Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 5 - Evidence, September 22, 2016 - Morning
VANCOUVER, Thursday, September 22, 2016
The Standing Senate Committee on Transport and Communications met this day at 9 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, I call this meeting of the Standing Senate Committee on Transport and Communications to order.
On behalf of the committee, I would like to express our distinct pleasure to be in the beautiful city of Vancouver.
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. This study began last March with the objective of finding a better way to bring Canadian oil products to market.
British Columbia is a key partner to bring Canada's natural resources to international markets. As our gateway to the Pacific, our nation's crude oil must pass through the province to the various ports.
We are pleased to hear from British Columbians about their role in the transport of crude oil.
I would like to introduce our first witness from Generating for Seven Generations, Matt Vickers, Chief Executive Officer; Ward Kemerer, Chairman; and Len Wilson, Partner and Managing Director.
Please begin your presentation and afterward the senators will have questions.
Matt Vickers, Chief Executive Officer, Generating for Seven Generations: Thank you, Mr. Chair. First and foremost it is very important for me to acknowledge the traditional territory we are on. If you do not mind, I lift my hands to the Coast Salish people, all those that have gone before, all those leaders today and all those yet to come, for allowing us to be in their territory.
It is very important for me, senators and Chair, to do that, especially because I carry hereditary responsibilities from the nations that I have a bloodline to. My great-grandfather from Skidegate, so Haida; my grandmother's father and my grandmother, Tsimshian, from the village of Laxklan or Kitkatla just out of Prince Rupert; and my grandfather that married her, another nation, the Heiltsuk, in Bella Bella. When we carry hereditary names protocol is crucially important, I am sure as you can appreciate. Thanks for allowing me to do that and thanks for the opportunity to present.
I have been at it seven years and my partners another two years prior to me. You have a hard copy of our presentation in front of you. I am not going to walk through it but for any questions we certainly can come back to it. The key of our presentation is to look at alternatives. If we are saying no to pipelines, we are saying no to supertankers. My hereditary responsibility is ensuring for the next number of generations as our elders teach us that if we are going to make a major decision today how is that going to affect seven generations from now? They are going to have to live with it, hence the name of our company, G7G.
The most important reason for saying that the supertankers aren't going to happen on the pristine northwest coast is because, as I say, we have hereditary responsibilities for the food for our coastal communities.
We certainly know that if we are saying no and the world needs the energy it will get the energy one way or the other and we will need to provide an alternative. We certainly believe we are providing the true alternative to pipelines coming to the pristine coast to load supertankers. We are providing an alternative by looking at the original stewards of the land, the First Nations. From Alberta, the Treaty 8 First Nations, the 24 of them involved there, right to Alaska, the Chugach in Prince William Sound. We all know the history of Exxon Valdez, what has happened with respect to that accident. They are now experts in guiding the supertankers in and out.
We are also feeling that why spend a lot of money building another port to export oil when we do not need it. There is one already in place. They are experts, as I say, in guiding the tankers in and out since the ExxonValdez. We looked at how to work with the existing port. Ward and I went up to meet with the Chugach to ask them if we looked at this idea would they be open to receiving the oil.
Most importantly along with that is understanding and knowing we have a lot of people that we have to deal with along the route and how do we get it down to the tidewater in Valdez. Initially four of us started G7G but Tom Jackson turned 65 a couple of years ago and said, "Matt, this is taking a little longer than I thought it would. I am retiring," so he retired.
They used to say it is four guys with a great idea. We were looking to engineering firms to assist us in approaching government. We went through discussions with a number of firms. The guys might be able to help me in case I forget, but we talked to firms like Siemens. We talked to WorleyParsons. I think Ward even had discussions with Bombardier. Len and Ward actually had discussions with AECOM. They looked at the project and said, "Okay, here are these four guys with this idea. Let's see if it is real." We engaged with them, did a scoping document, presented it to the Alberta government and then lobbied the Alberta government to assist in getting feasibility study money.
Again, gentlemen, you may be aware there were earlier studies done for this rail. The U.S. army in the Second World War was looking at building a rail to Alaska to get fuel to their equipment there. In 2005 to 2007 the Alaska-Canada rail link study was done for one commodity only, iron ore or basically the mining industry.
My partners at that time were working on green energy in the Tahltan territory. The people there were wanting to know if there were different ways to get the product from mining to market. These other studies that were done certainly came up on Google. It was looked at and we said, "Instead of one commodity, what about all commodities?" As we can appreciate a pipeline can only ship one commodity and rail can ship everything and anything.
The guesstimate of the Al-Can Rail link study to build that rail link was $11 billion and the revenue generation from that was $1 billion, I believe. The prospective funders of the day basically just put it on hold.
From there we looked at all commodities and what about pushing this rail, this alternative. Indeed we started looking at the opportunities to provide an alternative, to look at the rail, and to get the proper experts involved.
One of the key things in B.C. is looking at buy-in with the First Nations traditional territory. With respect to the lack of treaties being signed, the partners and I said, "If we want to do this, we have to do it right. Let's partner with the First Nations." We started with the Chugach and the Chugach agreed to take anything.
The North Slopes resources are declining. The pipeline was designed for 2.2 million barrels per day. It is down to 500,000 barrels per day and in decline. They have to add extra heat to make that oil flow. The Chugach said they would welcome anything we could bring to keep the oil flowing and keep people gainfully employed.
Then we followed the route all the way back to Fort McMurray, meeting with all the First Nations and getting letters and resolutions of support from all of them. We then approached the Assembly of First Nations that represents all 634 First Nations in Canada and got a resolution from them.
With respect to governments I believe the most important aspect was that it was a great idea but how much was it going to cost. There is a link to the pre-feasibility study in the report that has been given to you. It was done with the Van Horne Institute, AECOM and ourselves. We certainly went through it in fine detail. I just got back from a conference in Anchorage and some of the engineering firms there were blown away by the appendices and the amount of information that is available.
The key right now is governments. Certainly in Alaska we are hopeful because they have been trying to get this support from the governors and mayors. Where is the funding going to come from?
Believe it or not many have been coming to us saying that they can raise the funds, but in the latest trip we made to China the success rate with respect to the number of meetings over 10 days was tremendous. We had a letter of intent before we went. We actually have a memorandum of understanding to finance the entire project and being a joint venture partner with the First Nations.
I am trying to keep it short. It is a lot of information, because I want to make sure that there is time for your questions. If any of my colleagues think I have missed anything out, certainly feel free to jump in but, gentlemen, I did my best to give you the 10,000-foot version as quickly as I can to allow you time to ask us questions.
Senator Black: Gentlemen, thank you very much for what you are doing in undertaking this important project. I am a senator from Alberta and it is obviously key to Alberta's prosperity and to Canadians' prosperity that we get oil to markets outside of North America. Thank you for the initiative that you are undertaking.
View yourselves as professors, if you will, because I have a couple of questions that I want to understand your point of view on. The first thing is really a technical matter. Earlier in the week in Edmonton we heard from a gentleman named John Falcetta who is involved with a project. Perhaps he is even your partner, I do not know, but he is involved with a project where he is proposing to do rail transport of oil from Fort McMurray to Valdez. Are you aware of this gentleman and that project, and what can you tell us?
Mr. Vickers: I want to keep this very civil. Mr. Falcetta was the vice-president of AECOM, represented AECOM and G7G with an investment banker in one of our presentations. He left AECOM and threw his hat in with a couple of investment bankers. I am doing my best to stick to the adage that someone trying to copy you is the greatest compliment, but someone that was in a position like that doing something like this, I will just say for me personally, is a little disheartening.
Senator Black: I will take it from your comments that you are not partners.
Mr. Vickers: Correct, sir.
Senator Black: I have a couple of other questions to help my understanding. You have worked from the assumption that there will be no tanker traffic on the West Coast. That was not discussed. That is your assumption. I am not saying you are right or you are wrong but that is clearly your assumption.
Yet, don't I understand that today there actually is tanker traffic on the northwest coast, not emanating from Canada but traffic moving down the coast, down to Seattle, San Francisco and Los Angeles and traffic moving up? I understand if the waters are rough outside of Vancouver Island they move in the inner channel. I have an understanding there is already traffic moving on this coast. Am I wrong?
Mr. Vickers: No, indeed you are right. I mentioned my heritage. There are some refineries wanting to build LNG plants other than Kitimat that our people are opposed to. It is looking at these big supertankers coming into a very confined area, especially Douglas Channel, right?
Senator Black: Right.
Mr. Vickers: You are just crying for an accident to happen.
Senator Black: I understand. I am not arguing but I just wanted to confirm my understanding that there currently is tanker traffic. There are people who have shared information with us that tanker traffic into Kitimat is a different proposition than tanker traffic into Prince Rupert.
Mr. Vickers: Yes, sir.
Senator Black: This is what people suggest. Based on that, what is your view respecting the Enbridge's Gateway project? If that terminus was to be relocated from Kitimat to Prince Rupert, do have you a view on that?
Mr. Vickers: Again, partners, if I may take off my G7G hat and put on my hereditary hat, indeed we make our living from the ocean, the Skeena River and Nisga'a, the Nass River, the greatest salmon spawning rivers in the world. The spawning beds are in the Prince Rupert area.
Senator Black: Right, you bet.
Mr. Vickers: Yes, that is the short answer, a great objection to that.
Senator Black: Would your objection also continue to the development of LNG facilities either at Kitimat or Rupert?
Mr. Vickers: No objection to Kitimat whatsoever. None of the First Nations have ever objected to that.
Senator Black: Is the Kitimat project is the Shell project?
Mr. Vickers: There have been a number there and one has backed out, but yes.
Senator Black: And the Petronas project is at Prince Rupert?
Mr. Vickers: Yes.
Senator Black: Or proposed at Prince Rupert. Thank you very much, gentlemen.
Senator Neufeld: Thank you for your presentation. I know you have been working at this for quite a long time.
You say that you met with leadership of First Nations, tribes, villages and communities along the proposed project and you are already receiving letters of support for the concept. Can you tell me how long ago you actually visited with those groups, the First Nations? I guess that would be the Treaty 8. How many letters of support have you received from the First Nations to date? What has been the timeframe from when you first talked to them about this to now?
Mr. Vickers: Yes, 2009 is when I got involved and the chairman and I first went to meet with the Chugach in Alaska, as I stated earlier on. We asked them and we got their answer that they would welcome anything we could bring and then followed up with letters and resolutions of support from Alaska. We then went to Yukon. Over a three-year period we knocked on every door along that proposed route on the map you are looking at right now from Valdez, which is the Chugach territory, all the way to Fort McMurray.
Len and I actually were the ones that went to one of the Treaty 8 annual assemblies and got a letter and resolution of support from them. They were the last ones. Individual First Nations communities, Fort McMurray and Mikisew Cree also gave letters of support in addition to the tribal organizations responsible for the territory. Once we finished with them we then went to the Assembly of First Nations and got a resolution of support from the Assembly of First Nations which as I said represents all 634 nations. We have letters of support from all along that prospective route, except for one, and that is Fort Nelson.
On the next page you see there is a workaround around Fort Nelson if need be but there are relatives on both sides in High Level. The Kaska basically have said to us: "Once you find the financing we will go and approach our cousins and relatives and have a chat with them."
Senator Neufeld: That is good. What is your estimated cost? I know a lot of that area quite well. I have flown over it. I have driven it a lot. It is pretty rough country whether it is straight swamp or whether it is mountains. What kind of costs are you anticipating to actually have a railroad that would be able to transport oil safely?
Mr. Vickers: Again that is why it was crucially important for us to ensure that we chose the right engineering firm to walk through that process. In the pre-feasibility study there are numbers that looked at building another port in Valdez, which is not required, and building another pipeline, which is not required at this time because of the decline in the North Slope.
Right now the number that we are looking at is $27 billion Canadian. I believe from our trip to China it is listed as $25 billion U.S. Maybe that is a trillion Canadian, is it? Sorry, folks.
Senator Neufeld: No, I don't think it is quite that much. That is an awful lot of money, so what kind of return? Mostly what you would be building it for, I assume, is to transport oil because you are originating in Fort Mac. Although you will pick up other commodities along the way, or you could, I would think you are thinking about unit trains out of Fort Mac to move this oil. What kind of return do you need to actually satisfy a debt of $27 billion?
Mr. Vickers: It is important to note that we are at the stage of now finishing the business case to prove out the early numbers. Again, gentlemen, please correct me if I am wrong. With two commodities the conservative estimate is between $4 billion and $6 billion per year in revenue. The initial work that was done indicated where viable and where feasible a one million barrels per day haul one way, no back haul and no other commodity.
If you go through the pre-feasibility study appendices they are for two commodities and hence the Van Horne Institute with the University of Fairbanks, University of Calgary and Michigan Tech got involved with the mineral side of it.
You mentioned stopping in Fort McMurray. The Saskatchewan government has talked to us about extending it to Saskatoon because if we all remember a few years ago the grain producers had their greatest crops ever and had problems getting the potash to market. It just goes on and on, sir.
Senator Neufeld: How many trains would it take to move a million barrels a day? How many unit trains of let's say 100 cars?
Ward Kemerer, Chairman, Generating for Seven Generations: Could you ask that question again?
Senator Neufeld: In response to my question about what kind of a return you need on the movement of oil I understood Mr. Vickers to say that if they could move a million barrels per day on the rail line that would satisfy the debt.
Mr. Kemerer: Yes.
Senator Neufeld: I am asking about unit trains that run around 100 cars a train. How many trains a day would it take to move a million barrels every day, 365 days of the year?
Mr. Kemerer: I understand now. We challenged AECOM on one aspect of the work available on its website. We asked if with this fairly ambitious 2,400-kilometre project they could build a state of the art, purpose-built railway. I had asked them to spend as much as they could on developing a railway and building it properly to start, unlike a lot of the railways that we have in Canada, by lowering the grades and straightening out the rail track. They accepted that challenge and came back with tremendous fuel savings efficiencies.
Railway is already extremely safe. They came up with a train configuration or a consist as they call it of about 200 cars or 192, to be specific, with about six locomotives. We only require five locomotives to haul these, which is about half the number that CN would require. Perhaps, being from Revelstoke, British Columbia, at times on the toughest division that CP has they would almost require three times that many for the so-called double-unit train.
That is not a problem. In fact that is a very big efficiency move on the loading/unloading sides and the efficiency of moving that train forward down the track over two days only.
This is getting into the details and the weeds of the technical aspect of our purpose-built project. It would take a lot more to explain why we are going to be different but that gets around this purpose-built, super-efficient railway that we are going to build.
To answer your question about how many trains, if you just use the simple math of 700 barrels per railcar, that is 140,000 barrels per train. In the case of a million barrels we would need about eight trains a day. Make that 12 for 1.5 million barrels a day. That would probably be the limit of a single track state of the art and when we get into double track we could move much more. I hope that kind of answers your question, senator.
Senator Neufeld: I guess that is assuming everything works perfectly and that you can build that super rail straight. When I look at the mountains, and I know the mountains you have to travel through, they are not dissimilar to where you come from. It would be interesting to actually see that take place where you could have 192 cars behind six locomotives moving that eight trains per day on a constant basis. That is entirely up to you. It is just my thought process.
I just have one last question. On page 15 it refers to the benefits of this project for British Columbia and says, "Connect the North to the rail network of North America." You know that we already are, right? From Fort Nelson south is all connected to the North American market.
Mr. Kemerer: Yes.
Senator Neufeld: I wonder why you made that statement. It almost sounds as though we are not connected to the North American market yet we are from Fort St. John and Fort Nelson. Fort Nelson is pretty quiet now because nothing is happening in Fort Nelson as far as forestry and there is no oil there. That is their main haul. I wonder why you put that in there when already we are connected.
Mr. Vickers: Yes, I think most importantly is looking at Alaska connecting to the Lower 48 coming through Fort Nelson. I think the important point there we were trying to make is looking at how the north is now connected totally.
Another point I need to make, senator, came through the pre-feasibility study. Believe it or not, from Fort McMurray to Delta Junction in Alaska there is no grade higher than 1 per cent.
Senator Neufeld: From where?
Mr. Vickers: From Fort McMurray, the red line that you see on the map. There is no grade higher than 1 per cent.
Senator Neufeld: And that is to Delta Junction?
Mr. Vickers: Yes, sir. That is where Alaska Rail is now moving to join this proposed project so that there will be the connection. They have crossed the Tanana River. I believe they have run out of money and they are looking to the state for additional funds to finish their rail as well.
Senator Neufeld: Who said that from Fort Mac to Delta there is no grade greater than 1 per cent?
Mr. Vickers: AECOM.
Senator Mercer: Thank you, gentlemen, for being here. I appreciate your participation. I am from the East Coast so I am very unfamiliar with the territory we are talking about. I may be a bit naive in my questions, but I am sure you will be patient and gentle with me.
The question I ask is: Why are we going to Alaska when looking at your map it seems like a shorter distance from Fort Mac to Prince Rupert? Could you give me an answer to that question?
Mr. Vickers: Indeed, sir. In my opening statements I mentioned traditional and hereditary responsibilities for the First Nations on the coast and protecting those pristine waters for the benefit of future generations.
You may be aware that the Royals are on their way to tour this area right now. They are going to be stopping off in my home community in Bella Bella and looking at the Great Bear Rainforest.
One of the key things we have said is that there is no way we want to see another incident like the Exxon Valdez. To ensure that does not happen is to ensure that those supertankers do not come into very enclosed areas prying for an incident something like that to happen.
Senator Mercer: There has been a very large investment in the development of the Port of Prince Rupert in recent days. It is there and it is happening. Why would we not want to capitalize on that very large investment by adding another product to be exported through Prince Rupert?
It seems to me there is a fair amount of duplication of effort here. I do want to ask a little more about the train in a moment but I do not understand why in this map you provide at page 9 it seems to me a lot closer between Fort Mac and Prince Rupert than between Fort Mac and Delta Junction.
Is the cost per inch of rail line significantly high enough that one would think changing a route, even if the route is not a straight line from Fort Mac to Prince Rupert, would be a lot cheaper than a line from Fort Mac to Delta Junction?
Mr. Vickers: Senator, with all due respect, I think I have answered that. There is no way we want to see that happen. There is a port already set up for exporting. They are exporting oil right now out of Valdez. That is not happening in Prince Rupert right now. It would not be duplication in any shape or form because there is no oil port on the northwest coast of B.C.
Senator Mercer: I appreciate that there is no duplication of a product going out of Prince Rupert currently but what we have going to Prince Rupert is a rail line.
Mr. Vickers: Yes.
Senator Mercer: And we have a port that has been developed and is functioning.
Mr. Vickers: Yes.
Senator Mercer: Why would we not capitalize on this very large investment that has been made in Prince Rupert?
You mention going across traditional lands. It would seem to me that in engaging our First Nations people in discussions about this and involving them from the get-go there are some opportunities for First Nations, particularly opportunities for young people in First Nations communities, to be trained to help build any lines that need to be built, to manage them after they are built, and to share in any profits that may be made in using their traditional lands for transport.
I also recognize that the lack of treaties in British Columbia which those of us in other parts of the country do not have complicates life. Isn't there an opportunity here to sit down and be a huge not short-term but long-term life-changing benefit to some of our First Nations communities?
Mr. Vickers: Thank you, senator, and that is exactly what we are doing from the 25 First Nations from Fort McMurray to the Chugach in Alaska. All of them are going to be 50 per cent equity owners in this rail project. AECOM can be operators to train the First Nations to be owner/operators eventually.
With respect to the financing, as I have said, we have just come back and we have the financing MOU in hand. They are just waiting now for the Prime Minister to make a statement with respect to any issues with this investor to do the joint venture with the First Nations along this proposed rail project.
Senator Mercer: The Prime Minister finds himself in a very precarious position because he has a bunch of decisions to be made with respect to moving of this product east, west, north and south. It is not going to be any surprise to anybody that he is going to make some enemies when he does this, one way or another. He may pay. There may be some political costs to him as well. However leadership does come with the tough decisions.
With the land that you are proposing to follow from Fort McMurray to Delta Junction you are moving farther north. I know about the railway in Churchill, Manitoba. I am Deputy Chairman of the Agriculture Committee so I have sat through the long and protracted debate on the dismantling of the Wheat Board by the previous government. At that time when we talked to people in Churchill and talked to people in the railroad at Churchill it was fairly evident that the railroad to Churchill was not as viable as it looked on the map because it was going across tundra.
The land is soft and there is a constant need for adjusting how to move product north to the Port of Churchill. The Port of Churchill itself is a terrific port, if you can get there economically and if you can get there fast. You cannot get there fast now. You have to slow the train down because of what you are going over.
Are we not going to encounter similar geographic issues as we move north and west from Fort McMurray to Delta Junction?
Mr. Vickers: That is an excellent question. I do not know about similar geography. Will there be permafrost? Sure, there will be permafrost. Have those issues been looked at? Will they be addressed? Yes, they will.
Alaska Rail has been operating for how many years from Anchorage up to Fairbanks and now they are extending to Delta Junction. I was just presenting at the oil and gas congress in Anchorage. A couple of the engineering firms pointed out that the trickiest area is going to be between Delta Junction and Tok but it is not impossible. To hear the engineering firms give that kind of information and feedback after the presentation was obviously very heartening.
Senator Mercer: However I have been on the train from Fairbanks as a tourist and not in a business context. A lot of those trains are going across pretty solid Rocky Mountain type of terrain as opposed to soft permafrost that will move and change over time. Are you telling me that the permafrost here is not an issue?
Mr. Vickers: Of course I am not telling you that and I am not an expert.
Senator Mercer: Nor am I.
Mr. Vickers: Yes, so we leave that to the experts and they tell us it is not an issue and that they can deal with it.
Senator Mercer: I hope they are not the same experts that told the people in Churchill they had fixed the problem because they did not fix the problem. The problem continues for the people of Saskatchewan and Manitoba who are trying to move very valuable product.
We are talking about moving another valuable product of petroleum from Alberta to market. Churchill moves some very valuable products to market as well or should be moving very valuable products to market from Saskatchewan, Manitoba and I suppose even from Alberta.
The Deputy Chair: Before we go on to second round I would like to raise a few points and ask a few questions myself.
Mr. Vickers, I want you to know I appreciate your personal commitment to protecting the environment, but I want to say we are all custodians of the environment. I certainly believe I am too. My family has been on the East Coast for hundreds of years and we live in a port so I appreciate how complicated it can be.
I want to get some more instruction from you, just direction on what you are thinking. You have no tankers at Prince Rupert. What shipping would you be comfortable with in Prince Rupert? You are going to run a spur line there or you would potentially run a spur line at Prince Rupert. You have spur routes from Watson Lake down to Prince Rupert. What could be shipped out of Prince Rupert that would be acceptable?
Mr. Vickers: Most importantly with respect to the maps we are looking at different spurs. The map should show that there is only one port for oil and that is Valdez.
The Deputy Chair: Right.
Mr. Vickers: For other ports it would be minerals. In the original study they were looking at the rail coming from Watson Lake to joining at about Kitwanga between Hazelton and Terrace to take any and all commodities except for oil to the Port of Prince Rupert.
The Deputy Chair: What about LNG or upgraded oil?
Mr. Vickers: Looking at how the LNG is going to be exported, one of the key issues we shared with Fort Nelson was that lakes were virtually disappearing. As far as they were concerned the government was not listening to them so they just are saying no to everything. We are saying that we can backhaul. We would put a bladder in our tanker cars, for instance, and bring water back for the fracking to alleviate that issue.
Looking at LNG export why not by tanker cars as well? In a lot of places in the world they do not have the pipeline infrastructure, but if you take a car, unload it and then just pipe from that, now they have availability for LNG.
Hopefully that is the short answer to your question with respect to other commodities.
The Deputy Chair: Senator Neufeld mentioned Kitimat and you had no problem with LNG going to Kitimat. What about heavy oil going to Kitimat? What is your opinion on that?
Mr. Vickers: Right, and the same thing. If you go back to the studies that have been done for years the Douglas Channel is very narrow. Those LNG supertankers are huge. If you add oil supertankers going in that narrow channel I am afraid you are just prying for an incident to happen, so not only the coastal First Nations but the Haisla in Kitimat themselves have said no to the supertankers.
The Deputy Chair: I just want to make the point that one of the great assets we have on the West Coast, is that Prince Rupert is the deepest and one of the finest harbours in North America. We have a great one in Point Tupper on the East Coast of Canada. It is an artificial harbor, though, created by the Canso Causeway. It is extremely deep and ice-free. These are two of the great assets that the company has in terms of export.
I just wanted to put that on the record because I know there is going to be a lot more discussion about this subject and Prince Rupert is probably going to be in the mix a lot. I just wanted to speak to you about those things and get your ideas about Kitimat and Prince Rupert.
Senator Neufeld: I was remiss in not asking you about getting approval from basically all the First Nations, which is great. That is not easy to do. I am sure there are conditions on some of those approvals. At least that would be my experience over time.
How about the environmental movement? Have you spent time with the environmentalists? Their real drive is to keep it all in the ground and it would not matter whether you are talking to them, whether the First Nations are talking to them, or others. At least that has been my experience and they fight a tough fight.
What has your experience been with the environmental movement? Have you spoken to any of them and, if so, could you share with us who you spoke to and get their approval that it would be okay to increase the capacity of oil coming out of Fort Mac, out of Alberta and Saskatchewan?
Mr. Vickers: I will let Len respond to this, as he had some meetings arranged.
Len Wilson, Partner and Managing Director, Generating for Seven Generations: Yes, we have met with some of the environmental groups. The main one we have been spent a lot of time with is Ecojustice that represents the groups. Because there are alternative solutions we started in the renewable energy. We have what we call project transition that we presented eight years ago of how do we get off fossil fuels someday. How do you get there? You have to have a plan.
Within the technology available to us and over the eight to nine years we have been working at this we have come up with a lot of different ideas on how we could do this to ensure that the environmentalists are involved as well. Can we use wind energy? Can we run the train by electricity? Can we extract the oil using electricity? All these technologies are there. It is just a case of what is going to drive it to make it happen. We are in conversation with them about that.
Senator Neufeld: I appreciate that wind energy is usually the first thing that comes up because that is what people associate all energy with. Electrical energy is just a small portion of what we use oil and natural gas for today. Most of the clothes we are wearing would not be on our back if we did not have petroleum products.
Mr. Vickers: Yes.
Senator Neufeld: That paved street you see out there would not be paved in asphalt from the bottom of the barrel and all of those kinds of things. The International Energy Agency has told everybody including those who are opposed to increasing the production of oil that consumption is going to increase over the next 30 to 40 years simply because the population is increasing. There will be more people needing those products that are produced. My frustration is with people saying we can go to wind energy and we have solved all the problems. It is such a small portion of it. In Canada 75 or 80 per cent of our electricity is generated by renewable resources. We are very good when it comes to the world stage on electricity already.
How about all the other things that we need on a daily basis that are oil driven such as medicines or you name it? I am sure you are aware that there are pages, pages and pages of heating our homes and those kinds of things.
Mr. Vickers: Yes.
Senator Neufeld: What do they say about that? I imagine electrifying the rail would add another $24 billion to it.
Mr. Wilson: I absolutely agree with you. We totally understand that petroleum is needed as a fossil fuel. That is what we are talking about and what we are talking to them about. As proponents for this railway we need to be responsible for the greenhouse gas emissions upstream and downstream. That is what we are talking to them about. I was talking about whether we could run this train using electricity produced by wind power. That is all I meant.
Senator Neufeld: It is specific to rail.
Mr. Wilson: Yes.
Senator Neufeld: And it is wind energy to electrify the trains.
Mr. Wilson: Correct, and also could we extract the oil using something. They ask us about that all the time because there are technologies out there that are not being used at this point in time. They ask us about that but that is where we are at.
Senator Neufeld: Does Ecojustice say that if you actually electrified the train they would be just fine with increasing production out of Fort Mac and the rest of Canada?
Mr. Wilson: They have said that they will wait for us to come and give a presentation.
Senator Neufeld: Thank you for that.
Senator Mercer: When we came here my fundamental question on this subject was really the issue of a Canadian product. The problem we have is not exclusively British Columbia's problem by any means. It is a Canadian problem. We are the third largest resource of petroleum products in the world. That industry has been driving our economy for a number of years. It is generating the wealth in this country that helps us be the wonderful place we are.
We have a problem. We have one customer. If you opened a Starbucks on a corner in Vancouver, mind you, you would be one of 1,000 Starbucks in this city but if you only had one customer you would be beholden to that customer. That customer could demand whatever he or she wanted from you. If you wanted to stay in business you would continue to deliver.
We are in that situation. We have one customer but we also have a massive amount of product. We have to get it to market. How do we get it to market if every time we try to get it to market somebody says yes, we want to get it to market but don't bring it this way. It is the old not in my backyard thing. This is not a debate exclusive to British Columbia. It is a debate that we will have as we go east and I know we will probably have that debate in Montreal when we get there.
Then you come up with a solution that takes our product from its source and moves it right into the backyard of our one single customer and you will be subject to all kinds of regulations, et cetera, in the State of Alaska which we do not control, which we will never be able to control. I do not want to put nefarious thoughts in the minds of the Alaskans, but they will react in their own self-interest, as they should.
Why would we risk taking our product and putting it through another country's territory when we have territory of our own that has access to the same waterways? Yes, I understand the configuration of the water is different and the risks change, but it seems to me that taking our product and putting it through a foreign country to try and ship it to another country so we can get to some future customers is a very risky thing for any nation to do.
This is a strategic part. You cannot do a lot of things in this world without this product. All over the world this product is needed. As much as we all would like to see us be less dependent on this product, we are going to be dependent on this product for some time to come. While we are sitting here debating it, our competitors are delivering it to customers that we should be delivering it to, plus the fact we are selling our product to our one customer at a discount.
Canadians should understand clearly how much money we lose every single day because we sell our gas and oil to the Americans at a discount. They have us. They have us in their hands because they are our only customer and they can demand that we sell it at West Texas crude prices.
I don't understand the concept of why we would risk going through the territory of another country when there are options that would allow us to go through Canadian territory to get our product to market and, just as important, to generate jobs on our territory for our people, both the people in our First Nations communities and in other our communities.
Mr. Vickers: Thank you, senator. That is an excellent point. As a matter of fact the first time I went to Beijing I was with the Royal Bank in 2000. There were more bicycles than cars on the road. I just got back in July and there are now more cars than bicycles.
The Port of Valdez is two days closer to that market than Prince Rupert or Kitimat and four days closer than Vancouver. Talking about getting the product to market in a timely fashion and to a market that is other than the one single discounted client right now is the other major reason for doing this, sir. The Port of Valdez is not a federal port. It is owned by the City of Valdez. They have a free trade agreement with Korea.
A number of these issues were brought up with respect to sovereignty and with respect to access to certain markets. We have done our best to deal with the issues and the concerns of people. Along with the ban on the supertankers, getting the product to the prospective client in a timely fashion was another major reason for the Port of Valdez.
Senator Mercer: I will end on this note because I know that you were about to say it yourself, Mr. Chair. The port at the Strait of Canso in Nova Scotia is a day and a half closer to the same market. We have some decisions to make and as I said earlier there are going to be some unhappy people but hopefully there will be some happy people, too.
The Deputy Chair: Gentlemen, time is up. I want to thank you very much for being here this morning. It has been a good discussion.
Honourable senators, I would like to welcome our next witnesses: from the First Nations Limited Partnership, Robert Metcs, Chief Negotiator and Chief Executive Officer, Havlik Metcs Limited; and Alexandra Ballard, General Manager and Communications and Partnership Development Director, Havlik Metcs Limited.
Please begin your presentations and then the senators will have questions.
Robert Metcs, Chief Negotiator and Chief Executive Officer, Havlik Metcs Limited, First Nations Limited Partnership: Thank you very much for having us. We will put forward a few brief remarks or introductory comments. The FNLP or First Nations Limited Partnership experience lends itself well to a question and answer session so we will try to get to that as soon as we can.
The First Nations Limited Partnership was formed in 2008 for the specific purpose of trying to secure the maximum benefits from at that time the proposed Pacific Trail Pipeline, the pipeline component of the proposed Kitimat LNG project.
Two things should really be noted about that. The first is that it is a limited partnership and it is a commercial entity. On that basis it was formed for the specific purpose, as I said, of trying to secure and maximize benefits for the 16 First Nations limited partners.
As a commercial entity it exists not for the purpose of some tribal associations or other type of entities that were formed by First Nations but for a commercial purpose. That is unique in some respects. The commercial aspect of that entity was chosen for a specific purpose and in the realization that pursuing benefits could be done more powerfully and more efficiently as a collective. The 15 nations at the time, now 16, realized that the more traditional aspects of engagement such as environmental issues and rights and title issues were better done by each nation individually.
For that reason the negotiations and the interaction we had with the proponents of the pipeline project and the LNG project was designed such that the collective would try to maximize the benefits and each of the individual nations at the same time would try to minimize the impacts of the proposed project.
The reason it was left to the individual nations to do the minimization of impact work was that the broad basis of our partnership stretched from Kitimat in British Columbia, in which there are largely coastal nations, over and down into Treaty 8 territory and near Summit Lake just south of Fort St. John in British Columbia. It was quickly realized that there was not a lot in common between these nations in terms of what their interests were and their particular or potential issues with this project. In that fashion FNLP is a very unique entity because of that commercial split and because of the fact that this cost benefit analysis was put forward to these nations.
We talked a little bit about what was achieved and the structure of the negotiation process. The idea that we would try to maximize benefits and minimize impacts incentivized all the parties, including the proponents of the project, to try to do just that. The results of the process, which was about a 2.5-year negotiation process, speak for themselves. The agreement was signed in February of 2013. If the project goes forward, which is anybody's guess at the moment, it could potentially bring over $1 billion of benefits of various kinds to these communities. They decided to support this project and continue to support this project because they realize that if this does occur this could be a community changing experience for these nations.
The decision was made after community deliberations. As we said the benefits of the project were clear. The impacts to the communities were set out to be relatively clear and each one of them decided that they would get behind this project and support it. We are as far as we know the only LNG-related pipeline that has the support of every First Nation along the route, and the 16 nations are quite proud of that.
Another aspect is that the process we put forward of maximizing benefits and minimizing impacts unfortunately does not always lead to the results people may want. Because we are a natural gas pipeline, which is certainly different from oil pipelines, in this case our 16 nations decided they were going to be in favour of it. Many of our 16 nations are not in favour of oil pipelines going through their territory. That decision was made in the same calculation. It is the idea that the potential impacts of oil far outweighed whatever the potential benefits that were seen to be on the table or that could be on the table.
If we leave anything with you today it is that these communities do not feel that they are acting irrationally by supporting one project and perhaps not supporting others. This is a long deliberative process. There was a lot of political capital expended by each of these communities, each of these leaders. The decisions were made and they have been defended in the communities.
We will look at some of the lessons that are in our handout and hopefully invite questions on them. Over the years we have seen five major lessons come out of this process.
The first one is pretty clear: First Nations should be viewed as potential commercial partners and partners in general rather than potential legal impediments. It is oftentimes a basic respect issue. If industry and governments look at the nations as if they can be partners and they bring value to partnerships, it gets things off on the right foot, and it certainly did in our case.
This is probably something that people have heard many times but we will repeat it again. Early engagement with First Nations on a commercial basis can both reduce project risk and lead to the creation of significant economic value that can be shared equitably among all the participants. That is precisely what happened with FNLP and with the proponents of the PTP project. It was a difficult negotiation but at the end of the day there came to be a realization that everybody would be better off by signing the agreement that was signed. It was quite substantial and I think it raised the bar considerably for all projects that are to come whether in British Columbia or the rest of Canada.
This comes back to what I said earlier. The engagement process should be structured to provide First Nations with a meaningful cost benefit analysis. We kind of backed into that accidently but once we realized this is what the structure entailed it created proper incentives for everybody to negotiate in good faith. It does not guarantee a result and it does not guarantee an outcome. There were many occasions where it seemed that we may not get the support of all 16 nations. The incentives were there to try to make sure that when problems came up it was either we needed to work on the minimization aspect or we needed to work a bit more on the benefit aspect as to how we could fit this in to make it an attractive alternative to saying no it is possible.
The fourth lesson was quite interesting for us because again we discovered this accidently: First Nations and industry can benefit from directly engaging with each other and not necessarily through a government process that says this is how you need to interact. We were engaged in the commercial negotiation one commercial party with another. Once we got an agreement we then went to the British Columbia government that had been involved previously. It was a legacy agreement but that negotiation for two years took place completely and entirely apart from any involvement from the government.
There were some good positive points to that because at the point when we had a deal it was industry and the First Nation group going together to deal with government on their issues. It created a different dynamic that is perhaps normally the situation when usually governments and industry are on the side of the table with First Nations. I think everybody was feeling a little strange but it was certainly effective.
The last one is that we discovered it is not a good idea to try to do everything before you can do anything. By that I mean we were one project. There were a lot of people on the government and industry sides saying we needed to have a process to deal with LNG pipelines in general, LNG projects in general or oil projects in general. We needed a process to get answers on corridors and various ideas. To some extent the LNG industry in British Columbia suffered for that and because there was this idea that unless we figure out how to get oil and natural gas pipelines to the coast we would not be able to get any pipeline to the coast.
Unfortunately in this day and age there was this idea that the LNG window may close. That may be the case. A good part of that had to do with the fact that there were an awful lot of discussions over why these nations aren't supporting oil pipelines as opposed to their support for natural gas. Somehow it was considered to be not good enough that they support the one and not the other.
It has been an increasing political issue within our group but I put it out there for the sake of perhaps trying to get everything you may end up getting less than was expected or ideal. With that we would be pleased to take your questions.
Senator Black: Thank you both very much for being here. Thank you for the tremendous work and leadership that you are providing on this very complicated issue. I wish that we had these five lessons that you have put forth five years ago. We likely could have saved ourselves all a lot of platinum hair in my case, but nonetheless we have them now.
I have a question for you. By way of context I am a senator from Alberta so I am very pro energy and very pro in terms of Canadian prosperity getting Alberta product to other nations around the world, other than the U.S. That is where I come from.
Point 1, I want to talk with you about consultation and the process of consultation. I am wondering whether or not you would share my view that meaningful appropriate consultation with First Nations is essential. It is not negotiable. It is essential.
Point 2, it is like any conversation in any relationship. At some point a decision must be taken. In many conversations I am involved in sometimes I like the result. More often than not I am not crazy about the result but I accept the result and I move on.
I am more interested in your view on whether or not you are of the view that consultation automatically means veto.
Mr. Metcs: You put me on the spot. It is a good question and I guess I will put some context to the answer and then I will answer your question very clearly.
We were hired to do a specific purpose. We were hired as negotiators by a commercial entity, as I stated. Then the limited partnership was formed for a very specific reason. It was to negotiate as best as we could the best benefit package and commercial deal that we could for the limited partners.
At the beginning the thought was that the FNLP would do all of the consultation aspects as well. It became clearly apparent when everybody got into the room that the 15 nations at the time did not have enough in common to be able to consult as a group. There were far too many differences between them.
What they did was ingenious at the time. Nobody really thought about it that way but it turned out to be. The suggestion was made as to what we could do together. What could they do together was to try to maximize the benefits through negotiating collectively with the proponents, which is what they did and that is how we got hired.
To come back to the clear answer to your question, everybody would like to have a process where there is a clear answer that everybody accepts. The decision for us at the end of the day was our job to develop and deliver the benefit side of the equation to each of the nations. Each one of them had been doing a lot of the consultation work and the legal work where the lawyers were involved. They did legal work on their own because they had various different issues. Then they decided whether their share of the benefit package that was negotiated collectively was enough to get them across the line and to accept.
We did not have a lot to do with that. There were issues where the collective did decide that they could work together in some way to push the proponents on some consultation issues. We did that, but the decision at the end of the day was among the nations.
For seven years I have been involved in this. I mean it is inescapable that on the government side there is going to have to be a decision on how they are going to deal with some nations saying no to projects.
We were lucky to some extent because we had a natural gas pipeline project that came to be accepted after they looked at what the potential was for things like pipeline ruptures. Those were dealt with in great detail during some of our meetings. There were groups trying to say that these were all hydrocarbons and they were all the same. We had to make a distinction between oil and natural gas to try to separate it from that.
Two things were made clear to us. These nations supported natural gas but the majority of them did not in any way support oil. That was the decision.
Senator Black: My question is: What do you do when you come to an honest disagreement between parties of equal status and a decision needs to be taken that is not going to please everyone? What do you do in that situation?
Mr. Metcs: On that point I think that is where government has to come in to make that decision. There could be delays. Alex may want to add something to this.
It was a respect thing that comes up. The First Nations are part of a broader consultative process and governments have to deal with the national interest, the other players, the other stakeholders, the industry and all of that. Here is an input into that and if there is a no or a yes, then I guess that would put on your shoulders the responsibilities of government to try to figure that out and to try to balance it.
Alexandra Ballard, General Manager and Communications and Partnership Development Director, Havlik Metcs Limited, First Nations Limited Partnership: Basically just to add to what Rob said, the nations can get so far together. Obviously the FNLP is an example of how they got a lot further than certainly we all felt at the beginning. Ultimately to your question, if there is an honest disagreement then there will come a point at which government will have to step in.
Senator Mercer: Thank you very much for being here. I am anxious to find out whether this project, this method of getting things done, is exportable. I am from Nova Scotia and I am anxious to proceed with Energy East and a large number of negotiations will have to go on.
I was interested in the five key lessons that you highlighted. I will draw attention to three of them. The engagement process should be structured to provide First Nations with a meaningful cost benefit analysis. What does that mean in dollars and cents or potentially what does it mean in dollars and cents?
Mr. Metcs: That is an excellent question. We are trying to get across the key lesson that came out of this. We were told to maximize the benefit as a collective. We had 15 nations at the time behind this going into negotiations with the proponents. There was at that point the incentive on their part to say that if we reach an agreement on the benefit package as a group it could then be presented to each of the individual nations. Then there would be a good chance that there would be an acceptable agreement and that the project could go forward.
The incentive system is that on both sides we were very clear that not only did the benefits have to be attractive such that the community saw there would be a lasting benefit to having this project. That was very important. Each of the communities at the end of the day saw this not just as a pipeline but potentially as a way to ensure community development in a manner that they could wrap their hands around and say that this would help them do X, Y and Z. We found that was very important.
We got to the point where the numbers, the job opportunities, the business development opportunities and various aspects of our agreement which were quite detailed were such that people were saying that it could effect some change that would be acceptable and that everybody would want.
At the same time on the cost side there were the environmental issues. Also there were the usual issues on the legal side that you deal with in consultations. As a negotiating team we made clear that those would have to be dealt with as a priority to the satisfaction of each of these communities. They would place those efforts side by side with the potential benefit agreement. They would then look at them and say what they thought were the benefits in this case and accept whatever dangers there were potentially perceived as they were to the community. We found that was effective. It worked for the 16 nations that we had.
Senator Mercer: Is it based on a percentage?
Mr. Metcs: It is an art form. We as a negotiation team were tasked to say this was the best we could do on the benefit side and chances are we were not going to get any better. When you are involved in these things for a couple of years you realize where the red lines are and to say that if we don't get here we are perhaps not going to buy into the deal.
We were pretty certain when we delivered this package to the leadership and then later through them to the communities that we had a good chance of it being accepted. It did not take long. It went through in about a month and a half or two months.
Ms. Ballard: At most.
Mr. Metcs: Then one by one the nations started coming back with the band council resolutions saying that they were in.
Senator Mercer: Of course this meaningful cost benefit analysis is complementary to the next of your five key lessons that First Nations and industry can benefit from engaging directly with each other.
Mr. Metcs: That is right.
Senator Mercer: I guess that is common. Colleagues, if you have not read the document, there is one key recommendation I want to put it on record. Perhaps we should ask the Prime Minister to adopt number 5: Don't try to do everything before you can do anything. I do not know who wrote that but I am stealing it.
Mr. Metcs: I suppose I will have to take credit. Whether it is good or bad I will stand and put my hand up.
Senator Mercer: I do not see a copyright on it.
Ms. Ballard: You can use it.
Mr. Metcs: By all means.
Senator Mercer: Thank you for that.
Senator Neufeld: Thank you and good to see both of you. This has been a long process. It started long before seven years ago. I remember clearly dealing with these issues when I was minister from 2001 to 2008. It has come to what I think is a good place.
I do not have any questions really but I want to make a little statement. I think you folks have done a great job. On the first one of the lessons, that First Nations should be viewed as potential partners rather than as potential legal impediments, I can remember that being clearly said to us by the premier of the province, Gordon Campbell. That was one of his drives. He said, "We need to involve First Nations on a commercial basis so that they get some of the benefits." We all worked to that.
Now it is Chevron and Woodside but Encana, Apache and another few companies have been involved in the very start of it. When I was first a minister and it first started we put it through as an import terminal, to be perfectly frank. It went through the environmental process so that it would be an LNG import terminal. It turned out to be because of what took place in northeastern British Columbia with all the natural gas that was there to be an export terminal. It totally flipped and the Haisla actually did a lot of work to make this happen.
I am pleased that it is there and that it looks good. Like you said it is anybody's guess whether the LNG port is going to go ahead. That remains to other people to make those decisions but I just hope that this agreement will continue on.
Another thing happens when you have the agreement of First Nations in the environmental movement. They are a little less hesitant to try to say we should leave it all in the ground. That helps us an awful lot too in those agreements. I totally agree with the five key lessons and I think we would be a lot better off if we started going forward with them.
As a first real try at getting a big project actually approved there were lots of mistakes made. I know that but we learned from those mistakes. Obviously everybody learned from these mistakes, the government, the First Nations and hopefully the federal government.
It is good that you have brought this to us. It is good for us to have it in our text of how you can actually maybe get a large project. You are talking about billions and billions of dollars in capital investment, not including all the things that happen on the ground where people actually are working and providing good lives for their families and family-supporting jobs. We should all be proud of what took place here.
I do not have any questions because I think you have done a great job.
Mr. Metcs: Thank you.
Senator Neufeld: I understand that nothing runs perfect but we have come to what is a good agreement. I wanted to make sure that our previous premier, Mr. Campbell, got some credit for some of the work that he did with First Nations while he was premier.
Senator Mercer: I am stealing the quote. I have already tweeted it to a few people.
Ms. Ballard: Excellent.
The Deputy Chair: I want to conclude by saying that I am impressed by this blueprint of the way we should do things. Help me out with this. Is there anything I am missing? Is it just now awaiting the approval of the federal authority to get this done?
Mr. Metcs: It is actually simpler than that. They are waiting. This is a commercial decision now. Our understanding is that the necessary permits are in place. Obviously there is the First Nation agreement and support.
It is ironic because we have all of that, and now the proponents are looking at the commercial aspect of it. That is really what is going to drive this. It is out of everyone's hands now in terms of decision. It is within Chevron and Woodside to decide whether they can find the buyers at the price that they need, as Senator Neufeld said, to make the massive capital investment necessary to build it. They could do that. They have all the tools and the necessary permits to go ahead with it tomorrow if they wanted to.
Ms. Ballard: Our advice from Chevron and Woodside is that in the main they are simply waiting for the world markets to improve and then they will proceed. Assuming that they do improve they will be proceeding to a final investment decision. That is the key that we are waiting for now, the final investment decision.
The Deputy Chair: We have to identify a buyer in the market.
Mr. Metcs: Yes. They do not have, as some of the other LNG projects have, buyers built into their consortium of proponents. They are looking for buyers and the market turned against them in the last three or four years. I would not be surprised if they try to bring some buyers into their group but those things are beyond us.
The one thing we have made clear to Chevron is that the FNLP nations support the project. It is interesting that they want it to happen. You go through a tough negotiation process and then once it is done everybody is asking when you are building the project.
Chevron and Woodside keep assuring us, as Alex said, that they want to go forward but now it is in the realm of the business and the commercial sphere to make that decision.
Senator Black: Given that we have a moment or two now, can you inform the committee as to where you understand the Petronas project is at? You have been good enough to brief us on where the Chevron project is at. Where in your view is the Petronas project? What are we expecting from the Government of Canada in the next month or so? Where is the Shell project or LNG project?
Ms. Ballard: LNG Canada.
Senator Black: The LNG B.C. or LNG Canada project. Can you just inform us as to that, please?
Mr. Metcs: Maybe we could start with the Shell project. As you are probably aware the two pipeline corridors largely overlap between those two projects. My understanding is that Shell made an announcement that they are putting it on the shelf for a while.
I do not want to dodge the question but I do not think we are the right people to answer that. There are as many opinions as people in terms of where these projects are. I do not think anybody knows other than the proponents what their decisions are going to be. We have a hard enough time getting Chevron to tell us what their plans are. We are probably not going to give you an answer that is going to enlighten you in any way.
Senator Black: Fair enough. Tell us, though, if you have any view as to what if anything this committee vis-à-vis our work might be able to do to be helpful respecting interventions of the Government of Canada?
Mr. Metcs: One thing we can say, and I am sure Alex would have some statements as well, is that when we finished this agreement back in 2013 there were an awful lot of conferences that we were attending with various people from around the world. One thing that really struck us was the view that nothing could happen in Canada. It was too difficult. We are putting it on the too difficult pile. There is remarkably little information that we saw on what were the issues with First Nations.
Since you asked we have the chance here to say that with FNLP this is an example that First Nations, industry and governments can come to an agreement on major projects. It is possible, not impossible. That is something the world should see.
An individual from Korea called it a legal morass. As a Canadian that is not a good thing to be hearing. For whatever it is worth this agreement shows that it is possible to get a broad-based agreement and support of First Nation.
Ms. Ballard: In terms of assistance and taking this model forward both at a national level and an international level to the markets we are actually looking to in order to be able to export our product, it is ensuring that model is well known and understood. As Rob says it is not just that First Nations are always saying no.
The Deputy Chair: Thank you both for being here this morning.
Honourable senators, our final witness for this morning is Mr. George Heyman, Member of the Legislative Assembly for Vancouver—Fairview. We invited the premier but unfortunately she declined. We also invited the leader of the opposition. Due to scheduling conflicts Mr. Heyman is here replacing him.
Mr. Heyman, please begin your presentation and then afterward the senators will have questions.
George Heyman, Member of the Legislative Assembly (Vancouver—Fairview): Good morning, Mr. Chair and senators. Thank you for inviting me to speak today on the transportation of crude oil. As you are aware I am the environment spokesperson for the B.C. official opposition, the New Democrat caucus.
Our caucus has been consistent in opposing the expansion of crude oil tanker traffic off B.C.'s coast. We formally opposed the Enbridge pipeline and we formally opposed the Kinder Morgan expansion project in submissions to the National Energy Board and in public statements.
There are many reasons for our opposition to these projects but overall our reasoning is simple. These projects pose great risks to our province's economy and environment while providing little benefit.
Crude oil spills, particularly heavy bitumen, are a major concern for British Columbians. We are all too aware of the risks oil tankers pose to our coastline. We are too close to the Alaska coastline that was fouled by the Exxon Valdez spill to ignore the very real risks oil spills pose to our environment and to our economy.
Tourism is one of our province's major industries. It brings more than $14 billion into B.C., money that goes into the pockets of small businesses and communities in every corner of the province. Our tourism brand relies heavily on our spectacular natural environment.
Tourism is not the only industry in B.C. that relies on a healthy environment. British Columbia's seafood industry produces further sales of $13 billion a year.
If a spill affected even a fraction of the value of these industries it would more than wipe out any of the comparatively small and short-term benefits offered by crude oil pipeline construction and tanker traffic to our province. Yet evidence from other jurisdictions suggests that the damage would be much worse.
Oil spills do not just affect the immediate area. A tourism department study found that more than a quarter of people planning a vacation in Louisiana changed their plans following the Deepwater Horizon spill. Their fishing industry was even harder hit. Over half of people surveyed thought that Louisiana seafood was no longer safe to eat, even if it originated from outside of the spill area.
The Gitga'at people on B.C.'s central coast know firsthand how even a small spill of refined product can contaminate shellfish and other traditional foods. After the Queen of the North ferry sank near Gil Island they were unable to harvest shellfish and seaweed near the area for years. This experience helped inform their firm opposition to the Enbridge Northern Gateway pipeline.
Spills aside, an equally compelling argument against the expansion of crude oil pipelines is the need to take immediate, strong and systematic action to limit climate change. We are seeing B.C. and other communities struggling to plan for a future where the sea level has risen, storms worsen, and droughts are more common and pronounced.
We are living in the hottest year in human history, a regular occurrence for years, and all indications are that hotter years are coming. Already we are seeing the impacts on our province. The pine beetle epidemic has left vast swathes of B.C. forest dead. We had record low sockeye returns on the Fraser River this year, likely due at least in part to warming waters. We have begun to experience droughts in the Fraser Valley which combined with years of drought to our south threaten food security for British Columbians.
Neither the Government of British Columbia nor the Government of Canada has a credible and comprehensive plan to bring down greenhouse gas emissions. Our government stood before the world in Paris and agreed to take immediate, lasting and significant actions to reduce carbon emissions, yet neither has delivered. The expansion of crude oil pipelines and the massive expansion of crude oil production to make these projects economic run counter to our stated commitments to stop runaway climate change. Without a clear national climate action plan how can we know how much fossil fuel production can be accommodated within our stated international commitments and our commitments to our children and their children?
British Columbians believe climate change exists and is a real threat to our economic and social future. We want to be part of the solution. It is no wonder then that the Kinder Morgan pipeline project faces steep opposition from many local communities and many directly affected First Nations.
The traditional territory of the Tsleil-Waututh Nation, the people of the inlet, is ground zero for the Kinder Morgan expansion project. The Tsleil-Waututh Nation steadfastly opposes the project because of the threat it poses to the marine environment and to their traditional lands. Their assessment of the project concluded that it would add to negative cumulative effects in Burrard Inlet, undermine Tsleil-Waututh's ability to once again be able to harvest and eat abundant, safe marine foods, and jeopardize contemporary Tsleil-Waututh economic initiatives such as real estate development, cultural tourism and other business enterprises.
Similarly the Squamish First Nation, whose traditional territory includes parts of Burrard Inlet, Howe Sound and English Bay, has filed a court challenge to the National Energy Board's recommendation for approval of Kinder Morgan. Chief Ian Campbell said the potential for a spill from increased tanker traffic in Burrard Inlet poses a grave risk to his band's traditional fishing and marine activities.
The mayors of Vancouver, Burnaby, New Westminster, the City of North Vancouver, Victoria, Squamish and Bowen Island issued a declaration of non-confidence in the National Energy Board review of this project because of the perception the process had a predetermined outcome. This perception was based on limited ability for public testimony, refusal to allow cross-examination of industry witnesses allowing Kinder Morgan to keep secret their spill response plans, and refusal to answer key requests for information by local governments and the provincial government.
The view that the NEB process was illegitimate is shared by many residents of coastal British Columbia and is not ameliorated by reviews such as this one where the question is how we get social licence to build crude oil pipelines to the coast and not should we build crude oil pipelines to the coast. That is an important distinction.
Any consultation with a predetermined outcome will fail to get social licence. If the goal of a review is to build the pipeline, not to determine whether the project truly is in the public interest, then of course the public will not accept the final recommendations whether they are made by the National Energy Board, the Ministry of Environment or any other agency. In order for processes to have credibility they must not have a predetermined outcome or an inherent structural bias.
Where many communities and First Nations are withholding permission any attempt to hammer these projects through will only harden the resolve of those standing up for a modern, reduced carbon economy and a healthy environment.
In the absence of a credible national greenhouse gas reduction plan continuing to push for the expansion of crude oil infrastructure is unlikely to be met with broad social licence in this province. British Columbians believe climate change must be addressed with concrete plans. We believe that the benefits of a healthy environment outweigh any small benefits that we might get from expanding oil exports in our waters.
Senator Mercer: First of all, thank you for your presentation. I am somewhat mystified by. Let's back up for a moment. I very much appreciate the concern for the environment. I particularly am concerned and I am particularly interested and in support of the longstanding commitment British Columbians have had to the environment. Environmental support is not a new thing which was just invented on the Burrard Inlet last week. It has been here for a long time and I support it.
British Columbia is a rich province. It is one of the richest provinces in Canada. Even someone who is not supportive of the use of hydrocarbons has to admit that the extraction of hydrocarbons in Alberta and Saskatchewan in particular and in Newfoundland and Labrador has been driving the economy of this country for a number of years.
It has generated the jobs. It has generated the taxes. It has generated the ability of governments, not just in Alberta and Saskatchewan but the government in Ottawa, to do some of the things they have been able to do all across the country including in British Columbia. We need to recognize that we have the third largest resource of gas and oil in the ground of any place in the world.
All of that being said, and putting that in the context of your objection to any movement of gas and oil off the coast of British Columbia, we are held captive by one customer. I used the story this morning with another witness of opening a Starbucks on the corner here if there was room. There are probably Starbucks on the other three corners. If I opened a Starbucks on the corner and I had one customer that bought enough coffee to keep me going, that customer could demand anything he or she wanted because I would be beholden to him.
We are in that situation. We have one customer and we have a tremendous product that the world wants. Whether we want the world to want it or whether we think that we should continue to use hydrocarbons for energy generation, et cetera, is secondary argument. We have a responsibility to Canadians to help provide an environment where jobs are available to them and where we are collecting enough taxes that we can provide services to them.
In that context how would you propose that we deal with the hydrocarbons in the ground in Alberta, Saskatchewan, Newfoundland and Labrador, and in parts of my province of Nova Scotia?
Mr. Heyman: Thank you for the thoughtful question. I want to make clear that the overall health of the economy of Canada, as well as the economic health of Albertans in particular in this instance, are not of no regard or important to myself, to the leader of the B.C. new democrat opposition or to our caucus.
Let me answer first of all by saying I have attempted to present a submission within a seven-minute timeframe focused on questions that you asked. The key question, as I understood it, is how the federal government could help facilitate social licence for crude oil transportation infrastructure such as pipelines and improved public confidence in the pipeline process.
Rather than address hypotheticals I addressed the two proposals that have been made in British Columbia but mostly Enbridge Northern Gateway but mostly because it would appear that with decisions of the current federal government Enbridge Northern Gateway is unlikely to proceed. It is pretty hard to imagine the pipeline going if there is a ban on tanker traffic on the northern coast. Kinder Morgan is very much alive and awaiting a decision from the federal government.
I focused on what my caucus and I thought were the critical issues. We have been pretty consistent on that. First of all I do not expect hydrocarbon use or fossil fuel use to disappear tomorrow. I would hope that most of us believe that by 30 years from now we will have a very different energy economy in the world. If we do not, I think we will be in some not just significant environmental trouble but economic trouble. Anybody who has seen the hundreds of millions of dollars used fighting forest fires, the effects of drought on food supply or the dislocation of people in the southern hemisphere from islands that are rapidly being deluged with water, understand that not only are these humanitarian crises. These are very significant economic challenges for the world, and particularly for Canada.
While I understand that money that is spent ameliorating or mitigating these impacts does get counted as part of gross domestic product, most of us would think we would rather see money being spent and counted as part of gross domestic product that is actually productive money and not corrective money.
Going back to the two proposals these are proposals, as I have said, that had significant opposition from British Columbians and from many First Nations, not all. I want to be clear. I am not here to speak for First Nations but I have no qualms about quoting First Nations directly impacted on the southern and northern coasts who have made their views known.
The reason for the opposition was because of the severe threats to not only our environment but British Columbia's economy and way of life; and in the case of these First Nations, to their traditional way of life, their traditional food harvesting and some of the economic opportunities they are looking for that aren't dependent on impact benefits agreements with hydrocarbon companies.
I then talked about the process itself with Kinder Morgan. Frankly if somebody wanted to design a process that was guaranteed not to get social licence that would be a pretty good case study of limiting the ability of people to testify; cutting off the ability of people to ask questions, refusing to release information that they had released in Washington State because Washington State law required them to — it may have been United States law, I would have to check that — not doing it in Canada because there was no legal requirement to release the details of their spill response plans, releasing information on economic benefit that many economists have called into question, and claiming they would have world class spill response plans when many people say that they do not know if that is true because they cannot see their plan and diluted bitumen is heavy oil that sinks very rapidly and they are not aware of any effective spill response plan for that product.
On the one hand you have Alberta's economy and the significant contributions it has made to British Columbia. Then you have British Columbia's economy and way of life. Significant threats are perceived by many British Columbians, threats which the B.C. government itself, not just the opposition, has said have failed to be answered by Kinder Morgan or by the NEB process and therefore they have not endorsed the project.
Going back to your question I expect us to use fossil fuels for some period of time. I know you heard about liquefied natural gas earlier. That is one of many things that may play a role in a transition to a lower carbon future and hopefully one that actually meets the commitments that were made in Paris.
In order to see where Alberta's oil resource or other hydrocarbon resources in Canada fit into an overall economic and social plan that actually can get us to reduced emission targets we actually have to see a plan and we do not have a plan.
A critical point I am trying to make here is that if we actually had a trusted assessment and a climate action plan that talked about mechanisms to reduce greenhouse gas emissions over time in order to meet the commitments that have been made by the federal government and the premier of B.C. for 2050, then we could see how we can fit oil extraction and production into that economy, where natural gas fits into that economy, and what measures are necessary to remove any significant threats to other parts of the economy that could result from spills. I cannot comment on hypotheticals, whether any project could meet the latter test because we have not seen them. What we have seen are two proposals that my caucus, many other British Columbians and I believe simply fail to meet those tests.
Senator Mercer: I do not think any of us would disagree with you or others who talk about the reduction of the use of hydrocarbons and the effects of greenhouse gas, et cetera. Senator MacDonald and I are both from Nova Scotia. We can testify that for the first time in living memory on Monday the City of Halifax imposed restrictions on water use because of the drought conditions we faced this summer. As a Deputy Chairman of the Agriculture Committee I have great concerns about the effects of that.
However the changes that you say need to come are not coming that rapidly. We need to remember that in 2050 there are going to be 9 billion to 9.6 billion people on this planet. Our ability to deliver food, to deliver energy, to deliver sustenance of some sort to those 9.6 billion people is vitally important, not just for their good health but I would suggest for a stable world. Because hungry people are mad people and hungry people are willing to fight I would suggest that world security is at issue.
We need to find a way around this. I know you have commented on the specific projects that are before us right now but you cannot operate in isolation, sir. I think we need to find a way to do this.
I guess I could ask what your opinion would be on the Energy East project, the proposal to extend the pipeline that currently exists all the way through Quebec currently to New Brunswick. Senator MacDonald and I would tell you that it should be extended to Nova Scotia. It should not end in New Brunswick. What is your position on that proposal?
Mr. Heyman: I do not have a position on Energy East because it does not run through British Columbia, but if I were forced to have a position I would probably say that the Energy East pipeline and other proposals need to be subject to a full, open, transparent and independent environmental assessment in which the public has confidence, cross-examination is allowed, witnesses are allowed, independent science is respected and assessed on those merits in terms of their overall benefits, any potential negative impacts they may have and whether those impacts can be mitigated.
I am not paying a lot of attention to Energy East because I am an elected member of the British Columbia Legislative Assembly, but I am not going to take a blanket position that we should not transport oil or that we should not develop oil resources. What I have said is that should be in the context of a long-term climate reduction plan and a transition strategy.
I want to be clear. It is not my desire and certainly not the desire or position of my caucus to say that if people are working in the petrochemical industry or in fossil fuel extraction it is just too bad, they should be out of work. Of course that is not my position. It is not the position of my caucus. It is not the position of responsible environmentalists with whom I speak.
What people do say is let's actually develop the long-term vision of how we address climate change. Instead of just giving it lip service, let's see how much we are going to develop, where the best markets are and if there are opportunities to add value to the resource. In British Columbia there are at least two refinery and transportation proposals that are meant and designed to address many of the concerns people have raised. I do not know if they are viable, but I think they deserve to be looked at and subjected to the kind of environmental assessment process I described. That is the best answer I can give you.
Senator Mercer: Thank you for that.
As my final question, the problem with politics is that you can sit and, as you very clearly have done, outline your position. At the end of the day the man or the woman sitting in the boss's seat, in this case the Prime Minister, needs to make a decision. That does not wait. It does not wait for the development of new technology for automobiles or for energy generation, et cetera. It is immediate because the reality is the payback to him or her is very real every four years.
Job review is as you know sometimes cruel. It is sometimes cruel in politics because it affects people's lives. We have a situation where a decision needs to be made.
I apologize. I have rambled on and I did not pose a question there, Mr. Chair, so I now pass.
Senator Black: Thank you very much, sir, for being here. Thank you for the contribution you make here to the public here in British Columbia.
We have had the benefit of being on this study for two or three months. We have just completed a good day in Edmonton and a good day in Calgary. We have heard some information that I would like to play back to you and perhaps you could comment.
As a questioner I have the disadvantage of the fact that I am a lawyer and therefore I tend to want to stick to facts. I would urge you to stick to facts.
Our source in respect of the Kinder Morgan project would be the Alberta Enterprise Group, which is the group that represents the businesses in northern Alberta involved in energy production. I am responding to your comment, your quote, where you said there was no economic benefit to British Columbia from Kinder Morgan.
Mr. Heyman: That is not what I said.
Senator Black: Clarify what you said, please.
Mr. Heyman: I said that the risks far outweigh this relatively small economic benefit and I think the Chair has a copy of my written remarks.
Senator Black: Very well. I thought I did too. That is fine. You think there is a small economic benefit, so this could just be a definitional problem.
We are told from Kinder Morgan that there will be 9,000 jobs created on an annual basis during the construction period and that there will be over the life of the project $250 million of fiscal benefits — and that is just fiscal benefits to government — created over that period of time. Is that what you consider little financial benefit to your province?
Mr. Heyman: If you give me a moment I want to look at some of my background material that actually called some of those questions into—
Senator Black: Certainly.
Mr. Heyman: Here it is. I am not familiar with the groups you met. I have not had a chance to look at their material, but I am told that Kinder Morgan estimated the pipeline expansion would generate between $18.2 billion and $22.1 billion in direct, indirect and induced effects to GDP and up to $4.5 billion in government revenues.
However, and I would have to get this study or your researchers would have to get it, researchers from Simon Fraser University came to a different conclusion. Their conclusion was that the company overestimated the project's anticipated financial benefits and that it might in fact be a net cost, not an economic benefit to Canada.
Now those are two very extreme views and neither one of them may in fact be completely accurate, but to say that the figures presented by the group that you heard in Alberta are accurate I think they would have to be subject to review as would the Simon Fraser researchers.
Senator Black: Of course. The figures that were presented by the group in Edmonton were actually the figures of the Conference Board of Canada. That is what we have been told, that there is in fact a significant economic advantage to British Columbia. We can leave it at that.
In terms of Kinder Morgan's existing operations I understand they have existed off Burnaby Mountain for 30 years or 40 years, a long time. Do you have any evidence that you can suggest that there has ever been a spill, an oil spill?
Mr. Heyman: In fact there was an on-land spill in Burnaby some years ago. We are also talking about a very significant increase in tanker traffic. I think it is a sevenfold increase.
Senator Black: I acknowledge that but that is not my question. My question is: Are you aware on the water of any oil spills from that facility over the life of the facility? I am told there have been none.
Mr. Heyman: I am not aware.
Senator Black: Thank you. Would you disagree with the statement made by the Canadian Pipeline Association and by others that the safety record for pipelines in Canada is documented at 99.9 per cent?
Mr. Heyman: I can neither agree nor disagree because I have not researched that.
Senator Black: If that were the case I am sure you would agree that is a pretty good record.
Mr. Heyman: I would have to look at the impact of the failure that happened because obviously if it is not 100 per cent then there was a failure. I would also have to look at the failure of pipelines in other jurisdictions including ones managed and under the responsibility of Kinder Morgan.
If I could go back to your previous point about oil spills on the water, not only is there a significant increase in tanker traffic. There is also a significant increase in the size of tankers, all of which impact the risk analysis.
Senator Black: I agree that is a legitimate concern. I agree with you. I am just trying to deal with what we have today. I think you would agree with me that one of the 200 — I do not know what it is — conditions that the National Energy Board have put upon Kinder Morgan endeavor to address that problem. Would you agree with that?
Mr. Heyman: Endeavor and actually substantially and effectively address a problem are quite different.
Senator Black: But you would agree with me that on the conditions the NEB has imposed upon Kinder Morgan they have addressed that concern to the best of their ability at this time.
Mr. Heyman: Let me answer that perhaps in a way that you won't appreciate. We had a bit of discussion earlier about the net economic benefit to British Columbia. That is assuming the risks I described to the fishery, to First Nations' economic opportunity, as well as to B.C.'s tourism economy, in particular the tourism economy of the Lower Mainland. I have not even mentioned the environment in those considerations, the preferences or lifestyle choices of people who live here. All of that could be put at risk by a spill that was not sufficiently sustained.
So let me ask you, assuming there was only one significant accident with a tanker and it spilled diluted bitumen, are you aware of anywhere in the world where there has been a demonstrated effective cleanup of diluted bitumen, which is heavy oil and is known to sink very quickly and then move with underwater currents? We are not talking about the oil that we have seen moved in other areas.
Senator Black: I acknowledge that is the risk and it is something that not only British Columbians but Canadians are concerned about. This is a Canadian issue. We acknowledge that risk and are concerned about that risk.
In terms of the legitimate concern you have about climate change and protecting not only this beautiful environment but the magnificent environment of Canada, this is a concern that we share as well and again this is not the property of folks who live in Vancouver. We share these concerns for the environment.
I understand that Canada produces less than 2 per cent of all the oil and gas in the world and that Canada's contribution to global greenhouse emissions is less than 0.5 per cent.
I am always at a loss when I have these conversations with folks. While we want to do better and want to do more, if we shut in our resources tomorrow and move to caves in the Rocky Mountains we would not make any substantial difference to these global issues. Do you agree or disagree?
Mr. Heyman: I disagree. First of all let me reiterate. I think I have been clear. I am not suggesting that we move to caves in the Rocky Mountains or that we shut in our oil resources immediately.
Senator Black: The result of your presentation is that is the only consequence there can be. That is not negotiable here. To accept your point of view is to shut in Alberta resources. There is no other way to get it to market.
Mr. Heyman: That is your point of view. I am not going to accede to your point of view.
Senator Black: No, fair enough.
Mr. Heyman: Then the answer to your question is that I think it is not just a B.C. concern or a Vancouver concern or a Canadian concern about climate change. It is a global concern.
Senator Black: As it should be.
Mr. Heyman: We have commitments to do our part.
Senator Black: As we are.
Mr. Heyman: I would argue with that. I would say we are not yet and finally I would say that leadership involves doing our part, doing it early and making plans that show how economic transition can happen over a period of time with planning, with jobs today, as well as different jobs for children who are in school today and different jobs again for their children that provide leadership to other countries in the rest of the world. I would say some countries in Europe and elsewhere have been doing that. We have some different opportunities in Canada and British Columbia but we need to show a leadership role as well.
Senator Black: And you would agree with me that the Province of Alberta is showing a leading role in the North American context on endeavoring to deal with greenhouse gas emissions.
Mr. Heyman: I think the Government of Alberta has taken some courageous steps within the Alberta economic and cultural context to address—
Senator Black: It is the leader statistically in terms of programs.
Mr. Heyman: I am sorry. In terms of. . .?
Senator Black: In terms of what other governments have done throughout North America with its plans, policies and impositions of taxes and emission controls Alberta is the leader in North America.
Mr. Heyman: At the moment.
Senator Black: Yes, at the moment.
Mr. Heyman: Yes, I wouldn't dispute that.
Senator Black: Yes. I have one last question for you. I am very concerned about your relatively gratuitous attack on the NEB. As an elected official you understand the importance that institutions play in our stability. Your suggestion that you have watched it unfold for months and your conclusion that the NEB assessment process of this particular project was fundamentally flawed and broken, is that only because you did not get the result you wanted?
Mr. Heyman: No, and it was not just myself or our caucus that took that position. Many energy experts, academics and researchers who had initially asked to appear before the NEB withdrew because they said it was a biased process. It was a process that did not allow proper cross-examination. In fact I could dig through here, but I think that particular set of hearings may have been the first set of hearings in something like 20 years that did not allow cross-examination. I would have to check that.
Senator Black: If that is the case —
Mr. Heyman: If you will allow me to finish, it lacked transparency. It lacked the kind of openness that gave British Columbians or First Nations the confidence that the panel was willing to hear their views or to have the proponents' position statements and studies challenged. Insignificant time was allowed for people to respond to thousands of pages of documentation.
I do not consider first of all that I attacked the NEB or their process. I questioned it. I believe it was inadequate. I believe it was biased. I believe it was flawed. I am not alone in that. Many British Columbians share that view and many experts who have participated in many reviews of its kind also share that view.
Senator Black: I would simply urge you and your colleagues who share that view that if the facts align with that you have legal remedies around denial of natural justice and you should take those remedies but to be criticizing institutions that are endeavoring to do a job on behalf of Canadians I do not think is on. Thanks very much.
Mr. Heyman: With respect, first of all I think the process is subject to First Nations challenge, legal challenge. I believe it is the job of politicians to question the transparency and the adequacy of any set of government hearings or investigations and to propose alternatives which we have and which we will continue to do.
Senator Black: Thank you very much, sir.
Senator Neufeld: Thank you, Mr. Heyman, for your presentation. Senator Black has gone through some of my questions. Could you just let me know how long the ferry sinking that you said took place curtailed fishing in that area? I have not heard those stats before but maybe you could help me there a little bit.
Mr. Heyman: I cannot give you an exact figure. When I visited the Gitga'at Nation in Hartley Bay it was a couple of years after the sinking of the ferry. It certainly was not a crude oil spill. This was fuel that was on the ferry at the time when it sank.
They talked about their inability, some of the testing that they had done that made the sea products unsafe to eat. I do not know how much longer it continued but I believe it continued for some time. I was up in Hartley Bay in I believe 2012.
Senator Neufeld: When did the sinking take place again?
Mr. Heyman: I believe it was 2010 but I would have to refresh my memory on that. That is easily found.
Senator Neufeld: Yes, it would be. I would just be interested in finding out the actual facts of what actually took place.
Mr. Heyman: Are you aware of the incident?
Senator Neufeld: Well, certainly. I live in British Columbia. Yes, I am aware. I will get those facts. I will have my staff dig them out.
Correct me if I am wrong, and I am paraphrasing here, you said that if there was a long-term vision with Canada and British Columbia about a reduction in greenhouse gasses then you would be a bit more in favour of a pipeline from Alberta to British Columbia.
Do I understand that correctly? Would you still be opposed if there was something your party and you actually said was concrete? Whether it would ever happen or not this is what you believed it would take. If you were in government and you set something in place would you say the pipeline was okay now"?
Mr. Heyman: That is not a paraphrase of what I said. It is not what I said. I said that it is hard to deal with hypotheticals. What I did say is that in order to have a trustworthy environmental assessment of a pipeline project, a refinery, and some way of moving crude oil products in ways other than are currently happening, one of the factors that should be part of the environmental assessment is an assessment of impacts on greenhouse gas emissions and climate change and if there was a plan against which to assess these things then that is a different context to have an environmental assessment of a particular proposal.
Would I be in favour of either of these proposals? Climate change was one of the factors I listed. There were other very significant factors. If there was another proposal that had a different shape and different impacts that should be reviewed by an independent science-based environmental assessment but cannot deal in hypotheticals.
If your question is would my government or I ever or never consider a pipeline proposal, no, that is not what I am saying. That is not the purpose of this submission. That was not the purpose of the other submissions. In terms of the ones that we have seen, the two that we have seen, you know what our position is and it is based on a number of factors. Climate change is one of them.
Senator Neufeld: Okay, you say you cannot —
Mr. Heyman: It is an important one but it is one of them.
Senator Neufeld: Yes, it is. You say that hypotheticals are hard to deal with, and I agree with you. Saying that spills are going to happen, that would be a hypothetical too. We do not know that. It is just assumed, I guess, that there will be spills.
Mr. Heyman: That would be true if that is what I have said. What I have said is it is a possibility and a risk factor.
Senator Neufeld: Yes.
Mr. Heyman: And then I have gone on to detail —
Senator Neufeld: It is still a hypothetical.
Mr. Heyman: —the consequences.
Senator Neufeld: It is still a hypothetical.
Mr. Heyman: I am not going to argue the point.
Senator Neufeld: I am not going to argue the point any further with you either.
The information I have dug up indicated that there were 12 tanker spills in Canada going back to 1970 in a year. How big they were I do not know because it was never and still is not a requirement that the largeness of the spill be reported.
I am chair of a committee that asked the government to change that so people could actually see what a spill was. Was it a barrel? Was it 10,000 barrels? Was it two litres or whatever? Every spill is counted. Whether it is a litre or a thousand barrels it is all counted. As of today or the year 2000 there have been zero. We have come a long way in how we deal with these issues in relationship to the environment. Would you agree with me?
Mr. Heyman: I would say that in some aspects yes and in other aspects no. I think there have been significant changes to the Canadian environmental assessment process and they have not been ones that are more protective of the environment.
A more important point to answer your question is when we are talking about whether it is Enbridge Northern Gateway or Kinder Morgan we are talking about tanker traffic of a volume that is far, far beyond anything that has been tested in coastal waters, with tankers that are far, far larger than ones with which we have any experience.
In other words if you say that assuming there is a risk of a spill is hypothetical then assuming the fact that there have not been major accidents is a good track record is also a hypothetical, because we have no experience with the volume or size of transportation that we are addressing today.
Senator Neufeld: When you talk about the size of transportation you are referring to ships. Are you referring to Northern Gateway or to Kinder Morgan?
Mr. Heyman: With Kinder Morgan we are talking about a significant increase in the volume of tanker traffic off the southern coast. I do not have at my fingertips information on how much greater the size of the tankers are. There are inherent limitations to what can come in and out of the inlet. In the case of the North Coast the proposal was for extremely large tankers in an area that frankly hadn't seen oil tanker traffic of any significance.
Senator Neufeld: The Port of Vancouver regulates the size of tankers that come in. The size of the tanker that will be able to come in if the expansion takes place is no different from what it is today. It will either be an Aframax or a Panamax. That is all the Port of Vancouver will allow to go to the Westridge terminal. The size of the ship is exactly the same. The number of trips is different.
As I understand from the documents I have looked at there are about five tankers a month now coming into Westridge terminal for oil and that will increase to 34. It is a significant increase but still controlled by the Port of Vancouver. There will not be larger tankers. Were you aware of that?
Mr. Heyman: As I said I am not specifically aware of the size of the tanker difference in terms of the Kinder Morgan proposal. Certainly the almost sevenfold increase in the number of tankers per month, per year or any way you want to measure it, is something I am aware of and which I referenced.
Senator Neufeld: The Port n of Singapore apparently handles the largest number of tankers with 22,000 tankers going through the port annually with no spills, 22,000.
You might disagree with me, and rightfully so, but I tend to think that we have come a long way in actually protecting the environment the best way we possibly can. I cannot imagine Kinder Morgan would be any different. Knowing Kinder Morgan's record in British Columbia, actually it is pretty good.
I know there was one spill. It was on land but that was an inherent hit by a backhoe, as I remember. They did a remarkable quick job of a cleanup that was actually fairly large.
To portray the oil industry as not caring about the environment is probably a bit hypothetical, I guess you could say.
On the part about saying there is no benefit to British Columbia from shipping Alberta crude I have worked in the oil industry a good part of my life. I know there are a lot of people who live in Vancouver that worked in Fort Mac or in the Alberta oilfields and now do not have a job.
Where I live in Fort St. John there are a lot of people out of work in the oil and gas industry, a tremendous amount. Not so much related to oil but because of the price of the commodity. It has a very negative effect. You may not feel that in Vancouver because it is a big city.
I will have to go back and check these numbers. I am just going by memory from when I was a minister but British Columbia produces about 12 million to 14 million barrels a year. We consume about 70 million barrels a year. Those come from the good province of Alberta in either refined products or in crude for the one refinery we have here and the one refinery in Prince George. How can we say to a province like Alberta I am sorry we do not want to transport your crude to port so that you can continue actually being the spark plug for Canada's economy?
I am sure the two members here know quite well how many people there are now on the East Coast in Newfoundland, Nova Scotia, New Brunswick or any of those provinces without jobs because there are no jobs in Fort Mac. How can we say to our fellow Canadians just over the mountains no, we do not want your crude coming through British Columbia because we do not like it but we want to continue to get fed crude from your province to keep our cars running and all these vehicles that are going around here all the time? How do you square that kind of argument?
Mr. Heyman: You have made a number of statements. Let me first address one of them. You asked how we can say there is no benefit to British Columbia. I want to be clear that is not what I said. What I said was that there was potential risk that could significantly outweigh what would be a relatively short-term benefit for British Columbia. You can disagree with you me if you want.
Second of all, I would like to respond to your statement that we might not see this in Vancouver. That might be true of some people. You made a point of telling me that you lived in Fort St. John. I lived and worked in resource industries in Terrace for 15 years including two cyclical downturns. I understand what it means to workers. I also understand what it means to be laid off and out of work for downturns. I also understand that in almost every case, as is the case currently in Alberta and also in the Peace, the downturn and the job loss is not the result of people in British Columbia or in the Lower Mainland standing up for what we think is economically important to our region. It is the result of the price of oil and global economic factors that frankly are outside of our control. Let me just put that context.
Then you asked how we square the circle of saying to our friends in Alberta that we are not prepared to accept their oil through a pipeline in order that more people could be employed in their industry and the province could prosper. I have not said that. What I have said is the proposals that we have seen are risky for British Columbia.
Senator Neufeld: I did not say you said that. I said it.
Mr. Heyman: Okay. In that case I would say what I have said in my presentation. Let's have a national plan about how we are to address an economy that transitions to lower carbon. I hope everybody around this table understands it is going to have to happen at some point. Therefore we should start planning it as responsible leaders.
Let's look at proposals for extracting the amounts of fossil fuels from Alberta and other places that fit into those plans and adding value to them as much as possible as the market will support. Let's also look at other new proposals that can achieve social licence because they have a different risk/reward scenario for areas that are impacted as well as the First Nations. That would be my answer.
The Deputy Chair: Mr. Heyman, I have a few questions I would like to discuss with you. You spoke of GHG emissions and the latest efforts that were declared in Paris. You are not particularly convinced that they have put anything on the table yet that is going to be effective. Let's just work from the supposition that both you and I want to see these GHG emissions reduced.
Mr. Heyman: I am sorry. Could you speak a little louder?
The Deputy Chair: Let's you and I work from the assumption that we both want GHG emissions reduced. If we were to reduce the domestic use of coal, diesel and oil, in our country and try to replace it with natural gas, that is a carbon-based product but it is a much cleaner product and it produces much less GHG emission. Would that be something you would embrace and support?
Mr. Heyman: Certainly I would look at the context. I spent Friday touring a number of sites with FortisBC executives. Fortis does gas but a number of other things as well. One of the things we looked at was a geoexchange facility Fortis has in Vancouver that really does not require gas at all. Obviously I have no problem with that.
We also then visited Smithrite. It is converting much of its fleet from diesel to compressed natural gas, which I thought was a very good project and fits exactly in with what you are talking about. I asked a lot of questions about what opportunities there might be for conversion of passenger vehicles that still have a usable lifespan but currently run on gasoline or diesel to either compressed or liquid natural gas as a transition until their physical lifespan is exhausted. It does not necessarily reduce emissions to take a vehicle that was produced with a lot of emissions inherent in the process and throw it out before its useful life is over.
I looked at a biogas plant in the Fraser Valley that I was very interested in because it appeared to me to address two issues. One was producing biogas that could be mixed with natural gas therefore reducing the carbon content as well as dealing with nutrient management issues for dairy farms and other kind of farms that have a whole other set of environmental problems associated with them by providing an alternate way of disposing of these projects.
I think your question was would I support the use of natural gas as a transition of fuel in some instances and the answer is yes. In some cases it may be possible to go directly to renewables. I think it is obviously preferable because if you can produce energy or move transportation without any form of fossil fuel that is better, but in many cases that is not possible for range or other reasons I have mentioned. The answer is yes, I would.
The Deputy Chair: Are you familiar with what has happened in Ontario in the past decade with their energy situation? They have spent an awful lot of money moving away from natural gas, coal and oil, and have subsidized wind power and solar. The Auditor General of Ontario has told us that they have cost the taxpayers about $38 billion more than they had in order to do this. Ontario is losing its competitive advantage in terms of its industries and ability to support its industries, and people are being pushed into energy poverty.
Do you think there is a reasonable limit to the timetable in doing this? We also know that Germany has had a long history in the last 20 years of being on the front end of renewables. Now they are reopening their coalfire plants because they have gone too quickly too soon. They are shoving their industries out of business and they are putting people on fixed incomes into energy poverty. I am just wondering what your reflections might be on that.
Mr. Heyman: First of all I am not as familiar with Ontario as you are but I am generally familiar with the issues that you raise. I think there are some differences between Ontario and British Columbia.
The Deputy Chair: Of course.
Mr. Heyman: You are the Canadian Senate and we are talking about them. I am not an economist so I cannot make assumptions about modelling. In general terms I know two things. I know that governments make choices about how to subsidize a variety of industries. Sometimes governments make good choices. Sometimes they make bad choices.
I know that one of the mechanisms used by the Ontario government was a feed-in tariff. There are many fans of a feed-in tariff. Here in British Columbia what is provided for people who are producing alternate energy are either fixed sale contracts, or in the case of individuals net metering, which means that you sell power for the same price as you buy it. This has created an entirely different situation in British Columbia.
I do not think we should be creating situations where people on limited or fixed incomes are thrown into energy poverty. In fact I believe the opposite. It is a bit off the topic of these hearings but I could probably go on at some length about some initiatives as well as policy options that I think hold promise at least for British Columbia, a province with which I am far more familiar than Ontario.
The Deputy Chair: I would like to finish with one question and one point I want to make. You raised concerns about increased tanker pressure in the Lower Mainland. I think like Senator Black and the others that these are legitimate concerns.
Would you be more open, then, if you put the Port of Prince Rupert to use for tankers and take the pressure off the Lower Mainland?
Mr. Heyman: Are you referring to the Enbridge Northern Gateway pipeline?
The Deputy Chair: Not necessarily that pipeline but the use of a deepwater port like Prince Rupert to take the pressure off the Lower Mainland.
Mr. Heyman: First of all my concern is not just for the Lower Mainland. My concern is for the British Columbia coastline. There is no proposal to put a pipeline to and a port in Prince Rupert for crude oil.
I do not want to answer a hypothetical, but what I do know is that much of the objection to Enbridge Northern Gateway pipeline was based on First Nations along the pipeline route as well as people who were concerned that approximately 700 fish-bearing streams and rivers were at risk and offered evidence to support that.
If there was a proposal, the proposal should be assessed and, as I have said before, a robust, transparent, independent and science-based environmental assessment. There is currently no proposal to do that.
The Deputy Chair: The final point I want to make is that British Columbia is a beautiful and very wealthy province. When it comes to energy you are very blessed in British Columbia, you have so much hydropower.
I wonder what it would be like today for W.A.C. Bennett to try to build his hydropower in British Columbia with so much opposition to development nowadays. He left a great legacy to this province. One of the reasons you have such a wealthy province and such great options when it comes to power is because of the leadership of people like W.A.C. Bennett who made the big decisions and gave you the economic advantage you have today. I want to thank you for being here.
Mr. Heyman: Thank you very much for hearing our submission and asking questions.
(The committee adjourned.)