Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 10 - Evidence - February 1, 2017
OTTAWA, Wednesday, February 1, 2017
The Standing Senate Committee on Transport and Communications met this day at 6:46 p.m. to study the development of a strategy to facilitate the transport of crude oil to eastern Canadian refineries and to ports on the East and West coasts of Canada.
Senator Michael L. MacDonald (Deputy Chair) in the chair.
[English]
The Deputy Chair: Honourable senators, this evening the committee is continuing its 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.
I wish to welcome our first witness, Mr. Carlos Murillo, proposed by Senator Unger. He is an economist with the Industrial Economic Trends group in the Forecasting & Analysis division of The Conference Board of Canada.
Mr. Murillo, please begin your five-minute presentation. Afterwards, senators will have questions.
Carlos Murillo, Economist, Forecasting & Analysis, Industrial Economic Trends, The Conference Board of Canada: Thank you for the introduction.
Honourable senators and members of the Standing Senate Committee on Transport and Communications, on behalf of The Conference Board of Canada, we would like to take this opportunity to thank you for inviting us to provide input into this study.
We at The Conference Board of Canada work continuously to empower Canadians and key decision makers with insight and knowledge in the areas of economic forecasting, public policy and organizational performance. We do so by using an applied-research, evidence-based approach to our work, while remaining objective and non-partisan.
At The Conference Board of Canada, we have a clear understanding of the importance of the energy sector to Canada's economy and the role that pipelines play within that context. We also understand that investment in infrastructure is key to Canada's long-term economic success. Crude oil transportation is an area in which we've completed a number of studies in the past, in particular, examining the projects' economic impacts across the country. We also understand that crude oil pipelines are the safest and most efficient means of moving crude oil to market. In assisting the committee by providing evidence for this study, we will focus on those issues.
Lastly, we will provide some advice and ideas in areas which we believe may warrant further investigation, in the context of the questions which are central to the study.
First I would like to talk about the importance of Canada's energy sector. The sector accounts for about one tenth of the national economy, rivalling the size of the manufacturing sector.
The sector contributes significantly to the Canadian and provincial economies. It employs hundreds of thousands of workers across the country, and pays some of the highest wages across industries. It is a key source of non-residential business investment. It is also one of Canada's largest exporters, contributing significantly to various levels of government via taxes and royalties. The oil and gas extraction industries account for the majority of Canada's energy sector.
For the sector to continue to succeed and to contribute positively to Canada's economy over the long term, we believe there are three key challenges that need to be solved: first, remaining cost competitive in a low commodity price environment; second, being able to build infrastructure necessary to access new markets, and that includes crude oil pipelines; and third, successfully dealing with rising greenhouse gas emissions.
Given the anticipated levels of investment in the sector, the resulting production volumes and increasing volumes available for exports, at least two to three crude oil export pipeline projects will be required in the coming years.
Absent new pipeline projects, crude oil exports will move via rail, putting downward pressure on Canadian crude prices, affecting producers' revenues and profit expectations, investment, production, export levels and fiscal impacts across Canada.
The second issue I would like to discuss is the economic impact of crude oil pipelines. We have completed a number of studies at The Conference Board of Canada for the purpose of assessing the economic impacts of the Energy East and Trans Mountain expansion projects, and they indicate the benefits are significant across regions and industries and that will benefit the country for decades to come. Increased economic activity and related employment levels will not only originate directly as a result of the construction and operations of these projects, but will also materialize via supply chain and income channels across the economy.
The impacts also go beyond development and operations. For example, better prices for Canadian producers result in increased government revenues and higher profits to companies, which, in turn, might be reinvested in new projects or paid back as dividends to investors. Increased overseas exports will also result in increased activities at port facilities.
Lastly, there are a number of areas that we believe may warrant further consideration. First, we believe the term "social licence'' needs to be better defined, bounded and measured in the context of building support for pipeline projects. Perhaps more important than social licence, the federal government can play a leadership role by having a regulatory process that is clearly defined, evidence-based, independent, specific, standardized, transparent and will serve the best interests of Canadians over the long term.
There is a need to better establish whether public confidence in the regulatory process and its institutions has been permanently eroded and, if necessary, fix them accordingly. Finally, we believe that the risks and benefits of pipeline projects are already broadly shared across Canada and its people.
Thank you very much for your time. That's the end of my remarks.
The Deputy Chair: Thank you, Mr. Murillo. Before we start our questions, I want to remind my colleagues that there are a lot of people around the table now, so I will encourage — in fact I will enforce it — that you will have one question and one supplementary, and we'll move on to the next one. If there's time on the second round you'll get your opportunity for another question.
Senator Doyle: Thank you, Mr. Murillo, for being here.
I have a short question to begin. In my province of Newfoundland and Labrador, we have a significant oil industry for a small province and we also have a number of people who think that we're doing our little bit to help pollute the planet, so to speak. Most would disagree. But oil can be looked upon, of course, as both valuable and dangerous. Do you see any practical replacement for oil, say, in 30 years?
I'm asking you to take out your crystal ball here and in 30, 40 or 50 years, do you see any practical replacement for oil in the world, in the new technologies and what have you?
Mr. Murillo: Thanks for the invitation, first of all, to everyone on the committee and thanks for the question, Senator Doyle.
We tend to look at this based on one of the leading entities on energy predictions for the future going forward and that's the International Energy Agency. I looked at this extensively and the reality is that what we see going forward is that oil demand will continue to grow over time. The two main areas in which there still isn't a fuel or a feedstock which can replace oil are the transportation and petrochemical sectors. Those are two sectors in which demand will continue to grow because we don't have something to replace the role that oil plays in the field.
We acknowledge there are challenges to the environment with rising greenhouse gas emissions and many other ways in which pollution can happen when you're talking about producing, transporting or using oil, but the reality is that that transition to a lower carbon economy will take time. That's the way we see it.
Senator Doyle: You hear a lot today about electric cars and hydrogen fuel cells. What percentage of oil today is used in transportation? If someone came up with a clean, affordable replacement for the gasoline engine, how much effect would that have on the planet?
Mr. Murillo: I don't have the numbers right in front of me, but roughly two thirds of the use for oil would probably go into transportation fuels across different types. As an example, if you were to think of how many vehicles on the road today do not use gasoline or diesel or some kind of oil-based derived fuel, I think the percentage is smaller.
I do acknowledge that these technologies have the potential to change the industry and to change demand for transportation fuels over the long term. But the reality is with how much infrastructure and how much stock of cars there is today, it will take time for that to happen.
[Translation]
Senator Saint-Germain: Mr. Murillo, welcome and thank you for being here this evening, on behalf of The Conference Board of Canada.
Your brief focuses heavily on economic benefits, market potential, sales and oil exports. Of course, it's an area that will always involve risks, like many other areas. However, it's also an area that requires compensatory measures to alleviate the negative impact on the environment.
In your brief, I didn't find anything regarding the negative cost and the consideration of that cost in the economic analysis of the environmental compensation costs. Can you shed more light on this subject?
[English]
Mr. Murillo: If I may repeat the question to make sure I'm getting it right, you're asking about the risk of development and transportation and how —
Senator Saint-Germain: The risk management, if you consider the costs involved with the repair and compensation for the environmental negative impacts of petroleum.
Mr. Murillo: Do you mean in terms of regulations?
Senator Saint-Germain: In economic terms. There's a cost to compensate for the negative impacts on the environment of the use of petroleum, transportation and so on. I would like to see where in your economic analysis these risks have been considered, how much they cost and where you compensate for this.
Mr. Murillo: That is a very good question. In the standard economic analysis, we don't necessarily account for those particular risks. If you were to talk about, for example, a cost-benefit analysis, that's an area in which you can quantify those risks. Again, if you look at it from the development point of view, let's talk about the oil sands in a place like Alberta, the companies have to put a certain number of funds aside to know that they can deal with the environmental liabilities that may happen from something that will go wrong.
The same thing can be done for the National Energy Board and pipeline projects, and there are processes in place that ensure companies will have enough money to cover environmental liabilities. But in terms of how those environmental risks are accounted for in the economy, that's one of the big failures in accounting for those costs. Things such as environmental damage or rising greenhouse gas emissions, they are what we generally term as externalities, and that's why we're coming up across the country with different types of regulations to try to capture them, whether it's via cap and trade systems or carbon prices. Those are ways in which it can be accounted for. But at the present time, in a classic economic impact assessment, those impacts on the environment are not necessarily captured and quantified.
Senator Saint-Germain: Don't you believe it is important to know those impacts and to quantify the cost?
Mr. Murillo: Yes, that is very important, but I do think that is very challenging to do. There are many factors and there are a lot of environmental services that you have to assign a value for. How do you value those things? It's quite the exercise to do that.
With the tools that we have today, we can analyze the economic benefits across the economy, but we cannot necessarily capture those risks and the impacts that are not easily quantifiable. But it is definitely an area where we can see more work getting done.
Senator Mercer: Mr. Murillo, thank you for being here. You're an economist in Forecasting & Analysis, Industrial Economic Trends with The Conference Board of Canada. In your analysis and forecasting, have you looked at the effect, positive or negative, that pipelines would have on the return to Canadians based on a single factor, that if we were exporting via pipelines on either coast, we would be getting world prices as opposed to West Texas Crude prices, which is a discount price that the Americans pay for our product?
Mr. Murillo: Yes. That's one of the things that we tried to quantify in one of the reports, specifically the one done for Trans Mountain Expansion. In that particular report, there was an analysis done by a consulting firm in the U.S. This is part of the regulatory process. Kinder Morgan filed that analysis. They find that once you have increased access to markets, Canadian prices can go up roughly by $2 to $3 per barrel.
We did some quick calculations based on a media request recently. If you put numbers around that and you think out to 2020, that could easily translate into an additional $4 billion per year in increased profits. Those profits, again, get either reinvested into new projects or paid as dividends. If it gets reinvested into new projects, it generates corporate taxes and royalties. If it gets paid as dividends, it will either be spent as income or it will be taxed as well. There are ways to quantify it, but that's the best we can do at this point.
Senator Mercer: Thank you very much. You're one of the few people that put some numbers to this question, and it's very helpful.
I want to switch direction here. It will be no surprise to my colleagues. Has The Conference Board of Canada done any analysis on the benefits of not ending Energy East in Saint John but in the Strait of Canso in Nova Scotia instead?
Mr. Murillo: I understand that's one of the issues you're looking at. I read the interim report. We haven't done it. We do include the marine terminal in New Brunswick as part of the process. Looking at the economic impacts of doing it in Nova Scotia as opposed to New Brunswick, that is something we can do, but it's something we haven't done at this point.
The Deputy Chair: I'll intervene for a second. We encourage you to do it.
[Translation]
Senator Boisvenu: Mr. Murillo, welcome and thank you for your presentation, which was very clear. I have two questions. First, have you studied the possibilities for transitioning from the use of fossil fuels to green energy sources? When will industrialized countries, such as Canada, transition to having more green energy sources than fossil fuels? Are we talking about 10, 20 or 30 years, or half a century?
Mr. Murillo: Thank you for your question.
[English]
It is one of the issues we're looking at in a study we're doing right now. We will be publishing a report within the next few months. It's somewhere along the lines of transition energy. I can't speak in detail about it because it's not something that I'm working on, but I know some of my colleagues are working on it. It is something that would take at least a couple of decades to complete that transition, if you want to put it that way.
If we think about electricity, we are already one of the largest producers of renewable electricity, if you consider large hydroelectric projects across the world. Again, some of the largest challenges come with things like transportation fleets.
[Translation]
Senator Boisvenu: When we talk about any synthetic material, such as plastic or the clothing we wear, we need to find substitutes for oil to produce the material. We're looking at 30 or 40 years rather than a decade.
My other question concerns the costs associated with using green material. Many ecologists want us to start transitioning to green energy sources. However, we know that, at this time, people who use green energy sources for either heating or transportation are mostly wealthier people. An electric car can cost $100,000, as opposed to a small gasoline car, which may cost $8,000 or $9,000. Those hardest hit by the transition to green energy sources would be low-income earners, since green energy is difficult to access.
In your study, did you measure the potential impact of the transition from affordable fossil fuels to the more expensive green energy sources on the middle or lower-income class?
[English]
Mr. Murillo: I don't believe we've looked at those details, but that is definitely something that we think should be studied. I agree with you that there will be different impacts across income brackets across the country. I definitely agree with you that there are certain areas in which renewable fuels or non-emitting fuels are already making sufficient progress so that we can move towards a greener economy, and those are in areas such as electricity. It's feasible that we can see a good transition in the next few years.
In areas such as transportation fuels, there's still a lot to be done and it will take time. As you said, some of the end- use technologies are not there yet. We need to be able to have electric vehicles that are at an affordable point for replacing the vehicles that are on the road today, and it will take time to do it as well, but it will definitely affect different income groups differently.
Senator Unger: Thank you, Mr. Murillo, for being here tonight.
I would like to pick up on a couple of comments that you made. Questioning the legitimacy of the existing regulatory process is a legal tactic that the opponents to some projects have been employing, but it's not clear if public confidence in general has been damaged. That's a concept that I don't think our committee had a comment about. So I'd like you to elaborate on that.
My second question goes to the last page of your brief. You say, "It is our view that the risks and benefits of pipeline projects are already broadly shared across Canada.'' Would you elaborate on that as well?
Mr. Murillo: Yes. First of all, thanks for inviting me today. I understand that it was your invitation that got me here today. Thank you very much for that.
On the first question, the issues that are at the back of the report are the ones in which we haven't done a lot of work on but are the ones in which we put in ideas in terms of our input.
We have, actually, in the first addendum that we added to our report, and I know it's not available to everyone, but we looked at six polls done over the last year, and only one of those polls addressed the issue of whether there was lack of confidence in the regulatory process in the institutions. It did seem like the majority of the respondents pointed toward some lack of confidence, but there was still a part in the middle that could swing the majority one way or the other.
In terms of the polls, we didn't find a definitive answer to that. I would say you probably know better than us and have probably done more research on that front than us. That is our main comment.
The other part of that comment is that sometimes what we have observed is that there might be more of a loud minority that may make it appear that it's the voice of the majority. That's the way we look at it. But obviously within government there is more knowledge as to what the polls say and what the numbers are. That's basically our comment in that regard.
The last item in terms of how we think the risks and benefits are already shared, the main reason we believe that's the case is we go back to the economic impacts and the importance of the energy sector and importance of pipelines across the economy, and that's how some of the risks are shared. That's already dealt with the regulatory processes, with the natural resource development, regulatory processes across the provinces.
The last key point of that, in sharing the benefits, is we all benefit one way or another from access to energy by having the standard of living that we have and having access to the things that we have. That's basically the way we looked at that question.
Senator Unger: Thank you.
Senator Lang: I'd like to first of all make this comment: With the regulatory process and what is in place now, we seem to have entered into a stage of paralysis, where decisions don't seem to be able to be made. And I harken back from the area that I represent. The Alaska Highway Gas Pipeline, there was a window opened for that particular pipeline that would have made it feasible, and then it closed. Time took care of it. Subsequently, there was obviously no decision and the pipeline was never built.
The same with the Mackenzie Gas Project. We had 20-some-odd years of hearings where I think many people got rich, if they were accountants, lawyers or they were environmental activists. At the end of the day, they agreed there should be a pipeline but that window shut too because then it became uneconomical.
Now we have witnessed a number of other possible pipeline corridors, the Gateway, namely, as a possibility, and then we have the one we're referring to now in the east, for the eastern coast.
Senator Unger referred to your comments in your brief in respect to the regulatory process and the way it is set up now, the fact that there is legislatively, I think, a clear and concise process that is in place to hear the various interest groups and expertise, so that decisions can be made based on science and social and economic considerations.
What can be done by legislators to make this process more transparent and to meet what you call a "social licence'' than what is already in place, unless people don't want to respect the law and respect the process, the way that it's in place? What has to change?
Mr. Murillo: Is that not the million-dollar question?
Senator Lang: That's why you're getting paid.
Mr. Murillo: Yes, that is right. That's a very good question. We understand the process that NEB and CEAA are going through. I think that builds confidence in the process itself. Maybe an internal review of why the process is not working in a particular way or where the areas are in which the process is working is probably the way to look at it.
I'm not an expert in that regard, in terms of the institutions and their regulatory processes. I, as an informed Canadian, believe that the regulatory process is fair and robust enough to consider all the important things that are necessary, and I believe in the regulatory process and the people that are behind it. But that might not necessarily be the case for all Canadians.
I think another part of that is to understand whether people are not informed about how the regulatory process works, or whether it is the fact that they don't believe in the regulatory process. But I'm not sure of the best way to fix it, because it might not be the case that we need to fix it.
Senator Lang: If I could follow up on this on the question of those that are appearing before the regulatory processes in an official manner or otherwise.
It has obviously become very apparent over the last number of years that there are multi-millions of dollars, not hundreds of thousands of dollars, multi-millions of dollars being financed by outside interests outside our country for these organizations to appear before our regulatory process. Most Canadians are not aware that outside interests are financing these organizations.
Would you not think — perhaps another step for transparency — that any organization that is being financed by outside interests, outside this country, should have to disclose clearly that in the public arena during the course of any official presentation, so that everyone knows who is paying them, as opposed to having them wrap themselves in the Canadian flag and being paid by interests outside the country?
Mr. Murillo: I think that that goes to being transparent in terms of who is participating in the process. That doesn't necessarily make the process more transparent, in my view, but it is a good point and it will make the process more transparent in terms of who is participating. Then again, if it is about the process and if that is an issue that needs to be dealt with, it should be more about defining, in the process and in the regulations, who is allowed to participate and who is directly affected, and those things that need to be better defined. Maybe that's the answer. Because that's where I see where the challenge is.
Senator Griffin: Actually, a lot of this is follow up, I think, to what Senator Lang was asking. I want to come back to social licence. I like how you handled it in your paper and talking about the mining industry and the Black report on how to score social licence. But at the end of the day, it's still a very subjective thing. As you've already noted, a minority working effectively can seem to be a majority.
At what point do you feel that social licence needs to be trumped by arguments for doing things that are in the general public good, the greatest good for the greatest number, John Stuart Mill's tenet?
Mr. Murillo: Let me start by saying I was having that conversation with Mr. Desrochers earlier on, who is your next witness, and he will be dealing with everything that has to do with social licence. But I will answer some of the questions.
Some of the information that was put, in terms of social licence, actually goes back to some work that was done for Transport Canada by us a number of years ago.
If you go back to what we did, we're trying to find a way to quantify it, so you can use it in a way that is evidence- based because that's basically the way we approach things. But we still see the issue that social licence is a term that's not very well-defined, and it's not per se in the regulations or per se in the legislation or in the law that it has a clear definition. So it could be interpreted by many different groups in many different manners. That's where the main issue lies. And again, we go back to some of the findings that are already in the interim report.
As Mr. Gaétan Caron said before, perhaps we should move away from social licence and towards public interest. Do we have a definition for "public interest''? If we're going to move away from one, then it comes to the other. Let's do it in a way that we know a particular concept is well-defined and understood by everyone so we can all agree on a particular concept. What does that mean for the Government of Canada and for Canadians? That's what I think we need to better define.
We can agree whether or not we have social licence, whether or not we have public support for a project, I think that's more key to the question. It's better to define those concepts that are easy to misinterpret or use in a subjective and different manner rather than in the context of trying to make public policy decisions.
Senator Griffin: Good point. You also said that you personally believe in the regulatory process. I think there are a lot of folks out there in the public who either do not know the regulatory process or they feel that a company will promise anything in order to get the project. Then when the project is under way, corners get cut or there is sloppy maintenance later on.
So I think at the end of the day, public belief in the regulatory process needs to be substantiated and it needs to be real.
Mr. Murillo: Yes. That's not only with the regulatory process but with energy in general. I think there either might be a segment of the population that is not interested in knowing these things, or maybe there is just not enough information about it to make it accessible for everyone to understand. Where does energy come from? How do we use it? What does it cost? How does it contribute to our living standards?
Then, how do we get from taking that molecule of natural gas or crude oil from the ground to our homes? How regulated is that all along the way, from the provinces looking at their natural resources and how they're developed and how they deal with their environment to let's say that molecule moving across interprovincial borders to the public utilities, which at the end of the day will regulate how much it will cost for consumers?
There are a lot of complex steps in between that may not be understood, necessarily, but I do believe that we have some of the best and most stringent regulatory processes in the world, especially when it comes to protecting consumers at the end-use level, when it comes to moving dangerous goods across or within the provinces and when it comes to developing resources in a way that makes sense and is in the best interests of that particular province or Canadians overall.
Senator Runciman: Thank you. You're here as an economist but you've opened the door to a few other areas. I'm curious if you built into your assumptions with respect to the impact and need for Energy East what the impact might be with respect to the construction of Keystone. We now have the executive order signed by President Trump, and TransCanada is making the application. How does that impact the viability of Energy East? Have you had an opportunity to look at that?
Mr. Murillo: We have had internal conversations in terms of if you look at this pipeline as a whole, if you look at line 3, the Trans Mountain expansion, Energy East, Keystone XL, they will all achieve the same thing in terms of increasing market access. But they will achieve different things in terms of whether there is energy security. For example, if you look at Energy East versus a different pipeline, or if it is looking at market diversification, whether you are looking at Energy East versus Keystone XL.
Senator Runciman: Bottom line, you don't see it impacting the viability of Energy East if Keystone goes ahead?
Mr. Murillo: I'm not sure that's necessarily true. What we have seen in our analysis is that we would need at maximum three large crude oil pipelines over the next couple of decades, and all of those pipelines are competing within the same time frames. So I would not necessarily say it would affect the viability, but there are other considerations. It is the same company proposing the two projects, but we can't say if one is better than the other. I think it will be up to the regulatory process and investors to figure out which one will be built first.
Senator Runciman: You talked about your confidence in the regulatory process. You may have a view on this, or maybe not. You're probably more familiar with the process than I am, but it's somewhat perplexing to me now that the Energy East process, the NEB process, has to start all over again after two years.
I wonder if you have a view with respect to why this process would have to start all over again. It seems to me any of the evidence gathered prior to this questionable meeting should be valid, and to have to start the process all over again strikes me as curious, to say the least, and certainly has economic consequences for the country.
Mr. Murillo: Yes. I understand why it's being restarted.
Senator Runciman: Right from the get-go? You do?
Mr. Murillo: I understand, but I'm not saying I agree or disagree. What I can tell you is that from the perspective of an investor or somebody planning a project, it creates hesitation because the rules are changing partway through the process. That's one of the implications of doing that. Whether I agree or disagree, that's more of a personal opinion, but it definitely affects investor confidence in the regulatory process, if you look at it that way.
Senator Runciman: I'd like to see an explanation of why the evidence gathered prior to that meeting is invalid. Anyway, thanks.
Senator Galvez: Thank you very much for coming. I was recently appointed. In my head there are three perspectives that need to be used when analyzing these projects: We have to have sober reflection of the project. We have to look at it long term. We are here for many years, so there is the possibility of looking at something not in 4 years but in 20 years. And we have to represent minorities.
I've attended many presentations about pipelines. I have read economic analyses completed, for example, by Deloitte. There are four aspects that I think have not been properly addressed with respect to the difference between doing an economic analysis for pipelines that are constructed in the States versus pipelines that are constructed in Canada.
We have specific situations. Very quickly, there is hydrogeology and permanent soil frost. We have seismic activity on one side and on the other side that the United States doesn't have. Many times we have economic models being applied to the same pipeline, not taking these aspects into consideration.
Second is this unconventional oil, which is very different than the petroleum that comes from the Middle East, North Africa. We are talking here about diluted bitumen. If I put a glass here and shake it, all of them look the same, but diluted bitumen immediately cuts in two, a very heavy part and the diluent. The diluent is sometimes even 70 per cent, so we are transporting more solvents, which are very volatile.
The code for pipeline construction is very similar to that of the States. The oil that we transport here is very different in operation and the friction inside because of the chloride and sulphur, which produces stronger friction. Have you been close to a pipeline that transports dilbit?
Mr. Murillo: No.
Senator Galvez: It's very warm compared to another.
I'm an engineer; I'm sure it influences the utility life, the length of the life of the pipeline. This has to be taken into consideration in the cost.
Mr. Murillo: Yes.
Senator Galvez: Some of the senators talked about the emergencies. This petroleum, unfortunately or fortunately, is not water. It's a hazardous substance, and the companies that own these pipelines can claim bankruptcy. The form in which they have this money in case an accident happens may not be readily available. It may be as a credit note or something.
Mr. Murillo: Yes.
Senator Galvez: Finally, social licence, the people want to know what remains in their cities. Are these factors being considered in your analysis?
Mr. Murillo: No, in an economic analysis they wouldn't be considered. However, if you look at the regulatory process, all the technical aspects of where the pipeline is being built and what it transports, that's all being taken into consideration.
In terms of other aspects of addressing minorities and things like that, that goes back to the companies dealing with the communities. If it is, as an example, an indigenous community, there's the duty to consult, but that's all part of the regulatory process. It doesn't necessarily go into the economic analysis, per se.
Senator Galvez: There is a very close example with economic analysis during the Kalamazoo spill. There is a lot of data of the billions of dollars it cost to remediate this —
Mr. Murillo: Yes.
Senator Galvez: — that can assist.
Mr. Murillo: That brings up a very good point because it goes back to some of the questions that were raised before, and perhaps we need to rethink or extend the way we do some of the economic analysis. Then again, some of the economic analysis that we completed at The Conference Board of Canada were actually filed through the regulatory process with the NEB, and they met the standards the NEB called for. Perhaps it is up to the regulatory process to assess the impacts of an environmental impact within the economic analysis itself. That would be one way to put it.
Senator Bovey: I am very concerned about the cost of risk. I've lived in various parts of country, earthquake zone to prairie zones, and I guess I rest my case on that.
The Deputy Chair: Before we go on to second round, Mr. Murillo, I wanted to ask you a question in response to something that you brought up talking about the three pipelines going through the country. You obviously think there's room for that and there's an economic argument for it. I think I concur with you. If that were to occur, of course, it would enable Canada to take all foreign oil out of the mix for the most part, no heavy oil coming into Canada through ships' bottoms, coming through the Maritime provinces and Nova Scotia's water. There's a great environmental advantage to that and it takes a lot of risk away.
What sort of impact would it have or would it have any impact on a made-in-Canada price for petroleum? Could we see a made-in-Canada price for petroleum that would be fairly standard across the country of all the petroleum that was processed in the country, produced in the country?
Mr. Murillo: We already have that. The main issue is that global prices, no matter in which region of the world you are, generally are determined by a couple of benchmarks across the world. They're Brent if you're in Europe or Africa, or West Texas Intermediate if you're in North America. Then all the prices, whether it's a light crude, like an Edmonton light in Western Canada or a Western Canadian select, trade on relationships to those particular crudes.
If we are no longer receiving imports on the East Coast, those imports are generally priced based off Brent prices, and then our crude is generally priced off WTI. In terms of cost, it would be perhaps lower cost, but in terms of affecting benchmark prices across Canada, that already exists.
The question is more if you have increased access to markets, how does that affect Canadian benchmark prices? The answer to that is it would narrow the differential because it would make it not cheaper but more cost-efficient to transport across the country. In terms of creating a made-in-Canada kind of benchmark, we already have those benchmarks. Maybe the fact is that we don't see those benchmark prices for Western Canadian crude being paid at in Eastern Canadian refineries at the moment.
The Deputy Chair: We don't.
Mr. Murillo: We don't because they're buying crude that's priced off Brent, so it's a little different, and the main reason that's happening is we don't have a pipeline that's moving crude across the country.
The Deputy Chair: Second, right now the price differential between Brent pricing and West Texas is very narrow. Would you see a change or an impact on the price gap if we were able to bring all our oil to market, without much variance?
Mr. Murillo: Not necessarily. If you looked historically at the relationship between WTI and Brent, they have traded at very similar prices over the long term. The main reason why that's the case is because they are very close in quality. The two main quality components of looking at pricing benchmarks are sulphur levels, as an example, and the viscosity of the crude or the density of the crude. They're very similar in terms of density and sulphur levels.
Whether that would change if we get more pipelines, I don't think that's necessarily the case. We have seen the differential between WTI and Brent widen over the last couple of years, but it's starting to narrow down. But that had more to do with market constraints in the U.S. Gulf Coast. That's what was causing those issues. Over the long term, they should come back to where they are, which is basically trading at similar prices.
Senator Mercer: You told me in my earlier round of questioning that The Conference Board of Canada hasn't done a study of the Strait of Canso versus Saint John as the end point for Energy East. But if you've talked about Energy East at all, then you've obviously looked at the Bay of Fundy, and you looked at that as the end point for Energy East under that system. As you know, Senator MacDonald and I are anxious to talk about the Strait of Canso.
However, in that analysis, did you do an environmental analysis of what the potential difficulty would be in the Bay of Fundy with a catastrophic spill? The difference, as one of my colleagues mentioned, is what we're shipping here. We're not shipping refined product; we're shipping bitumen. It's much more difficult to disperse, as I understand, as compared to refined products.
The reason for the question, of course, is that the environmentally sensitive Bay of Fundy has a very sensitive fishery and also some sensitive breeding grounds for several species of whales, as opposed to the Strait of Canso, which is on the open Atlantic Ocean where the environmental impact, while significant, would not be as great, and dispersal would be a little easier in a bigger pond. Have you done an analysis of the environmental impact on the Bay of Fundy if there were a catastrophic spill?
Mr. Murillo: No, we haven't. That's the short answer to that.
Senator Mercer: I go back to your title. You're an economist, Forecasting & Analysis, Industrial Economic Trends. In today's world, industrial economic trends must involve an analysis of the environment, which I see missing.
Mr. Murillo: Yes.
Senator Mercer: I'm suggesting that you should get at it and do that, because that would be very helpful to the regulators and to those people who are either for or against this project.
Mr. Murillo: I agree with you that it can be done better, to include those environmental risks. That's definitely something that we will take away from this meeting, for sure.
Senator Mercer: We'd love to have you back when you complete the study.
Mr. Murillo: Of course. One last point based on what I said earlier, which is when we did these economic impacts for these particular pipeline projects, they were within the framework of the NEB. Once again, it could go back to being a requirement from the regulatory process that the economic impact assessments or studies look at the potential risks on the environment.
[Translation]
Senator Boisvenu: I want to follow up on the question I asked earlier. In terms of the period in which we'll see a gradual decrease in the use of oil and a move toward green energy sources, we're talking about 30 years. People agree that industrialized countries will move toward greener energy sources around 2050.
Two possibilities exist. The first is to continue to import, for 30 years, oil from countries whose environmental standards fall below Canadian standards. Oil importation also means taking a chunk out of the Canadian economy. We're talking about $20 to $30 billion, depending on the cost of oil.
The second possibility is for Canada to consume its own natural sources, which are exploited according to very strict environmental standards. This would have a significant economic impact on the ability to generate those revenues in Canada and to then invest the revenues in social programs and education.
Which of these possibilities is the most desirable for Canadians?
[English]
Mr. Murillo: The reality is that if you are selling within Canada or to the United States or elsewhere, you're still getting those revenues for local companies, and they're coming back to Canada in one way or another. The difference is whether we're looking at achieving certain public policy objectives, such as energy security, and that's a different kind of outcome you will see. We will no longer want to import oil from a particular country or another. That's where the question changes and whether those imports subtract from our economy. That's where that equation works.
From the point of view of using more of what we produce, that would be more ideal. Then eliminating those imports of oil, that would be more ideal from an economic standpoint. But then again, the main issue, as it stands right now, it's about whether we are getting the maximum value for the resources we can. At the moment, we're not because of pipeline constraints. That will change if we have more pipeline transportation or ease of pipeline transportation.
Senator Unger: Just a quick question, and this goes back to the people whose lobbyist activities were funded from other countries that certainly do not care about Canada's best interests: Should groups like this not be allowed?
We had a previous witness who, on this amorphous social licence concept, stated that every person in Canada who wanted to appear before the NEB should be allowed to, from one extreme to another. But at least she was representing a Canadian group. These people represent no one but the paycheques they receive. Should they be banned?
Mr. Murillo: That's a loaded question.
Senator Unger: Help yourself.
Mr. Murillo: I believe that it is in the regulatory process to determine who would be allowed to participate or not. I think that's up to the regulatory process to determine.
I'm not sure that the answer is everyone should be invited. I think everyone should be able to have input. That is part of a democratic process and a process that is more transparent. Then again, if you play the game of going the opposite way and limiting it just to the people that are along the pipeline route or something like that, to put it in a very narrow kind of sense, there are a lot of people who would argue that that's not necessarily the right process either.
There's a balance between who should be able to participate or not, and being able to keep the process efficient as well so that we don't have another Mackenzie Valley pipeline and another Alaska Highway pipeline. But I don't think it's up to me to say whether those people should be allowed to participate in the process or not, or if they have the best interests in Canada or not. I think it's for the regulatory process to make those boundaries clear so that we can avoid that situation if that's the case.
Senator Lang: I note the time is moving on, but I would like to bring to the committee's attention, because of where I come from, we are neighbours to Alaska, where there is the Alaska oil pipeline that's been in existence since the early 1970s. It traverses every possible hurdle as far as the geography of Alaska is concerned, or North America. It goes from permafrost to mountainous, to the tundra, but it also goes through earthquake zones.
That particular pipeline has provided a major economic social base for Alaska for almost 40 years, and continues to do so. In fact, it was the largest producer of oil for many years and is falling behind.
The question of risk versus benefits, the risk has been almost negligible except for the Valdez incident, which has taught a lot of lessons which the Alaskans have learned, and the Americans, as well as we Canadians.
I want to go back to the question of your thesis or the premise of your report or maybe going forward in future reports. What I don't quite understand is you have not emphasized the importance of energy security, as you referred to it earlier, for Canada, for us to be able to make our own decisions and to have our own access to our own coastline and take on our own responsibilities, as opposed to relying on presidents to make decisions, like Keystone, on our behalf. That is an intangible, but it is not an intangible, because there's a price tag to this, and time is not our friend in these cases. If we have friends like that who delay things for that long, they're not our friends.
Mr. Murillo: I understand the point you're making. When it comes to trying to quantify something like that, we've not necessarily been addressing it because it's more of a public policy goal in which we may appear to be advocating for something, and we don't advocate for one particular project or another. That might be one reason why we're not picking a winner or loser in terms of the different pipelines.
Energy security is a formidable goal for us to achieve if we're looking at having access to our own resources across the country. That's very important. But as a non-partisan, evidence-based organization, we have to tread carefully into what kind of assessments we make so that we don't appear to be favouring a particular project over another. That's one of the reasons we might not be addressing that.
The Deputy Chair: Thank you, Mr. Murillo. We're over our time. I'd like to thank you for your participation here today.
We are continuing our study on the development of a strategy to facilitate the transport of crude oil. I am pleased to introduce our next witness, Mr. Pierre Desrochers, Associate Professor, Department of Geography, University of Toronto. Thank you for attending our meeting, Mr. Desrochers. Please begin your five-minute presentation, and afterwards the senators will have questions.
Pierre Desrochers, Associate Professor, Department of Geography, University of Toronto, as an individual: Thank you very much. My presentation will be based on a few papers that I've published in the past that are freely available online, along with a broader paper that was sent to you but was not translated. In order to keep this within five minutes, I thought we could go over a few images, which I've sent to you. What I will present is my personal viewpoint and that of my collaborator and colleague, Joanna Szurmak. This is a big picture analysis or, perhaps more accurately stated, a critique of the social licence perspective needed to build pipelines.
If you look at the first image, you have a cartoon which sums up the main issue with social licence. The comic take on it is that social licence is undefined and unlimited. The real joke is that there is no such thing as a social licence form. Nobody knows what it is and how it can be enforced.
The concept of social licence, as you may know, was developed in the context of less developed economies, where institutions are never up to the standards that we have in Canada. But increasingly these last few years, if you look at the fourth slide, what social licence has become in advanced economies is essentially a permission that is granted to carbon benefit deniers to stop economic development. The point I want to make in my presentation is that the main problem with this perspective is that it takes those benefits for granted. The benefits that can only be attributed to carbon fuels cannot be taken for granted.
If you want to look at the bad old days, the next image, what you have there is a painting of the last peacetime famine in Europe, which took place in Finland, not in Ireland. You can see people practising slash and burn agriculture, essentially trying to produce food in an environment not dissimilar to the Laurentians here. You can see the girl in the middle, how happy she looks. The point is poor people, before carbon fuels came along, could do a lot of environmental damage. This is something that we've forgotten today. We don't understand the environmental benefits of carbon fuels.
Another way to understand this is to see the next picture, which describes a group of Dutch whalers going up north to Norway in order to produce whale oil ultimately, which was the best source of illumination available at the time. But as you can see on the painting, they are harvesting all the biomass they can, including a Dutch whaler who is trying to club a polar bear to death. I assume the painter did not accompany the whalers and did not understand what polar bears were all about. The point is that before carbon fuels came along, our remote ancestors were harvesting resources from the planet. It's not because they were poor and not numerous that they did not have a tremendous environmental impact.
The next slide is about the millions of people who still die today from not having access to carbon fuels. These are real deaths, not deaths generated through computer models. Between 3 and 5 million people a year die from burning all sorts of poor-quality biomass in their house, and millions more suffer from chronic illnesses that result from breathing the smoke produced from poor-quality fuels, especially mothers and young children.
The next slide is about living conditions before carbon fuel-powered cars came along. The upper left picture is a street sweeper in New York City collecting the dung that was produced by one of the tens of thousands of work horses that you had in New York City. The picture on the right is a traffic jam in London. Try to imagine the smell of the urine and the cholera epidemics that came from living in those conditions. So yes, cars are not perfect but if you look at what they replaced there was significant progress.
The following slides describe the transition from the so-called renewable era to the emergence of carbon fuels in the 19th century. This is for the United States. And the message that I want to convey to you is that humanity did not simply experience a qualitative switch from biomass to carbon fuels but also a quantitative shift in terms of the amount of energy available to human beings. There was simply not enough biomass to create the modern world. Humanity had to dig up fossil fuels from underground.
One of the benefits we take for granted is, among other things, modern transportation. I'm a geographer by training. I had to throw a map in at some point. If you look at the map, you can see that in white you have the only commercial routes that were profitable in the age of sail. So you had to deal with wind patterns and ocean currents and you could only go to a few places. Because the ships were made out of biomass, out of wood, they could only be so big.
The 19th century comes along, carbon fuel comes along, steel ships come along and suddenly the whole world opens up and as a result humanity is able to specialize production in the best regions of the world. Productivity goes up and, among other things, famine disappears. Carbon fuels and modern transportation put an end to famine because historically when most food was local, as it was before the age of carbon fuel, two bad harvests in a row and you would have a famine.
We now live in a world where we're born surrounded by synthetic products, we live surrounded by synthetic products, we die surrounded by synthetic products and a lot of people view that as an addiction. But I would submit that the real result is rather more akin to nutritious food. We're not addicted to whole wheat bread, we're not addicted to clean water, we're not addicted to all sorts of good things and as a result humanity has prospered.
There is a slide here on life expectancy. Approximately 200 years ago, when coal began to emerge, average life expectancy in advanced economies was about 32 years of age. Today we're pushing on about 80 years of age. The way I convey this notion to my students is to tell them to look to the person to your left, look to the person to your right, had you been born in 1750 only one of you would be alive today. So there are benefits to economic development.
Now it's not so much that we're more numerous and living longer than our ancestors but physically we're different. A number of demographers and economists have pointed out that we're much taller and much healthier than our ancestors.
You might know these benefits, but I will conclude by talking about some of the environmental benefits we take for granted. The next slide was produced in 1861, oil emerges, and you can see here a bunch of sperm whales celebrating the advent of petroleum. Why is that? It's because kerosene is the first product produced out of petroleum and obviously what happens then is that humanity begins to replace resources harvested on the surface of the planet from resources that come from underground.
The next slide is rather dramatic. It is the evolution of the forest cover in the United States. Long story short, because of the low productivity of our ancestors, the low point of the U.S. forest cover was reached around 1920 but since then tremendous improvements in terms of agricultural productivity, regional specialization, replacing biomass by stuff that comes from underground has resulted in a remarkable reforestation of the United States and every advanced economy in the world.
The one slide on climate change I will come back to later.
What I want to put out is that we don't live in a world where we turn the safe climate into something worse through petroleum but we've made a climate that was very dangerous to human beings and we've made it safer through infrastructure, better food, advanced warning systems and the capacity to move people.
Alternatives have been around for a very long time. That's the last slide.
The first one is from the early 20th century. You can pump your water for nothing, you can use the wind, it's free, but people use diesel generators for a reason. There are strong benefits to fossil fuel that we should not take for granted.
I'm sure I've given you enough food for thought for a fruitful discussion. Thank you very much.
The Deputy Chair: Mr. Desrochers, thank you very much for a very interesting and insightful presentation. I found it interesting that you mentioned kerosene. Of course it was developed in Nova Scotia by Abraham Gesner. He was the first in the world.
Mr. Desrochers: I make sure that my students learn about him.
[Translation]
Senator Saint-Germain: Good evening, Mr. Desrochers. Thank you for your work and for being here this evening. It's very much appreciated.
You've written extensively about the importance of petroleum-derived products in our lives. You mentioned them in your presentation, and your brief is very interesting in this regard. You argued that petroleum is the most reliable liquid energy known to man. Some of your work focuses on the many ways in which petroleum has contributed to major societal advances. However, you recognize that our relationship with petroleum products is not without risk.
What are the greatest risks of our reliance on petroleum products and what are the best ways to mitigate these risks?
Mr. Desrochers: First, I'm politely opposed to the notion of reliance on petroleum products. As I mentioned at the beginning, petroleum products appeared because we lacked biomass. For example, there's not enough cotton on the land to clothe people and there's not enough wool or fuel. There's no alternative to petroleum in the transportation sector.
Of course, problems arise. Sometimes spills occur, as we saw in Kalamazoo and other locations. However, in general, if we consider progress to be the creation of a problem that is less significant than the previous ones, I would argue that, except in some unavoidable cases, since petroleum and natural gas are hazardous materials, accidents and spills are bound to happen. Therefore, we must try to reduce these risks.
As a real alternative, petroleum is much less harmful to our ecosystems and lives than the other solutions proposed at this time. Obviously, we must do a better job of producing, transporting and transforming it. However, I find that, if we take into account the costs and benefits of all the solutions available, in general these are technical problems that we should be able to solve. I don't see major problems in relation to the other solutions.
Senator Saint-Germain: I want to emphasize the word "reliance.'' You said that, in terms of solutions, they're even more harmful and there are few of them. I'm thinking about hydroelectric and wind energy. You proposed that, until other more ecological and less harmful solutions are found, so while setting aside hydroelectricity and wind energy, we continue to develop the petroleum industry, both for imports and exports. Isn't that a way of increasing our reliance and delaying research and the implementation of other solutions? In light of your presentation, wouldn't there be a way to move toward a more acceptable economic, social and environmental solution?
Mr. Desrochers: I don't agree with your premise in this regard, because petroleum is not in competition with wind energy and hydroelectricity. Coal and natural gas are in competition with them, but petroleum is essential in transportation and synthetic product production. Wind energy and hydroelectricity produce only electricity, and not synthetic products such as asphalt and many petroleum-derived products. The markets aren't the same. If you want to promote alternatives such as wind energy and hydroelectricity, you turn to coal and natural gas, not to petroleum. I think the two aren't related.
Senator Saint-Germain: Interesting. Thank you.
[English]
Senator Unger: Thank you, Mr. Desrochers, for being here.
In your brief, you gave some interesting detail about the origins of social licence. You specifically mention that the movement to obtain a social licence aims to disrupt or displace democratically established processes. Would you elaborate on that?
Mr. Desrochers: The notion of social licence was first formulated in the context of countries where you had natural resource projects, especially mining, where government institutions are — again, let's put it this way — of low quality. In Canada, we've built a significant amount of infrastructure over the last two centuries and a number of people were involved. Yes, not everything was perfect. Some groups were probably not given the kind of treatment that they deserved, but, in a democratic society, I believe that the people who should have the final say on these things are people who are directly affected by these projects. The problem that I see with social licence, again, is that we have groups who take the benefits of carbon fuels, of petroleum, for granted and do not recognize that there are, again, no alternatives. I'm not saying that most people are lazy, but nobody would have bothered developing petroleum products if they had not been at least less problematic than the real-world alternatives that existed before. So a number of these groups, again, refuse to recognize these benefits or simply take them for granted without understanding that there are no real alternatives to them and have developed this notion that their perspective trumps every other and that they can somehow overcome traditional private-property-rights approaches to these things or the democratic process.
So what my paper is, and what my work over the last few years has been about, is to try to provide, if not a few additional, let's call them thoroughly inconvenient, truths, at least a big picture on these issues. I think that blocking progress and development without understanding the benefits that came from those is, in my personal opinion, anti- democratic. People who are directly affected should have the final say on these projects. Of course, as a society, we should have a debate about those issues, but my sense is that a lot of these opponents simply don't want a debate.
Senator Unger: Thank you. I'm from Alberta, and, of course, when these protesters first started running all over the country, it seemed, I wondered where they came from, why they came, and who was funding them because it was fly here, fly there. Then I learned, a year or two later, that they were funded by special interest groups, primarily from south of the border. I'm wondering if you would comment on whether or not these people who have no vested interest in Canada or the Canadian good should be allowed even to protest when, mostly, they're not friends to Canada?
Mr. Desrochers: I believe in free speech. Being an academic, these days, trust me, that is an issue close to my heart.
All I will say is that I don't have a problem with them voicing their concerns. After all, the petroleum market is a global market. Petroleum might be extracted in Alberta, but I don't need to tell you that a lot of it will end up in the United States. So I don't have a problem with people voicing their concerns, but blocking developments, insisting on a vague and ill-defined social licence, is, I believe, a different issue.
I honestly don't care who funds them. I would like to debate with them in terms of ideas, looking at the real costs and benefits of fossil fuels, but I would hope that they would respect Canadian institutions and the democratic process. They can be funded by Americans or Russians or Saudi Arabians; I don't mind. I'm an academic; I like to debate ideas. I'd like to debate ideas with them if they're willing to do so.
Senator Mercer: Thank you for being here. I can't help but think that students in your class must enjoy the exchange of ideas that must go on in the classroom.
Mr. Desrochers: They often tell me they never had another professor like me.
Senator Mercer: And nor have we. So thank you for that.
As to the issue of social licence, if you refer to our interim report, you will notice the absence of the use of "social licence.'' We had a debate around this table where we actually talked about not using those words but instead used "public interest'' as opposed to trying to change the channel as social licence has. The description of the actual licence that you provided is very interesting.
You used a figure of 3 to 5 million people dying because of the poor quality of the fuels they use for energy et cetera. First, I would like to see some data on that because that is a very useful tool to the argument that we need to continue to use petroleum products. You also talked about the evolution of the use of petroleum products and that, even if we were to develop a usable electric car, usable other energy sources, the world need for petroleum is not going to go away just because somebody has come up with an affordable, workable electric car, which we will talk about in the future once we finish this study. Do you see the long-term demand for petroleum products continuing? Because, as you showed in your presentation, many parts of the world still don't have the benefits of the petroleum products that we do and that some people complain about.
Mr. Desrochers: As you probably know, the electric car has actually been around for a century. It has always been the solution for tomorrow, but it has been that way for over a century now. In the early 20th century, you had electric cars were competing with the internal combustion engine, but also the steam engine, propane or kerosene, the Stanley Steamer and all of those things.
As you can see from my work, I do a lot of history of technology, and I can tell you that people have been predicting the end of petroleum and of the internal combustion engine for a long time. All we have at the moment in terms of electric cars are either toys for rich people like Tesla, something that can't be mass produced or affordable to most people, or else electric cars that are mostly produced because of government mandates in places like California. I believe that, without these mandates, the electric car segment would be limited again to toys for rich people. That's because there are some fundamental flaws with batteries that ensure that they're simply not competitive with the internal combustion engine. Again, people often believe that there was this Big Oil conspiracy to get rid of the electric car a century ago. No, Big Oil was not big at that time. Big Coal was much bigger in the early 20th century.
The internal combustion engine won for good, practical reasons, and the electric car, as long as it is based on the current battery technologies that we have at the moment, is not likely to supersede the internal combustion engine in the future.
I hope that something will come along. If there is something that history teaches you, it is that you have no idea what the future will be about, and it might be that — whatever they call it in "Star Trek'' or those sci-fi shows — another form of energy will come along that will displace petroleum. But I don't believe that any current battery technology is likely to displace the internal combustion engine, and, without subsidies, I don't think you would have any purely electric cars on the road at the moment.
Senator Mercer: You raised that interesting word, "without subsidies.'' Because, if it was economical and profitable, companies would be beating down the door.
Mr. Desrochers: It would be like our cellphones. Nobody subsidized the infrastructure to make this possible. If there is a market, people will develop it. Even if you look at the history of the petroleum industry, what a lot of people forget is that petroleum displaced coal. Coal was used in the railroad, but then diesel came along. You didn't need any subsidies to replace coal with diesel. Diesel was a liquid. It was easier to move around. It burned more clearly. It had a higher power density. So, if better technologies come along, the market would make them available.
Senator Mercer: Without subsidies.
Senator Lang: You may want to comment on this as well, following up on Senator Mercer's questions. The reality of it is that, within the next 30 years, if demographers are correct, the population of the planet will increase by 2 billion people. I suspect every one of those individuals will want the same standard of living that you and I have. It's not rocket science to figure out there will be a need for fossil fuels for a long time to come, unless some miracle happens and we no longer need them.
Knowing that and knowing what Canada has to offer, then we, at the federal level as well as the provincial level, should be doing everything we possibly can to ensure that we develop our resources responsibly and get the full benefit as Canadians from our resources.
That being said, you were here earlier when the other witness appeared, and you heard the debate about the question of the regulatory process and whether or not it was flawed. You're quite well read and knowledgeable. Do you have any suggestions or recommendations that you can make to this committee as to how that process could be altered or changed to make it so that it does work and meets the objectives that the general public expects it to?
Mr. Desrochers: I would like to comment on your previous remark about the world's population. I remind members of the committee that before carbon fuels came along, there were about 1 billion people on earth and they were miserable and not living long. Today there are over 7 billion of us, and we live longer and healthier lives than our ancestors, even today's poor people.
I have a comment in the paper I sent you, where a journalist mentions that if we keep on being addicted to carbon fuels, billions of us will die. The point is there wouldn't be 7 billion of us without carbon fuels. Humanity just couldn't have done it. That is something we should be reminded of.
I might be well read, but in terms of public consultation, you're the real experts. I would like to see people discussing specific issues in a process rather than having people coming and repeating over and over again the same point if there was a way to streamline the process about certain aspects of projects and asking people to get their act together. There are enough activists in this country. You could perhaps ask them put their concerns together and debate specific issues, as opposed to hearing someone making the same points over and over again. There might be a way to speed up the process. Again, I'm naïve about this and you're the real experts. I'm sure your ideas on this are better than mine.
Senator Lang: That's not necessarily the case. That's why we have witnesses come to these committees. I want to follow up on a question from Senator Unger. There was a question that was put to the other witness, the question of the obvious direct financing by outside interests to individuals to appear before our regulatory process. Frankly, that's a concern of mine because most Canadians don't realize that's happening. In order to meet fully the question of transparency, do you not think it would be a good idea to have it required by legislation that if anyone is being financed from outside the country, either directly or indirectly, that it be disclosed during the course of the process of a hearing so that everyone understands who is paying the piper?
Mr. Desrochers: Oh, sure, disclosure is one thing, but I don't think they should be prevented from —
Senator Lang: I'm not saying they should be prevented.
Mr. Desrochers: Disclosure is fine. To be honest, I have benefited in the past from funds from American foundations and governments. Disclosure, I'm with you, of course.
Senator Runciman: It's a perspective we haven't heard often, and I'm wondering, you talked about freedom of speech, and especially being at the University of Toronto where you get in trouble for not using certain pronouns, you can lose tenure. We really appreciate your being here.
I am curious about what you see as your goal. Obviously, you raised issues about how social licence is defined and a number of other issues with respect to the benefits of carbon-based fuels, by-products and so on. I am curious about how you are treated with respect to the positions that you have taken on this issue and what the response, generally speaking, is of your students.
In regard to the whole issue of global warming and the fate that is going to befall all of us, if you listen to some of the most extreme viewpoints on that issue, I'm wondering what your perspective is.
Mr. Desrochers: I won't use a technical term, but let's say that my student evaluations are very bimodal. By that, you either love me or hate me. There are not many people in the middle, if you want to know the response of my students.
I like to believe I provide a perspective and bring arguments that are not perhaps discussed or appreciated enough among academics or the general public. That's the beauty of being a tenured academic. I can sit back, reflect and take a broader perspective on things.
The problem I have with the current discussions of energy issues is that somehow a number of people seem to forget that reality is not optional. Carbon fuels are not perfect, but I believe our standard for progress should be creating lesser problems than those that existed before, and this is the message I try to convey to people.
There have been no sweeping energy transitions in the past. These things take decades. Coal was still the world's most dominant fuel until the Second World War, which is something people tend to forget. Petroleum was developed because it created lesser problems and had a number of benefits over coal. But energy education is something I believe in strongly, and this is what I try to contribute.
Senator Runciman: In terms of the widespread concerns about climate change, we use that term, and the pressures that have been brought to bear with respect to that issue have had some benefit in terms of innovation and new concepts, development, and even, in some respects, economic benefits.
Mr. Desrochers: Sure. Well, you might appreciate my lecture on climate change. Every new generation wonders about climate change. You go back to the 18th century, and you might know the philosopher David Hume, he was concerned about deforestation, and he thought that it was changing the climate. Then various technologies came along. In the early 20th century, a lot of people believed that all the canon shooting in the First World War were affecting the climate. When supersonic flight came along, people thought it was affecting the climate. Nuclear testing came along and people thought it was changing the climate.
Every generation worries about these things. This is partly because the climate changes all the time. You have got cooling and warming cycles, but ultimately concerns about climate change can lead to the development of new technologies, but all sorts of other problems lead to the development of new technologies.
Again, petroleum products were not developed because people were worried about climate change, but because people realized that using a liquid as opposed to a solid — coal — had a number of benefits. There has been tremendous progress for a number of reasons historically, but at the same time, if you adopt a perspective that might be overly dramatic, I believe that from a policy perspective you might end up diverting resources toward this problem, that might be better spent fighting malaria or indoor air pollution, things that kill millions of people today, as opposed to hypothetical scenarios at a future date.
Senator Galvez: I appreciate geographers because they are so good at putting history with the environment and the problems. I agree with the fact that technology evolved. You said technology evolved with time, and we passed from coal to petroleum. But at the end of your speech, you seemed to think that fossil fuels are the stop. That's my impression. If it's not, that's good. We evolve technology in order to get a better quality of life and a longer lifespan. Although we are getting a little bit fat because we don't do enough exercise.
Now we know that CO2 that is put in the atmosphere is causing climate change — climate warming. In French, we have a word I teach to my students:
[Translation]
We're not talking about climate change. We're talking about climate disruptions.
[English]
I say bouleversements because there are extremes. There are places on Earth where this is very evident.
Petroleum took millions of years to develop. It took bacteria, lots of process and pressure. We take it out and we use it for cars. But you just said that petroleum is useful for medications, materials, for this and for that. Is it a good idea that we take petroleum and use it for a car when there is electricity, gas or other things?
Second, do we have to say that petroleum will be the last technological evolution because there are no other alternatives? However, I think that for Quebec and for Canada, there are other energy alternatives: solar, wind, biomass, et cetera.
Mr. Desrochers: I might not have expressed myself clearly. I was trying to say earlier not that petroleum is the end point of technological progress but that none of the alternative technologies that are currently available seem to me likely to displace petroleum products. The Stone Age did not end because people ran out of stone but because alternatives were developed. The same will be true with petroleum. I just don't think that substitute will come from what we have at the moment. It will have to be something different.
Again, what the future will hold, I do not know, but I'm pretty sure that, with all due respect, wind is not the solution.
There are a number of reasons why the electric car has been around for a century and never really took off. Energy density is one. Try to start an electric car in minus 30. You're from Quebec. Also, try to put too many groceries in the trunk, and the lifespan of the battery or the amount of mileage you will be able to get out of your battery will be reduced. Turn on the air conditioning or heat. You know how many hours it will take to recharge your car?
Yes, Quebec has a lot of electricity, but sadly electricity is no substitute for petroleum product in the transportation sector as technologies currently exist. Perhaps a new battery technology will come along that will make what I just told you irrelevant. But there's a reason why, again, petroleum products completely dominate the transportation sector, and it's because electricity is not a good substitute. Yes, you can have the Montreal subway and commuter trains, but other than that, there's simply no real place for electricity within the transportation sector. You cannot power a jet on electricity. You cannot power a container ship on electricity.
Sadly, electricity is not a substitute for petroleum products in the transportation sector, not with the current state of technology.
Senator Runciman: You can be a witness for our next study.
Mr. Desrochers: I'd be happy to. I don't know what it's about, but —
Senator Eggleton: You've talked about the benefits of petroleum in many different respects, over time as well, but what about the damage to the environment? What about climate change and the carbon reduction programs that are now being entered into by the different provinces and the federal government? The federal government has signed the Paris accord. What about those goals as well? How do you reconcile your views with that?
Mr. Desrochers: I would argue that there are different ways to reduce carbon emissions. The first thing would be not to shut down your nuclear power plants, if you believe in that. Being from Ontario, you know as well as I do which countries are the ones that have the lowest carbon footprint in the world. There are places like Sweden, where half of their energy comes from nuclear — at least historically — and half from hydro.
At the same time, the problem I have with a lot of people who want to reduce carbon emissions is that they are reluctant to adopt approaches that work. If you look at the respective performance of the United States and European Union over the last two decades, Europe has tried the policy route, carbon credits and all of that. Their emissions have not been reduced.
The United States has embraced fracking and, as you know, natural gas emits about half of the carbon emissions of coal. Carbon emissions in the U.S. have actually gone down. Yet a lot of people who worry a lot about carbon emissions are also opposed to fracturing and to the substitution of coal by natural gas. This is a proven solution in the North American context. If we could let many other places on earth embrace fracking and displace coal with natural gas, I think we would achieve a lot of economically profitable results. But I don't see a lot of activists saying that.
At the same time, many of them are opposed to nuclear power, or they don't want new dams being built. At some point, you can't have your cake and eat it too. I'm for what works, and it seems to me that technological approaches work. Policy approaches have a much less commendable track record.
Senator Eggleton: But you're not saying there aren't alternatives. You just talked about wind, for example. Now you've talked about nuclear and other means, but you dismiss them because you don't think people want them, as opposed to thinking that, from a standpoint of trying to reduce carbon emissions, they could really play a role.
Mr. Desrochers: The thing is that there's no country that has embraced wind or solar to a large extent that has seen its carbon footprint reduced, because obviously you need backup power. The problem with wind is that it's an intermittent and a diluted form of energy. You need to build more long-distance transmission lines.
Look at the case of Germany or any jurisdiction that has invested heavily in alternative energy in terms of electricity production. In Germany, you might hear that for one hour during a year, more than half of their electricity came from renewables, but it came from wood pellets, not from wind. If you look at the statistics in terms of carbon emission reductions, wind just doesn't deliver because, again, reality is not optional. You need backup power, and you bring coal online, up and down, or other alternatives; they just don't deliver. If you're serious about that, at least don't oppose nuclear and encourage the substitution of coal by natural gas. Most new natural gas will come from fracking.
Senator Eggleton: You're suggesting we should give up?
Mr. Desrochers: That's not what I thought I said. I said we need new solutions. We need things that will work, not things that make us feel good.
Senator Eggleton: That's giving up.
The Deputy Chair: I don't think you're giving up. I don't think you have to look at Sweden or Germany. I think you look at Ontario and a lot of evidence of how this is evolving.
I'm curious about CO2. I'm not one of those people who like to call people climate change deniers. I'm not going to call you that. I might consider myself a climate change denier. I think the climate might be changing. There's substantial scientific evidence the glaciers are receding, the ice caps in the South Pole are retreating. That happens on Mars as well; this is all happening on Mars, and as far as I know, there's no human activity on Mars regarding CO2.
I'm curious about your response to production of CO2. Canada produces — and we've been told this repeatedly — but 1.6 or 1.7 per cent of the world's CO2. Of course, we've been led to believe it's a toxin, but for plant life, it's a nutrient. We have about 78 parts per million of CO2 today in the world's atmosphere. There was a time when we had 1,000 — even 3,000 parts per million. That's when the North Pole was a swamp, when it was 3,000. If we were reduced to 34 parts per million, all plant life on the earth would disappear. At 78, we're not that far above a narrow threshold.
One last point: Canada's forests absorb about four times the CO2 we produce. What's your opinion on this obsession with things like carbon taxes and with politicians trying to micromanage these issues?
Mr. Desrochers: Again, the whole point of my presentation was to remind people that there aren't only problems associated with CO2 emissions, but there are also significant benefits.
One analogy that I didn't use could be a vaccine, for example. Let's assume vaccines create bad reactions among 2 per cent of the population. Should we give up on vaccines because of that? And if you focus on the 2 per cent and completely ignore the benefit, the answer could be, "Well, yes, give up on vaccines. Look at the people who suffer from it.''
Again, I'm not arguing that petroleum products are perfect, but what I'm arguing for is to, perhaps, take a broader view in terms of the policy debate than what has been the case so far. Even granting some of these scenarios that, in my opinion, overemphasize the cost of carbon, we should not forget the benefits. Yes, we may lose a few glaciers and water levels might rise a little, but as you probably know, Amsterdam is something like six metres below sea level. Wealthy people can adapt. Rich people can live well in Edmonton or Singapore.
The point of the second-to-last slide that I included was to show that throughout the 20th century, deaths related to extreme weather events have gone down significantly. Even if there were some negative climatic consequences from our production of CO2, I think our increased wealth would allow us to adapt to that and prosper as a society. And, again, if you factor in the other benefits, like increased forest cover, more abundant wildlife and the fact that part of the greening of the earth in advanced economies can be traced back to CO2 fertilization, I believe a case can be made that we're lucky that we're living in 2017 and not 1817, and that that is something that we should remind ourselves of more often.
So I'll say that I'm not a climate scientist. There might be problems with carbon emissions, but there are definite benefits too, and we should remember them.
The Deputy Chair: Mr. Desrochers, I want to thank you very much for appearing here this evening.
I want to make one last point: My best friend is also a scientist and he always says, "Look, the petroleum industry saved the whales and the planet. There's no doubt about it.''
Honourable senators, for our meeting next Tuesday, we'll have an in camera meeting with our analysts about our upcoming study on automated vehicles.
(The committee adjourned.)