number of factors, but there is a risk of that differential widening again, as our production continues to increase in North America, if we don't find ways to expand our infrastructure capacity to get oil to tidewater.
There have been a number of studies over the years looking at what those impacts of that differential between Canadian prices and global prices could be, and it's significant depending on the analysis.
Senator Mercer: The other analysis that needs to happen is if Canada were able to get to tidewater, both east and west, with our crude oil and with the volume that we can produce — and this may be beyond your scope; I don't know — it seems to me that historically, when there are troubles in the Middle East, the price of oil goes up. That's not just in downtown Halifax, that's around the world. Our being able to get to tidewater east and west could help contribute to price stability around the world, because of our ability to produce the volumes that we could produce if we had the proper pipeline facilities.
As I said, it may be beyond your scope, but I'm disappointed that you referred to "private" studies as opposed to departmental studies and departmental analysis of private studies.
Mr. Hubbard: The government has done some studies as well in terms of the economic impacts of infrastructure proposals and of the decline or the differential between Canadian and global prices. Our colleagues at the Department of Finance often include this analysis as part of their fiscal updates, given the importance that the oil and gas sector plays.
Senator Mercer: Would you have involved Global Affairs Canada in that analysis?
Mr. Hubbard: They would be aware of that analysis as well.
Senator Mercer: "Aware" is not involved. "Aware" is reading it in the newspaper. Would they have been involved in an analysis or input into what the analysis should look at?
Mr. Hubbard: I can't say specifically who the Department of Finance has consulted in carrying out that analysis. I know we have regular conversations.
Senator Mercer: What about your department, though?
Mr. Hubbard: Our department has regular conversations with the Department of Finance and shares information.
Senator Mercer: What about Global Affairs?
Mr. Hubbard: With Global Affairs as well. We have an interdepartmental working group that has been established at the assistant deputy minister level that meets on a bi-weekly basis to share information on oil market developments, given the important impact they have on both the industry and the broader economy as well.
Senator Mercer: I would suggest that those meetings, hopefully, will take an important turn soon.
Senator Unger: In the crude oil pipeline network, where do the refineries in Atlantic Canada get their oil from?
Mr. Hubbard: There are two refineries in Atlantic Canada: Irving in Saint John and the Come By Chance refinery in Newfoundland. Both of those refineries are primarily reliant on foreign crude oil, but the refinery in Saint John also has railway infrastructure that has been developed and can access North American crude oil as well.
Senator Unger: My question was: Where does that oil come from for the Irving refinery, for example?
Mr. Hubbard: I don't have the complete list of countries, but it comes from a large number of global crude oil producers. Given their access to tidewater, they have the opportunity to purchase oil from any producer.
Senator Unger: Like Saudi Arabia?
Mr. Hubbard: It could be Saudi Arabia, it could be Venezuela, it could be the United Kingdom or Norway as well.
Senator Unger: And the United States? American oil, probably the same oil that we sell to the U.S. at a discount, is transported and is effectively being processed and comes on the water to these refineries for processing; is that correct?
Mr. Hubbard: I would have to get back to you with the precise numbers, but we have seen an increase over the last several years of exports of U.S. crude oil into Eastern Canadian refineries, yes.
Senator Unger: Okay. You talked about the National Energy Board being modernized. How long do you think that will take?
Mr. Hubbard: It will take time to consult and engage Canadians on changes and reform efforts going forward, but we are moving forward as a department with changes now. Minister Carr has announced the interim strategy, which will deal with how we review projects that are currently under way.
At the same time, Minister Carr has announced his intent to launch an appointment process as well for recruiting new members to the NEB. As I indicated in my presentation as well, the Pipeline Safety Act will be coming into force in the middle of June, which will strengthen our pipeline safety system as well.
While we will do a broader review of the National Energy Board, we are moving forward with changes now.
Senator Unger: Might it take months or years? Can you speculate?
Mr. Hubbard: It would definitely be on the longer side of months to years, given that, as you look to engage Canadians on these changes and get into potential legislative reforms, it takes time to move through that parliamentary process as well.
Senator Unger: I have a question about this "polluter pays" principle being enshrined in law.
Was it such a problem previously that it now needs to be enshrined in law? For the last several years I've been hearing that it's almost an accepted norm. Was it such a problem that it needs to be enshrined in law?
Mr. Hubbard: My colleague might have more to add on this from his experience in individual reviews, but we've never seen a specific incident where a pipeline company has walked away from its liabilities in the event of an incident. However, we have heard from Canadians over the years, in the context of some of these reviews, that the concern is there that if a company were to default or walk away from this incident that the public or taxpayers could be left to pay those costs of cleanup. This specific change is to put in place a system to avoid the potential for that to happen.
Senator Unger: Do the shippers not have to have a billion dollars in insurance in the event of a casualty, or is it more now?
Mr. Hubbard: That is one of the measures that will come into force with this legislation. They currently don't through legislation. The National Energy Board has imposed some conditions on individual projects as part of their approvals, but broadly across the industry it will be through this new legislation that we will have new financial requirements imposed on those companies.
Senator Unger: Do they have it in principle now?
Mr. Hubbard: In principle now companies have unlimited liability if they are proven at fault or negligent. The changes being introduced will put in place that billion-dollar liability regardless of fault so that that money is available right away to pay costs of cleanup.
Senator Unger: There was a comment that Canadians need to be consulted. We had a witness come a couple of weeks ago who was of the opinion that every single Canadian should have input into this if they so choose. To what extent will Canadians be consulted?
Mr. Hubbard: On potential reforms going forward, those processes are still being defined but the government has made some broad commitments about being more inclusive in its consultations and engagement going forward. Tim can probably speak to some of the examples of how this is being implemented for individual projects now.
Timothy Gardiner, Director General, Strategic Projects Secretariat, Major Projects Management Office, Natural Resources Canada: Is there an interest in getting into specific projects?
On the Trans Mountain expansion project, for instance, as part of the interim principles that were announced in January the government took action in May and announced a ministerial panel. Three eminent Canadians will consult and engage communities along the pipeline route and will also solicit and interpret feedback from the public through a website that we're setting up on the Natural Resources Canada website. They will report to the Minister of Natural Resources in November.
That is part of the government's commitment to consult more broadly with Canadians.
Senator Unger: Thank you for that.
As you can see, I'm from Alberta; Edmonton specifically. I haven't heard this figure recently, but two or three months ago it was that $30 billion in future investments in Alberta, specifically in the oil sands, have been cancelled. That certainly is giving Canada, I think, a bad reputation. We are not reliable, and now we have more red tape, more delays and more restudies.
In your opinion, Mr. Hubbard, which of the proposed pipelines is most likely to succeed and when?
Mr. Hubbard: What I would say to this specific question is that we are not in the position of picking winners in terms of individual infrastructure projects. We have a regulatory process and system in place. If these projects can meet those requirements, then the government will take a final decision on them going forward.
Senator Unger: Of course.
Mr. Hubbard: I would say that each of the proposals has its strengths and weaknesses. Those are being discussed and reviewed as part of the broader project reviews under way on each of those.
Senator Unger: If more regulations and more onerous taxes upstream continue to be piled on, it is likely that some of these companies will pull out and go somewhere else.
Mr. Hubbard: Canada operates in a competitive investment environment. Industry makes investment decisions based on where they can earn the best return. A lot of that relates to time and the certainty that they can make these investment plans within a certain time frame, so quite cognizant and moving forward with reforms that certainty for industry is an important principle. At the same time, a number of other broader objectives are out there that these regulatory systems are put in place for as well.
Senator Black: I am also a senator from Alberta and, like Senator Unger, I spend time every day on this file.
I want to start by thanking each and every one of you for the work you do on behalf of Canadians. In my view, you are working on the most important file in terms of Canadian prosperity. By virtue of the document that you tabled today and your comments, you clearly understand the file. I am very appreciative that you are doing what you can to advance this important matter.
Before I get to the substance of my questions, which relate to LNG so you can start to think a bit about that, I want to confirm for the record that you have made two points that align with my point of view. First, you have indicated clearly that Canada will need to diversify its energy markets. We all agree, but it is very important that we hear that from the Government of Canada.
Second, you have confirmed what I think we all understand: that the demand for oil globally will continue to increase until at least 2040. I want to confirm that you have made those two statements clearly.
Mr. Hubbard: That is correct.
Senator Black: That is very helpful.
Your department is doing what it can to move this forward. That is my view, which I take publicly all the time. I want to know from you what you think this committee should do to ensure that we get the result we need. There is no secret that we are looking to ensure that we can get oil from Alberta to the West and East Coasts. What should this committee do to assist you in advancing this file?
Mr. Hubbard: That is a very good question. You are already doing it in the support of facilitating a fact-based dialogue around the development and transport of our resources. It's important that Canadians engage in this discussion and ground their understanding and debate around these issues in the facts. Your study and its results will help to contribute to that dialogue going forward.
Senator Black: If you have any other ideas let us know, because we want to be constructive on this dialogue.
We haven't had an opportunity to talk much about LNG. My view is that because it tends to start on the far West Coast of our nation and so much of the oxygen has been taken by the pipeline debate, I think Canadians, and one hopes not the Government of Canada, are overlooking the stunning potential opportunities that LNG offers to Canada in terms of an industry, as we all know.
I want to ensure that the viewers at home know that we have a number of proposals now, and two very important ones: PETRONAS and LNG Canada. Combined, they are $80 billion in private money. There is no government money, but $80 billion in private money. This is something that I strongly believe would be a good thing for Canada.
I want to know what the Government of Canada is doing to ensure that this happens. I don't know where to look.
Mr. Hubbard: First, you are right in that a lot of the public debate is focused on the need to diversify our markets for Canada's oil production. It is equally important and relevant, and probably more so, to diversify our markets for our natural gas production. With the shale boom in the United States, projections are that they will become self-sufficient in their natural gas production as early as 2017. Over 60 per cent of Canada's natural gas production is currently destined for the U.S. market. If they no longer need our gas, it will not be about growing our industry but about maintaining the industry we have. LNG would play that important role in providing new markets for that tremendous resource we have in Canada.
In terms of what we are doing to support that industry going forward, LNG development is primarily regulated by provincial jurisdictions. Our colleagues at the Major Projects Management Office are working closely with federal colleagues around the environmental assessment and regulatory processes for those projects and the required federal permits to ensure that those processes are managed as expeditiously as possible.
Also, we are working closely with the Province of British Columbia and looking at some of the other issues and requirements that will help to facilitate this development activity going forward, such as the development of a regulatory regime for projects developed on port lands. The federal government has been actively engaged in those issues as well as the relationship and discussions with Canada's indigenous peoples that are impacted by those projects.
Senator Black: I would observe that is all tremendous work. I know you are doing that work and it is good work, but the clock is ticking quickly. PETRONAS, Shell and the partners in Shell have options globally, not only in respect of LNG opportunities but also other places to put their money.
I am interested in your view on the following: Should the Government of Canada not send a very strong signal from the top that these projects matter to Canada and that Canada will do what is required, appropriately, to ensure that these projects come to fruition? It will not be good enough to tell leadership that we're working with the Government of British Columbia, having further consultations with indigenous peoples and working on regulations. This has been going on for close to a decade. These companies need assurance that these projects matter to Canada. I want to know what you would recommend your masters do to ensure this.
Mr. Hubbard: I mentioned previously that there is a tremendous economic opportunity from LNG development going forward. You are right that it is a competitive global market, and companies will make decisions on where to invest their capital going forward.
We have tremendous opportunities and advantages in developing that industry in Canada. At the same time, we have a regulatory regime and requirements in place that companies must meet before they will get the "go" or "no-go" decision. We need to clear that before we can provide outright support for any individual project to ensure that they can meet and satisfy the requirements we have put in place in Canada.
Senator Black: Could you not take the position that Shell and PETRONAS, assuming that A,B, and C happen, you need to know that we are extraordinarily supportive of this initiative, as opposed to appearing to be in the back row of the bleachers in a very large stadium.
Mr. Hubbard: It's a tough place for a government to be.
There are arguments on both sides but, at the end of the day, when regulatory decisions need to be made, it's tough for a minister or cabinet to be cheerleaders on those projects when they need to make those tough decisions based on the facts before them.
Senator Black: The NEB has approved the PETRONAS project. Correct?
Mr. Hubbard: The National Energy Board approved an export licence for the PETRONAS project, yes.
Senator Black: PETRONAS would have the regulatory authority from the Government of British Columbia? All we're waiting on, as I understand, is CEAA.
Mr. Hubbard: We are waiting on a final federal environmental assessment decision on that project.
Senator Black: I understand that with regard to the Shell project, we're waiting on nothing except Shell and its partners. Is that correct?
Mr. Hubbard: There may be some outstanding permits associated with that development.
Senator Black: If I don't know it and you don't know it, we can assume they're not major, correct?
Mr. Hubbard: My understanding is that they're working towards a final investment decision at the end of the year and are on track to make that decision, but we'd need to talk with our colleagues at Shell about that.
Senator Black: My suggestion to you is, if they move that forward, that participants need to know that the Government of Canada supports this initiative.
I think it could be argued, respectfully, that we are seen to be in the back row of the bleachers in a very large stadium. I don't want to be at a hearing a year from now asking the question, "What went wrong? What should we have done at this time?"
Senator Eggleton: I want to ask you about the situation with the United States. You say that currently about 97 per cent of the crude oil exports and 100 per cent of gas exports go to the United States, but you point out that the situation is changing partly, certainly, because of the shale boom.
Where do you expect the numbers to go in the next year from where they currently are, and will this shale boom last? There has been a lot of controversy over some of the environmental impacts of it, like earthquakes and such.
Look forward a bit in how you see this situation evolving.
Mr. Hubbard: A number of factors go into these things. I would certainly be happy to share some of the most recent production forecasts from our colleagues at the National Energy Board that could give you precise numbers around this.
As I mentioned, on the oil production side of things, based on projects the currently under construction, we anticipate that Canadian oil production will increase by around 800,000 barrels per day over the next five years, minimum. It could be more if prices increase and support further decisions.
On the gas side, it will be dependent on whether we develop an LNG industry here in Canada. Without the development of an LNG industry, our gas production will be, at best, flat if not declining going forward given the huge increase in production in the U.S.
Regarding the development of shale resources and whether it's here to stay or not, it's a huge technological innovation that has been pioneered by oil and gas companies here in North America. They're very innovative and they will continue to find ways to develop these resources, both more competitively but also reducing the environmental impacts around it going forward.
The U.S. has brought on line about 4 million barrels per day over the last four years from shale production. The recent decline in prices reduced their projections over the next year by about 1 million barrels per day, but as we see prices start to rise again we expect that production will start being developed again.
Senator Eggleton: Any other additional information you can provide to the clerk would be great.
We've had a number of people come here and talk about the concept of social licence. Are you engaged in the conversation about that? How do you apply it to the development of your programs and policies?
Mr. Hubbard: We're very familiar with the term. I'm not sure if that's the precise term we use internally. Often, in our internal discussions, we refer to it as building public confidence in the development of our resources.
There's a significant amount of work underway to address these issues. I think it's really at the heart of one of Minister Carr's mandate commitments around the development of a Canadian Energy Strategy and working with the provinces in this regard, and building public confidence will be a big part of that objective going forward.
Senator Eggleton: You might have even said that a couple of years ago before social licence became part of the jargon. What's different?
Mr. Hubbard: I think expectations are growing amongst Canadians to be involved in these decision-making processes going forward.
Energy development used to be a quiet issue not that long ago. I remember the first expansion of the Trans Mountain project back in 2007 and 2008, when I think there were fewer than 10 intervenors who signed up to participate in that project. There is a very different scenario currently under way.
It goes to the heart of energy and environmental issues being high on the public agenda here in Canada, needing to engage Canadians and ensuring that we're making decisions based on science and the facts.
The Deputy Chair: I have a few questions while we're here.
My first one is with regard to the proposed pipelines and their effect on GDP. You mentioned the Conference Board of Canada estimates that the Trans Mountain expansion and Energy East projects will generate $77.6 billion in additional GDP for the Canadian economy. If you take line 3, the Northern Gateway and Keystone XL, what does that do to those numbers? Would it be unrealistic to suppose it would double them?
Mr. Hubbard: I would hate to hazard a guess, but by adding those projects up you'd be talking at least another $25 billion of capital investment which would have downstream impacts.
The Deputy Chair: So we're probably looking at close to double that number if these projects are approved. That's a lot of revenue and economic development for the country. I want to put that on the record.
Something else I wanted to mention is that the refineries on the East Coast get their oil from various sources. For some, like the refinery in New Brunswick and some in Quebec, it comes by rail, but most of the product arrives in ships' bottoms.
Do you have an exact amount of how many barrels of oil a day go to all the refineries on the East Coast of Canada, including Quebec and Atlantic Canada?
Mr. Hubbard: I would have to get back to you on that, but we have those numbers.
The Deputy Chair: I would think it's in excess of something like half a million today.
Mr. Hubbard: It would be in excess of that if you're adding the Quebec and Atlantic refineries.
The Deputy Chair: When it comes to the safe transportation of petroleum, it's not hard to make the point that petroleum going through a pipeline is substantially safer than petroleum arriving in ships' bottoms.
Mr. Hubbard: Pipelines do have a strong safety record in Canada. I think over the last number of years we've proven that we can deliver and transport resources safely through pipelines but I think we can, as well, through other methods of transport if we have the appropriate requirements in place.
The Deputy Chair: As somebody who lives on the coastline, I don't think we hear enough from any government the argument of advisability and importance of using pipelines to move petroleum to our refineries as opposed to going through our waters. I think the people of Atlantic Canada would appreciate that. The Government of Canada should be cognizant of that reality, because I don't hear ships' bottoms discussed when it comes to the movement of petroleum.
Mr. Hubbard: It is one of the issues that is top of mind to Canadians during these project reviews. The safe transport of these resources, whether it's pipeline or marine, is top of mind.
The Deputy Chair: You mentioned the complex decision-making landscape. There is nothing new about concerns around risks and impacts of pipeline spills. That has been around for 75 years. That is always something to deal with.
You mentioned here that the provinces have established their own pipeline conditions extending beyond regulatory processes. We all understand that anybody can come to the table and express a concern, but neither the provinces nor municipalities have jurisdiction when it comes to pipelines. Decisions, when it comes to pipelines, are completely within the purview of the federal government; is that not correct?
Mr. Hubbard: The federal government primarily has jurisdiction over federally regulated pipelines, but it does not absolve those infrastructure projects from undergoing provincial authorizations that may apply to those projects as well.
The Deputy Chair: It's fair to say that they don't primarily have jurisdiction, they fully have jurisdiction. They have to consult, obviously, but the jurisdiction and the final decision making is with the federal government.
Mr. Hubbard: The final "go" or "no-go" decision would primarily rest with the federal government.
The Deputy Chair: I want to thank you for being here today. We very much appreciate your time.
This meeting is adjourned.
(The committee adjourned.)