Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 52 - Evidence - April 30, 2019 (afternoon meeting)
EDMONTON, Tuesday, April 30, 2019
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-48, An Act respecting the regulation of vessels that transport crude oil or persistent oil to or from ports or marine installations located along British Columbia’s north coast, met this day at 1:02 p.m. to give consideration to the bill.
Senator David Tkachuk (Chair) in the chair.
The Chair: Senators, today we are continuing our meetings on Bill C-48, An Act respecting the regulation of vessels that transport crude oil or persistent oil to or from ports or marine installations located along British Columbia’s north coast, the proposed “Oil Tanker Moratorium Act.”
I am pleased to be here in Edmonton this afternoon to hear from witnesses on this bill, and before we begin, I will ask all senators to introduce themselves.
[Translation]
Senator Miville-Dechêne: Good afternoon. Julie Miville-Dechêne, from Quebec.
[English]
Senator Busson: Bev Busson, British Columbia.
Senator Simons: Paula Simons from Alberta.
Senator Tannas: Scott Tannas from Alberta.
Senator Smith: Larry Smith from Quebec.
Senator Neufeld: Richard Neufeld, British Columbia.
The Chair: My name is David Tkachuk. I am from Saskatoon, Saskatchewan.
For our first panel this afternoon, from the North Coast Regional District, we have Johanne Young, Director; from the North West Watch Society, Anne Hill, Co-chair; from the Friends of Morice-Bulkley, Dawn Remington, Chair; and from the Office of the Wet’suwet’en, Walter Joseph, Fisheries Manager.
Thank you all for being here today. We will now hear from our witnesses, starting with Ms. Young.
Johanne Young, Director, North Coast Regional District: Thank you, Mr. Chair. Good afternoon. I would like to just acknowledge that we are on Treaty 6 territory this afternoon, and I thank you for the opportunity to speak today to you.
I come here on behalf of my constituents to acknowledge my brothers and sisters of Canada, including our coastal communities from Haida Gwaii to my relations on the East Coast and to support the many First Nations communities, the Haida Nation, the Simpcw Nation, the Heiltsuk Nation and the many other coastal First Nations standing together in resounding support for Bill C-48, which is in place as credit to decades of work by coastal communities and Canadians in a united voice opposed to oil tanker traffic on the waterways of the north coast of British Columbia.
I would also like to acknowledge those whom you have heard from in Prince Rupert, five-time elected Member of Parliament Nathan Cullen. In 2014, it was Nathan’s version of this bill in the previous Parliament that toured the entire country where thousands of people came out under the “Defend Our Coast” banner and giving the Liberal government the mandate to implement this legislation. Passage of this bill this year received 67.2 per cent of the votes in the House of Commons, expressing the will of 11 million Canadians.
I acknowledge our MLA, Jennifer Rice, who spoke of the 2016 Nathan E. Stewart marine disaster, devastating sensitive ecosystems and subsistence food gathering resources of the Heiltsuk people in Hartley Bay where clean-up of these disasters are hampered by our unpredictable weather, our rugged coastlines of the West Coast.
Of course, I mention mayor of Prince Rupert, Lee Brain, who spoke to you about his own past economic collapse of Prince Rupert of the forestry, milling and fishing industries, inheriting a $400 million infrastructure deficit, and now developing the economy being viable without oil. He spoke of how the current economic model does not support the benefits of this type of development on the coast. Once terrestrial operations are completed, you would be looking at tens of jobs, not hundreds of jobs, with a lack of revenue that comes trickling down from these industries into the communities. There is a displacement of peoples that happen in this community, and it is by this boom and bust approach of industry that we have seen in Fort McMurray and in Kitimat years gone by.
As members representing the south coast of British Columbia spoke of, we also have very complex shorelines along the coast of British Columbia with many small islands all along the north and the south.
In fact, as Nathan Cullen mentioned, there are tens of thousands of square kilometres of islands in the Douglas Channel that were left out of the Enbridge risk assessment, risk analysis report, promoting an easy sailing through Kitimat, which is not the case. We have fast-moving currents, unpredictable weather and big storms, hurricane-force winds in our remote waters, and it is a particularly dangerous region.
Ours is a unique and distinct ecology. We have cultural keystone species. We have endangered species like the blue whale, species at risk, killer whales, much like the right whales off the East Coast. The coast is habitat for many animals, humpback whales, mammals, sea life. We know that an oil spill of any size is impossible to clean up and is devastating, not just to the coast but to the health of the Pacific Ocean.
Parts of Alaska will never recover from the Exxon Valdez spill of 10.8 million U.S. gallons of crude oil in 1989. I remember that. Prince William Sound’s remote location, accessible only by helicopter, plane or boat, made government and industry response to this spill almost impossible. It impacted 1,300 miles of coastline where the oil is still seen under the gravel and sand today.
In 2010, the BP Oil disaster, that was 4.9 million barrels, 15 million gallons of oil into the Gulf of Mexico with extensive damage to the marine and wildlife habitats, fishing and tourism industries. They are gone. We all feel the effects on our living earth of these disasters long after the clean-up crew is gone.
Invest in Canada. Create value-added industry here. Be wary of the motives of those who speak of the lack of opportunity in the north. It is the past naysayers of the Bill C-48, and they are the stakeholders in the companies. They are looking for personal gain regardless of the cost to the region and to the many. They are the fear mongers who say that we need jobs, that we will not have jobs without pipelines. We made it past coal. We move forward, we create jobs in other sectors and we need people to build wind turbines, not pipelines. We need them to build, install and maintain these turbines, solar energy production, biomass plants. We have engineering, manufacturing, installing. Those are real Canadian jobs that Canada needs to promote. That will take us to the clean energy sovereignty that Canada needs to move forward.
I see positive action happening under Premier John Horgan’s leadership in B.C. and I hope for change with our brothers and sisters in Alberta and the other Canadian provinces where we can all come together again as Canadians and First Nations people supporting each other in our fundamental Canadian values.
You are tasked here with the decision to move Canada forward for national and global interest. It is 40 years of debate and conflict on the northwest, and I ask you to use your diplomacy today to strengthen our relations with coastal First Nations and our coastal communities. Support the coastal First Nations tanker ban, support zero tolerance of an oil spill on the northwest coast and support MP Nathan Cullen’s Bill C-48.
Protect this unique and distinct ecology of the coast. Keep us moving forward in clean energy by legislating the bill and rejecting the status quo. Thank you very much.
Anne Hill, Co-chair, North West Watch Society: Thank you very much for allowing me to speak here today.
These pictures are of my two grandchildren, and they are the reason that I am here. I am not a scientist. I am a deeply concerned citizen and I am going to speak to you today from my heart.
I am co-chair of a grassroots environmental organization called North West Watch based in Terrace, B.C., and I am speaking for them. Our mission statement reads in part: To ensure that future generations will inherit healthy functioning ecosystems by promoting responsible development, informed decision-making, stewardship and protection for the watersheds of the northwest.
We are a small group of very committed volunteers. Many of us are retired. We raise money through community dinners, dances, bake sales and that sort of thing. We spend a lot of our personal time on this work. We are motivated by our love for the beautiful Skeena watershed and the nearby coastline and our deep commitment to protecting it.
North West Watch has been involved in helping protect our coast and rivers for over ten years. During the time of the Northern Gateway proposal, our membership grew exponentially as more and more people in our community began to realize what was at stake and what we would lose if Northern Gateway were allowed to be built. Every city council in the region passed resolutions rejecting Northern Gateway.
The City of Kitimat, the terminus of the proposed pipeline, has always been a resource town. Of all the surrounding areas, Kitimat had the most to gain economically from the proposed pipeline. The Kitimat city council, reluctant to pass a resolution against Enbridge until it knew how the people of Kitimat felt, decided to hold a plebiscite. A Kitimat grassroots group like us called Douglas Channel Watch with zero funding held information sessions and knocked on doors. Meanwhile, Enbridge conducted a heavily funded campaign including sending legions of paid staff from Alberta to Kitimat.
The outcome of the plebiscite was that the residents of that resource town voted decisively to reject Northern Gateway, in line with the other northwest communities, and it has always been a resource economy. There was then and continues to be huge opposition to tanker traffic on our north coast.
The Skeena region has one of the last remaining healthy intact watersheds left in the world. The Skeena watershed salmon economy is worth $110 million a year. Climate change is really hard on salmon for a number of reasons. We are still at an unprecedented level for drought in Skeena with no end in sight. Chinook returns last year were 50 per cent of normal and sockeye returns were 25 per cent of normal. Despite all this, we are still considered a global salmon stronghold. Our salmon need all the help they can get and we cannot afford to threaten them any further. My two children grew up knowing the joy of fishing the Skeena, and when I think that my grandchildren might not get that chance, it breaks my heart.
It has been said many times, but it bears repeating, that the weather and navigational challenges on the north coast are some of the worst in the world. An Environment Canada report notes that Hecate Strait is known as the fourth most dangerous body of water in the world. Thirty-metre waves are not unusual, and it is a guarantee that climate change will exacerbate those conditions in the future.
Kitimat also has one of the most challenging marine tanker routes to open water of any oil port in the world. Bitumen is one of the most toxic substances on earth, and no one has figured out how to effectively clean it up when it spills. Fifteen per cent is a best-case scenario. In a north coast gale with 100-foot waves, when the Coast Guard cannot even respond, I can guarantee that clean-up would not even be a fraction of 15 per cent. The north coast is one of the most pristine marine ecosystems left in the world, largely because the tanker exclusion zone that has been in place for decades has meant that we have had relatively few spills.
Do the math for shipping one of the most toxic substances on earth over the fourth worst marine weather in the world over some of the most challenging marine terrain in the world in a pristine ecosystem. Shipping bitumen on the north coast is an insane gamble. This is why we have had the exclusion zone in place since the 1970s, supported by both the federal and provincial governments. Even with the voluntary exclusion zone, we have had at least 40 spills since 1970.
On the next page, I will show you in a minute, is a map showing the size of the Exxon Valdez spill superimposed on the B.C. coast. So the top picture is the Exxon Valdez spill in Alaska and then the bottom picture shows the size of the spill superimposed on the B.C. coast. You can see that it stretches all the way from Alaska to Vancouver Island.
All it takes is once, when weather and human error come together to cause that catastrophic spill. When our ecosystem is gone, it is gone. Will we be able to leave anything behind? It is our responsibility to leave a habitable world for our kids and grandkids.
Please uphold the bill passed by our Parliament. Thank you.
Dawn Remington, Chair, Friends of Morice-Bulkley: I am Dawn Remington from the community group Friends of Morice-Bulkley based in Smithers. We are on the banks of the Bulkley River.
I am going to talk about why folks living 450 kilometres by road upriver care about the tanker ban. By the way you are laughing, I think you wondered.
The short answer is salmon. Our wild salmon start their lives in smaller parts of our river, migrate down to sea. They are going out right now, little guys. When they come back, they have put on a lot of weight. You can catch a salmon within the town boundaries of Terrace, Smithers, Witset, numerous communities that are close to the river. Wild salmon are part of our diet and our culture, particularly for the Indigenous people, of course. According to a 2011 poll, 70 per cent of British Columbians believe that the wild salmon is as important culturally to us as the French language is to people of Quebec.
The sport fishing tourism is a significant economic driver in our region. We have a unique summer-run of steelhead salmon. Ever since the book Steelhead Paradise was written 50 years ago, the Bulkley and Morice Rivers, the headwaters of our river, have been on the bucket list for international sport fishers. During steelhead season, the flights in and out of town are full. Guides and sporting goods stores are busy. The tourists, many of them international, support hotels and restaurants. Some fly their jets in and many are transported directly to all-inclusive wilderness fishing lodges.
I want to tell you how our group started out because it explains why we support Bill C-48. I am a water quality biologist, I am retired now, but I worked professionally for 37 years in the Skeena region, and much of that on the Morice and Bulkley Rivers, and I know them well. In 2010 when I first learned of the Enbridge pipeline proposal that would go along the Morice, the headwaters of our river up into the coast ranges and across down to the ocean, my gut feeling was, “Oh, wait a minute, I do not think they understand the Coast Mountains.”
The Coast Mountains are quite different than the Rockies. They are volcanic and the rock is softer and erodible. Plus they are on the coast, and big storms come in that can dump days of heavy rain, and at that point, we get landslides. There are papers about the number of really sizeable landslides in our region, and they gouge the side of the mountain and carry massive amounts of material down the valley, and can travel for kilometres. I just thought, what happens to a pipeline if it happens to be in the way? Later, an expert geomorphologist studied the pipeline route specifically, and his words were: “The unstable mountainous terrain in west central B.C. is not a safe location for pipelines. Eventually, a landslide will sever a pipeline.”
I guess my other concern, personally, was, “Well, what happens if there is a spill? We know that diluted bitumen is toxic to salmon. Would it be possible to get up into the remote locations at the headwaters of the river to contain or to clean up a spill on a fast-moving gravel bed river?” Later, again, an expert study by a fisheries biologist and a hydrologist confirmed my worst fears that it would be a great risk not only to the crop of fish in the river at that time, but that the bitumen would likely become entrained in the gravel by fast-moving waters and ice, depending on the time of year, and would for years be a risk to salmon and their eggs which are laid in the gravel.
Soon I was sitting around a table with a bunch of equally worried people. I became what they call an accidental activist, and we formed Friends of Morice-Bulkley. Not long after that, the Enbridge pipeline spill on the Kalamazoo River in Michigan happened, and we got to see what a diluted bitumen spill looks like, how difficult it is to contain and how difficult to totally clear out of the bottom of the river afterwards.
We concluded that the risk was just too great to our river and our salmon. We began disseminating information, as it came available, about the project. We became interveners, submitted evidence and so forth. The more people learned about that project, the more they opposed it. In fact, there was a massive public outcry, biggest I have seen, where everyone of every walk of life was together on an issue across northern B.C. opposing the Enbridge pipeline. As you know, eventually that project was rejected.
Recently, we have been working on participating in environmental assessments on several projects proposing to move either bitumen or refined bitumen products by rail to the Port of Prince Rupert. Again, our worry is spills, since the CN Rail runs right from the headwaters of the Bulkley all the way down to where it joins the Skeena and then follows closely on the banks of the Skeena right to Prince Rupert. Derailments are not uncommon on that rail line. In fact, there has been in the recent years a number of coal cars, the most recent one spilling into a salmon-bearing creek.
To conclude, we do not find it an acceptable route for our river and our fish. A voluntary tanker exclusion zone has existed on the north coast since the 1970s, and partly because of that, our coast is relatively unspoiled. We still have wild salmon in our rivers. Many rivers no longer have them when they once did. I think it is a distinct and unique part of Canada.
Bill C-48 does not prevent the movement of all hazardous petroleum products, as you know, but it does limit the most persistent of them. It does limit the volume of tankers, and in our mind that is a good thing. And therefore, we encourage you to support Bill C-48 without weakening it in any manner and recommend it be passed by the Senate and returned to the House of Commons. Thank you.
Walter Joseph, Fisheries Manager, Office of the Wet’suwet’en: Thank you. My name is Walter Joseph. I am Fisheries Manager for the Office of the Wet’suwet’en.
Wet’suwet’en is the First Nation centred around the villages of Witset and Hagwilget, and the Witset is one of the main fishing spots on the Widzin’kwa, that is the Wet’suwet’en name for the river. Archeologists think it has been there about 5,500 years, Hagwilget may be even older, and that also used to be a really important fishing area.
There are fishing villages up and down Widzin’kwa all the way up to Widzin Bin, that is the Morice Lake. So to the Wet’suwet’en, salmon is an incredibly important part of the culture, the food needs. It is absolutely critical to the Wet’suwet’en.
Currently, the Wet’suwet’en could use up to 10,000 sockeye, say 4,000 chinook, 3,000 coho, say 1,000 pinks, maybe 2,000 steelhead. In the past, the quotas were much higher. These numbers are what the communities can reasonably use.
Just before I started, in Witset, they took in approximately 30,000 sockeye. That just gives you an indication of how important and how big is the scale of the fisheries to the Wet’suwet’en.
In addition, the Wet’suwet’en would also trade with other First Nations downstream. Currently, heron kelp is being traded in the area. It is a real delicacy that the Wet’suwet’en regard as an important part of their culture, as well as clams, crab,cockleshells, abalone. Now, all these species are really dependent on the shoreline.
In addition, when sockeye go back downstream, migrate to the ocean, for a period of time they stay right in the estuary and along the shoreline until they acclimatize to the salt water. When the salmon are very small, they are most susceptible to impacts of, say, oil.
Heron spawn on kelp. When the Exxon Valdez spill happened, that species was pretty much wiped out. The heron never came back after the spill.
Some of the studies I have seen say that when salmon eggs are exposed to oil, it really affects them. They simply cannot swim as well as they could in the past. It really impacts their ability to travel upstream through rough rapids.
To summarize, oil spills in the magnitude of the huge tankers that are proposed will have an incredibly bad impact on species that the Wet’suwet’en depend on. A lot of these species are protected through the Constitution and the species at risk act.
These spills cannot be cleaned up. There are still traces of oil from the Exxon Valdez spill. It will have a big impact on the Wet’suwet’en. I just cannot imagine not being able to continue Wet’suwet’en traditions and culture without having access to these resources that may be wiped out by allowing tankers to go through some pretty rough waters.
The Wet’suwet’en chiefs have always strongly opposed anything that would impact salmon. They oppose allowing tankers along the coast. Thank you.
Senator Simons: I want to thank and welcome you all to Treaty 6 territory. I must say, I had the great privilege of travelling to Prince Rupert and Terrace a couple of weeks ago, for our hearings there, to see your magnificent coastline and the Skeena River, which are truly extraordinary sites to see. I take very seriously the passion with which you speak in defence of your region. It is an extraordinary part of Canada. It is a unique ecosystem and I agree that we need to find ways to protect it.
As you spoke, I wrestled with many things. I am mindful of the testimony we heard in Terrace from the chief of the Nisga’a who feels that her First Nation was not consulted and who would like to have the opportunity for her nation to consider the potential to develop a deepwater port and to pipe Alberta oil across the sea. I am reminded of the Lax Kw’alaams, a First Nation to whom we spoke. The elected representatives support pipelines, the hereditary chiefs do not. I am mindful of testimony we heard this morning from the chief of the Ermineskin First Nation, who argued that by refusing to allow First Nations in Alberta to send their oil to market, the ban is an infringement on their treaty rights.
So as a non-Indigenous senator, I am struggling to know how I balance the wishes of one First Nation against the wishes of another, and what you say to your own neighbours, the Nisga’a, the Lax Kw’alaams, about their own wishes to develop ports and pipeline capacity.
I am sorry, that was bad form. I should direct the question specifically, but anyone who wants to jump in could answer it.
Ms. Young: That is a very tough question. I am not sure that we can answer on behalf of the different nations.
Senator Simons: If you had to sit down with a neighbour who was Nisga’a or Lax Kw’alaams who wanted to have a port, who wanted to have this opportunity, how do we as senators balance the competing interests and the competing requests of those communities?
Ms. Young: I would say err on the side of caution, because you will have to venture through many different unceded territories and regions, and I am not sure you will have the ability to pass through all of them, or even some of them.
You may have the hopes and wishes of some. I think it is important for us to develop these industries in other capacities that provide these economic ventures and possibilities. For example, the Tsilhqot’in have provided a very sustainable economy without oil pipelines and things. It is possible to have economic development in these different areas, and perhaps just giving them other possibilities and viewpoints would be beneficial.
The Chair: Given that you have not had an oil economy there, ever, why wouldn’t those economies have flourished by now? You have never had an oil economy there, you have never been dependent on one.
Ms. Young: Are you speaking, sorry —
The Chair: I’m talking about the West Coast and all of the First Nations. Have they developed commercial economies in that area over the last thousand years?
Ms. Young: We have great potential for wind turbine power production, especially on Haida Gwaii.
I know that the Haida Nation has clean energy sovereignty in place, and it is on the nation’s vote referendum. As a whole, they are moving forward. There is potential to connect a subsea floor cable to Prince Rupert, which would help support the economy there.
Oil is just not viable any more.
The Chair: How do you heat your homes?
Ms. Young: With wood. I heat my home with wood.
The Chair: I suppose most of the homes use diesel and wood, perhaps natural gas?
Ms. Young: Yes, propane. Many are still wood. I hope to have a wind turbine on my property. It is very doable and it is becoming more cost efficient. That is the way I hope to go in the next couple of years.
Ms. Remington: Could I just add, another aspect of your question about the Nisga’a? I have looked at that because I know that is the desire for some. It has been expressed, and I have heard about it by rumour more than anything.
How are you going to get tankers in and out of there? Have you looked at any possible routes? Between the north coast of Haida Gwaii and Alaska is a relatively narrow, shallow, stormy channel. I can’t think of supertankers going through there when it is known for this massive gyre of currents that form there. I cannot imagine. That would be the most expeditious route to the ness, and that is why I am talking about it. I am sure Alaska would question that route as well. It is quite problematic.
Senator Simons: Thank you. I appreciate that because that is not a perspective we have heard before and that is very helpful.
Mr. Joseph: The Wet’suwet’en have always taken a very long viewpoint, where they would like to keep the salmon for generations to come. I cannot see the oil industry lasting very much longer, the way things are currently going.
The tar sands are a mess. They are really a mess, something that Alberta is passing on to probably their great-grandchildren to clean up, and they still have no clue how they are going to do it. They cannot clean up spills. So if you are looking at a long-term viewpoint, there is potential for the salmon to last forever, if you take care of it, as well as all the other species that depend on the coastline. That is not the case with oil shipping. Once an oil spill happens, things just die off.
Senator Neufeld: Thank you all for being here. I do understand the iconic nature of the salmon. I know British Columbians take it very seriously when you start talking about salmon and salmon runs.
Coastal GasLink is building a pipeline from northeastern B.C. to Kitimat to bring natural gas to an LNG plant, and it is going through the same mountains, through the same country.
Are you in favour of Coastal GasLink bringing natural gas from northeastern B.C. down to Kitimat?
Ms. Remington: It is part of my notes. I skipped over it when I was talking about the Coast ranges and the number of landslides.
The Pacific Northern Gas pipeline is not huge. It was put through the Coast Mountains in 1968. During my years of working, I saw that pipeline taken out numerous times by landslides or flooding. As you point out, that was gas, and it does not have the spill potential of an oil pipeline. It was expensive and inconvenienced the people down pipeline, but they would move it and patch it up and it is actually still there and operating. From the point of view of safety of a pipeline, it is more preferable, in my opinion.
Senator Neufeld: Are you in favour of it, was the question. I am aware of PNG’s line.
Ms. Remington: I think Walter should talk about that. I do not feel that I should speak about it.
The Chair: Did you want to answer that or should I go on to the next question?
Mr. Joseph: The Wet’suwet’en oppose the CGL pipeline and are still opposing it. Many of them have been arrested opposing it, and there are probably going to be more arrests in the future. The Wet’suwet’en have opposed it and will continue opposing it.
Senator Neufeld: You talked about the Nisga’a. The Nisga’a battled for over 100 years to get a modern treaty. Some of the things they went through to get that treaty were horrendous, but they finally got it. Part of that treaty states that they want to be able to look after themselves, they want to have economic development on their own, those kinds of things.
What do you say to the Nisga’a when you say “no” and they say “yes?” Do you just say, “Tough, you got a treaty and part of it says that you can go out and economically make things happen for your children and your grandchildren?”
Ms. Hill: Is this question directed to —
Senator Neufeld: Anyone who wants to answer.
Ms. Hill: Well, I would just say that White non-Indigenous people do not have a homogeneous attitude or view on this issue, and I do not think it is really fair to expect Indigenous people to. I think they are just as often as divided as non-Indigenous people.
Senator Neufeld: You talked about 30-metre waves and I have heard of that before.
We have tankers actually outside of the exclusion zone coming from Valdez down past lower Vancouver Island into the Strait of Juan de Fuca, and delivering oil to the U.S. refineries there.
Are those 30-metre waves just right at Prince Rupert or are they out in the ocean too? If they are out in the ocean too, how do those tankers that now go up and down the coast — and there are one to two daily and there have been no accidents — get through? Maybe you can help me. You live there.
Ms. Remington: When the voluntary exclusion zone was put in, it was in response to investigation by the U.S. to bring tankers into the north coast and put a pipeline down to the U. S. to move the then north coast oil that they were developing at the time. Environment Canada did a study in the early 1970s. I have a copy of it and can send you the reference.
They looked at the ports and at the marine passageways and concluded that it was not a wise thing for Canada to do to the coast, and the voluntary exclusion zone was put in. The U.S. now takes tankers out 50 miles. The short answer is that the waves are different out there. There are large swells but they have a special class of tanker and they have special tug escorts for all of them. They are being escorted very carefully down the safest route, away from islands you can run into, away from the 100-foot waves and —
Senator Neufeld: They do not escort the tankers all the way south.
Ms. Remington: I am not sure of all of that detail.
Senator Neufeld: No, they do not.
Ms. Remington: I just want to add one point. The entrance into the Strait of Juan de Fuca and down to Cherry Point is wide open. They are a long way from shallow water reefs or land, and it is a much safer marine route to land, and Cherry Point juts out. That is why they chose it for the terminus. I believe they chose the safest way to do it.
Senator Busson: Thank you very much. I am from British Columbia, and my daughter lives in Burns Lake. I have a granddaughter who is three. I have pictures of her holding a fish bigger than her that her father swears she caught herself, so I understand the neighbourhood and what is at risk as well.
One of the things that Bill C-48 does not cover is the transit of boats, ships and supply vessels and barges through the Hecate Strait with limits up to 12,000 metric tonnes of fuel and oil, et cetera. This bill does not address, nor is there anything in the works that I am aware of, that imminent risk, what I consider a risk. We know about the Queen of the North, the luxury liners that ply that coast back and forth on the Inside Passage. You can throw rocks at them from Campbell River.
Do any of your groups have any concern about that? Should there not be as much energy and finances, et cetera, directed at that imminent risk as there is at the unlikely risk of an oil tanker spill?
The Chair: There is no defence, I understand, right? There is no system to clean up.
Senator Busson: Not that I know of.
Ms. Hill: I think that a lot of the oil traffic you are talking about is not persistent oil, so a lot of it would be refined oil, like diesel.
Senator Busson: Some refined oil, but there is their own fuel, bunker C, fuel oil and all of that.
Ms. Hill: These are smaller tankers carrying persistent oils?
Senator Busson: Up to 12,000 metric tonnes.
Ms. Hill: I think Bill C-48 is maybe the best we can do right now.
Ms. Remington: The short answer to your question is yes, we are worried about it. It is a concern.
The Nathan E. Stewart, was the tug that normally pushed a massive barge filled with fuel up to Alaska, and it had been plying the Inside Passage for some time. We were aware of it, but under international marine law, I am not aware that there was much that Canada could do.
I would love it if you tackled that as an addition to Bill C-48. Make it stronger.
Senator MacDonald: I thank the witnesses. I appreciate your concern about managing risk, but I am from the other coastline. We manage a lot of risk, certainly a lot more risk than is managed out here.
You have 6 million metric tonnes going through the southern channels here in B.C. We manage 283 million metric tonnes on the East Coast.
The Grand Banks of Newfoundland, which is the greatest fishing bank in the world, has five operating wells. They manage about 150 million metric tonnes a year.
Senator Busson just mentioned 12,000 metric tonnes in one ship. That is 100,000 barrels of oil.
We had two really experienced tanker captains speak to us in Terrace, decades of experience, one of whom was an Aboriginal from the area. He has no problem with shipping in that area, and he has no problem with shipping stuff with double-hulled tankers.
As somebody who grew up in a shipping community, a shipping family, and on a very active coast, I think the biggest risk is any single-hulled vessel, and you have all kinds of them — ferries, local people out fishing in single-hulled vessels.
I am not saying you should not be concerned about managing risk. Managing risk is very important. I believe that a double-hulled state-of-the-art tanker is one of the least risky vessels that can go through the water. Anything that is single-hulled carrying fuel is probably of a higher risk, at least statistically .
I just put that across for you to think about, because we are very used to this on the East Coast of Canada. We have a huge fishery. The fishery on the East Coast is very valuable and very complex, and it is all through the Maritimes and Atlantic Canada. Yet we handle all kinds of petroleum safely, both shipped in, shipped out, and produced out of the ground.
Ms. Remington: Not to be impertinent, but I just want to say, so far. So far, you have done that.
Ms. Young: All it takes is one.
Senator MacDonald: You mentioned this Douglas spill, it’s a single-hulled tug. There is more risk in single-hulled vessels.
Ms. Hill: You also heard some testimony in Terrace from Dave Shannon who has done a ton of research, and again, I am not a marine navigator, I do not have any experience in that.
However, his feeling was that the Exxon Valdez would have still had the same problems it had if it had been double-hulled because of the way that it hit. It is not a magic bullet.
Ms. Young: I do find what they are doing on the East Coast particularly scary. We need to remember that it is a matter of when, not if. Regardless of the hull, they have also proven that double have different widths and they are not impervious.
With our coastlines and our many little rugged islands that are not even accounted for, it is just a matter of time, and human nature is, it is a matter of time. It will happen. We are seeing extreme weather patterns on the West Coast and there is less and less reaction time or premonition to the weather patterns that we are seeing now. A rogue wave, for example, is very possible and it happens.
The same applies to the flooding that is happening on the East Coast . People there are just amazed that it is happening a second year in a row. Should we be amazed? We have been told by many scientists, experts, who say that these weather patterns are going to be worse, they are going to be more frequent, and that is what we are seeing. We have had oil spills off of all the coasts. We have had tankers go down and it is happening a lot. We cannot afford to have it happen anymore, which means we need to say no to the north coast.
Senator Tannas: Your response helps me with what was going to be my question. I have been in your beautiful communities, all of them, to go fishing —Haida Gwaii, the Queen Charlottes. As I shared with Ms. Remington and Ms. Hill, my company has insurance offices in Smithers and Terrace.
I remember clearly the Smithers airport because of the size of the bear in the lobby. It is amazing. It is a remarkable place.
I also know that the industries that drive your communities would not be possible without fossil fuels. I think we have to acknowledge that, as magical as your places are, they would not be what they are without fossil fuels. They are coming from somewhere.
I do not mean to be lecturing because that is not the point. The point is that we are the Saudi Arabia now of oil, and it can move and will move all over the world. You could say that we have a responsibility to supply other than ourselves with oil.
Then the question is, okay, Smithers, Terrace and Haida Gwaii use products from oil, but we do not want the transport of oil going through or threatening our communities. There are places where this is called “not in my back yard,” and I think you have an exceptionally great argument for “not in my back yard” because your back yard is really, really important, beautiful and rare.
However, does it come with a responsibility maybe to look at what the alternative transport place might be. Or is it really that you do not want any oil going anywhere, and it is not your department to think about a solution to this that involves the transport of the fuels that you use, I use and everybody in here uses?
Ms. Hill: Thank you for those good points. I am sure that you have all read David Anderson’s op-ed in The Globe and Mail, but I will just quote him. He says:
Forty-eight years of experience has shown that the B.C. tanker ban has not soured foreign investor attitudes nor hamstrung the development of Canada’s petroleum industry. To suggest that legislating this existing ban would have such negative consequences defies both experience and logic.
We have a voluntary exclusion ban and we are shipping a lot of product.
Senator Tannas: I get that. So David Anderson would go on to say we need to ship it from somewhere else. Do you support that?
Ms. Young: I actually disagree with your comment about the Saudi Arabia of oil for Canada. I think that you have probably heard from the economists and the experts that say that our oil is not as great as we had thought. We are looking to ship it because we know that the U.S. has control and is basically renting out the space.
However, do we offer a pipeline to a single entity company of Eagle Spirit so that he can send the oil off just further north of the coast? Sorry. I am just at a loss for words at the moment.
Senator Tannas: So it is a no, no oil on water is really where you are at? I get it.
Ms. Young: We cannot afford it.
The Chair: Thank you very much, witnesses.
For our second panel this afternoon, I am pleased to welcome, from Tamarack Valley Energy Ltd., Brian Schmidt, President and Chief Executive Officer; from the Young Pipeliners Association of Canada, Nancy Manchak, Edmonton Chapter Chair; and from Rally Canada, Tim Cameron, President.
Thank you for being with us today, and Mr. Swampy is here to assist as well. We are getting to be friends here, Mr. Swampy, so thank you for being with us today.
We will now hear from our witnesses, starting with Mr. Schmidt, please.
Brian Schmidt, President and Chief Executive Officer, Tamarack Valley Energy Ltd.: Thank you. I have with me Dale Swampy, and I want to thank him for being with me here today.
Good afternoon, esteemed members of the Senate committee. Thank you for providing me the opportunity to speak to you today, and in particular, thank you for coming to Alberta. This is ground zero of the proposed Canadian oil tanker ban.
My colleagues and I in the energy industry understand your important role and sincerely appreciate the Senate’s efforts to get this right.
I am Brian Schmidt, President and CEO of Tamarack Valley Energy, an intermediate oil and gas producer with light oil plays in Alberta and Saskatchewan. I am here because C-48, in the same vein as the current C-69, is killing our industry.
The junior intermediate oil and gas sector has been decimated. We have gone from 96 to 22 juniors since 2006. The largest multinationals can move their capital but those of us Canadian companies have our assets and workers here and are vulnerable.
The time I used to spend meeting with investors and planning expansion I now spend on policy advocacy because there is no investment for growth to plan for right now unless we deal with market access.
We are all here to discuss Bill C-48 that was introduced because the Liberals thought in 2015 it was good politics, it would help secure the left-wing environmentalist vote in B.C. In my opinion, it was never good policy. It was simply a campaign promise that had little if any environmental, economic risk and impact assessments.
However, enough has changed in the past four years that, I think we agree, it is no longer good politics either. Back in 2015, the energy industry certainly was not in favour of this Canadian tanker ban, but there were other pipeline options on the table that we did not see it as an existential threat. We all thought Energy East, TMX and Keystone XL would be on line by now, but that has changed. Now we are facing gluts, price differentials, an exodus of capital in the tens of billions of dollars. Most alarming, though, is the fact that we have lost 60,000 jobs since 2017 as a result of our inability to get resources to market.
I know you have been hearing from people who are angry and scared because this legislation strikes at the heart of their ability to earn a livelihood, to pay their bills, to feed their families, to keep their employees working or to provide services for their constituents and members. These stakes are incredibly high for us.
So the energy sector is in a much different place than it was when the Liberals made the political calculation to campaign on the Canadian tanker moratorium.
It is also my observation that the support that existed for this ban in the first place was based on outdated perceptions of industry, and we are in a much different place in how we respond to environmental impacts or engage with First Nations as well.
I have heard many proponents of the bill, including the Minister of Transport, refer to the Exxon Valdez spill as the reason why to require a ban rather than safeguards on the northwest coast of B.C. This is an appeal to emotion rather than logic. I trust the senators understand by now how Valdez could never happen today, how technologies and standards have changed. Oil products are safely shipped, about 4,700 ships a day, from ports in Canada and other nations around the world.
The industry has put a lot of time and effort into resources in the past three decades to minimize environmental risk.
I have also heard Minister Garneau tell this committee that the First Nations who are opposed to Bill C-48 are hoping for and working toward a pipeline and a port to improve their economic and social conditions in their nations, are, and I quote, “private interests” who are not in the same category as First Nations in support of the government’s bill. This is insulting, divisive and paternalistic.
I have worked with oil-producing nations for many years, as a partner, investor, trainer, board member of Indian Oil and Gas Canada. I see First Nations businessmen and women work tirelessly to create economic opportunities for their people. They were concerned with ending poverty on their reserves and the abuse and the addictions and hopelessness it creates. Yet they get criticized constantly in the media and by environmental NGOs and sometimes other First Nations for daring to participate in the resource economy.
To get put down by government because they are trying to create revenue and jobs for the purpose of their people, that is too much.
And I think C-48 and C-69 were designed with the idea that all First Nations are against development, that they are victims of development who need protection from Ottawa. What that does is reinforce the harmful stereotypes that will keep First Nations poor and dependent.
According to numbers generated by Indian Oil and Gas Canada, oil-producing First Nations price differential is costing each family about almost $19,000. It is down 78 per cent per family from 2012. The price differential is a result of lack of pipeline capacity.
This is real, it is happening now, it is causing despair, domestic violence and substance abuse. I will guarantee you the minister did not consider these massive effects when he told you that. He said he was not cancelling an operating project, therefore it had no real economic impact. He told you that his government is not willing to take even the negligible risk of an oil spill along the coast because it could hypothetically affect First Nations’ livelihood. He told you this without considering the producing First Nations already losing out today, just like he did not consider the 60,000 jobs or the estimated $200 billion in tax revenues as quoted by RBC president, David McKay, or the approximately $85 million per day that we were losing in December due to differentials.
Senators, one of my proudest moments was being named honorary chief of the Kainai Blood Tribe by my friend and business partner, Chief Roy Fox. I think I have a unique window on how First Nations interact with the energy industry and how provincial and federal policies consistently interfere with their ability to do business. I can tell you that there are real impacts, not hypothetical ones, from the lack of pipeline capacity for them.
Finally, I want to point out to you how perplexing Bill C-48 is to me as a businessman. In business, we always look for win-win situations. That is the only way projects get done. When I want to expand, especially on or near First Nations territory, I need to get environmental approvals, regulatory approvals and most important, consent from First Nations. This takes time, it takes money. We are usually successful in finding a way forward where everyone is on board.
If this legislation was a business project, there is no way it would get investment and there is no way it would get regulatory approvals. It does not ensure everyone benefits. In fact, most Canadians lose out. It has not assessed and quantified the negative social and economic impacts it will result in. It has not been drafted in an evidence-based risk assessment. It does not respect First Nations rights, and we often forget this part, but the UN Declaration of Indigenous Peoples mentions economic rights seven times. It does not have social licence. It appears the voice of any opposing First Nation was ignored.
If Bill C-48 was an energy project, it would fail.
The Chair: Mr. Schmidt, we are getting close to the end time here, so speed it up.
Mr. Schmidt: All right. It is especially frustrating in this situation as the government has other options, and I am speaking of the corridor, of identifying sensitive sea areas and world-class marine safety units and the art of infrastructure. The minister could not explain that to you when he met you.
This bill is tearing the fabric of the country apart. It is aggravating historic divisions between East and West, between industry and environmentalists, between rural and urban, and indeed First Nations families that have different views on development.
I request the Senate provide a better solution than what the government has put forward. It may take time and we think the time is well taken.
We need legislation that provides high environmental standards, improves marine safety responses and creates economic opportunity for Indigenous and rural communities. We need a win-win with real solutions that protect the environment, is evidence-based, is safe, and keeps Canadian jobs. Thank you.
Nancy Manchak, Edmonton Chapter Chair, Young Pipeliners Association of Canada: My name is Nancy Manchak and I am a professional engineer working in the Canadian pipeline sector. I am also the Edmonton chapter chair of a non-profit called the Young Pipeliners Association of Canada, YPAC.
Thank you so much for the opportunity to speak today about the concerns regarding Bill C-48 identified by young professionals in the pipeline industry.
Established in 2012, YPAC is a Canada-wide network of over 1,400 young professionals who work directly in the energy pipeline industry. The vision of YPAC is to ensure the sustainable future of the pipeline industry. To achieve this vision, we provide educational, mentoring and networking opportunities for our members. YPAC also works collaboratively with industry associations such as the Canadian Energy Pipeline Association and our peer young professional partners in Australia, the United States, Brazil and Europe.
As I speak today on behalf of YPAC, I want to highlight that YPAC represents members from across Canada. These members are united in our vision of creating long-term industry sustainability. We have active chapters in Edmonton, Calgary and Vancouver and are in the process of forming chapters in Ottawa and Toronto.
With this, a key concern that YPAC has with the proposed Bill C-48 is the legislation’s potential to adversely impact one region of Canada over another. Canada’s strength is in its diversity of population and landscape. Bill C-48 will limit this strength and equality of opportunity by implementing restrictions specific to a portion of the British Columbia coastline. In turn, this will restrict the growth potential of the Western Canadian energy sector while also reducing opportunities for local investment and employment.
Canada’s abundance of natural resources combined with our low population density and northern climate make us an apt choice for having a highly developed and world leading pipeline and energy sector. Canadian energy is produced under a great degree of environmental, human rights and regulatory oversight, and in a way that benefits all Canadians, directly and indirectly.
For future longevity of the Canadian energy industry, it is necessary to obtain additional market access for our products. To do this, Canada must balance environmental protections while recognizing the economic prosperity potential that lies in our coastlines for all Canadians, including young pipeliners.
Bill C-48 will limit access to new markets for Canadian crude exports and will entrench the Western Canadian oil industry’s dependency on U.S. oil benchmark pricing. It is another signal to the world that Canada is closing itself off for business, creating continued investment uncertainty.
Yet, at the same time that Bill C-48 will constrain crude exports along the British Columbia coastline, with the closest access to growing Asian markets, Canadian East Coast refineries will continue to import oil at coastal ports.
Now, through my professional work experience, I have been very fortunate. I have worked directly in five provinces and one territory. I have observed the positive impacts that Canadian energy and pipeline companies have had on the communities they operate in and around. I am here today because I am a proud young pipeliner. I appreciate the degree of creativity and continuous improvement that is present in our industry. For young pipeliners, YPAC wants this culture of innovation and rewarding work to remain in the future.
To ensure the sustainability of the pipeline industry, young pipeliners need confidence that the industry offers long-term career prospects in Canada. However, investment uncertainty from Bill C-48 puts a sustainable future for the Canadian pipeline sector at risk by demotivating top young professional talent.
We must be cautious not to force educated and highly mobile young professional Canadians to leave Canada for more business friendly jurisdictions around the world. The Canadian oil industry’s West Coast market access is critical for the preservation of young pipeliners’ as well as for all Canadians’ well-being and high standard of living.
Just as the Government of Canada has a duty to ensure that environmental protections are established and maintained, it is also the duty of the Government of Canada to enable safe, responsible and sustainable economic development without undue hindrances.
Bill C-48 threatens the future of Canada’s world-leading pipeline industry and thus YPAC is in opposition to Bill C-48. Thank you again for your time. I look forward to your questions.
Tim Cameron, President, Rally Canada: Thank you, senators, for the opportunity to speak.
My name is Tim Cameron. I am President of Rally Canada from Drayton Valley. I am a proud father of three teenage boys and a proud husband to my wife.
I have got a background in project management, which would have included four years ago preparing for new work, new drilling, which would include all of the environmental applications, site surveys, that sort of thing, First Nations consultation, as well as and including the final construction up until when the rig would arrive.
So four years ago, I had 50 guys working for me. Today there is not enough work for me so we are all out of work and we are looking for something else to do.
Drayton Valley is located approximately 130 kilometres southwest of Edmonton and it is one of many conventional oil and gas producing communities in Alberta. Our region does not produce heavy crude or oil sands but our community has been unimaginably impacted by the lack of access to the markets that the shortage of pipelines has produced.
My grandfather was the company man or site supervisor for the drilling of the Pembina 1 Discovery oil well southwest of Drayton Valley in the early 1950s, so it is fair to say that my family has been directly involved in the energy industry for generations.
Our family has witnessed the ups and downs that life in this industry brings, always saving to ensure that you can survive and training and learning to make sure that your services are valued during the next upswing.
During the most recent downturn, the initial phase was brought on by commodity prices. The second half, up to and including today, has been due to a complicated combination of government stonewalling, environmental evolution through regulation and underlying indifference or even disdain toward our province and our energy industry.
Our community is suffering unduly. Food bank utilization saw all-time high usage in 2015 but unfortunately has increased steadily from there. Today families of every description are accessing the service. People who had several years of savings and have exhausted their resources trying to weather the storm are just trying to get by. They are at the end of their rope. I know many baby boomers who have stated that they have invested all of their retirement savings into their businesses and are now at a point where they are not able to pay their taxes. The data around corporations in arrears in Alberta supports this statement. We have lost approximately half of our local businesses due in part to several hundred industry players that have had to close their doors province wide. Charities are facing serious funding shortfalls. Schools and sports teams make similar comments.
We are not interested in handouts from government. We want them to acknowledge the many truths about our industry that provides so much for our society and that led us to continue to work without the constant meddling that has intentionally sterilized it.
Last December, the people of Drayton Valley, a community of 7,000, generated 6,800 letters of support for the energy industry and pipeline approvals in five days. Is there a community anywhere in Canada who has generated such a significant response to an event in recent memory, if ever? These letters were delivered to our provincial energy minister and then were ultimately forwarded on to the federal energy minister, Minister Sohi. He did get back to me with a brief email, but our requests for meetings have always been denied, mostly rebuffed actually.
The people of Calgary and Fort McMurray are undeniably unaware of the state of affairs within the energy industry, but when you drive through them, they are big enough that it is difficult to tell from a glance how serious the impact is. It is hard to tell if there is less activity than would be considered normal. This distinction is easily made in Drayton Valley. As of April 1, our local financial institutions were quietly saying that 17 per cent of the homes in our community are in jeopardy as the owners are not able to make their mortgage payments. The banks were trying to work with the owners to keep them in their homes and were allowing people to make their interest payments if they were able. This number does not include the scores of people that have already left the community due to bankruptcy. My 17-year-old son who is in Grade 11 had two friends not return after the Christmas break because they had gone out to get jobs to help their parents pay their bills.
My written words do not express the deserved emotion that come with these statements. What is happening to taxpaying Canadian families at the hand of their government is unconscionable.
Out of curiosity, I travelled to North Dakota last fall to see myself what that activity level within their energy industry would look like. The line that I crossed was more than a border between countries. It was a difference of ideologies. The energy industry there was thriving and I was able to meet with senior management staff who, when presented with the information that I was from Alberta, would comment that they hoped that Canada and Alberta would continue to vote Liberal and NDP governments in respectively.
They are unbelievably happy to those trained in Canada who come to work in their energy industry south of the border due to our level of training, extensive knowledge of both environmental and safety regulations in addition to our work ethic. Additionally, I spoke to an elderly landowner who commented that his nieces were able to work locally due to their bustling oil and gas sector. He stated that the opportunities to keep families local and employed had not been available in the decades past and that the community was unbelievably grateful for the benefits that are provided.
This is a mindset and a reality that has evaded our current federal government. The lie that has been perpetuated that ours is an industry without an environmental consciousness or somehow that we are a dirty industry is an insult to those with the most minimal knowledge of how we operate.
I have friends and family from across the world who agree in unison that Canada’s standards are by far the most rigorous. Most state that safety and environmental regulations in other jurisdictions are approximately 20 to 30 years behind what we deal with daily in Alberta.
Is our industry perfect? No, it is not. Improvements and innovation are always required, and as a society, we should expect better. With that being said, why would we stop producing our resources only to accept lesser standards, both environmental and humanitarian, than our own?
This does not consider the volumes of Canadian workers in businesses that generate tax revenue for our country. Please make no mistake about this fact. If I am unable to continue with my career in Canada in my field of choice, I will continue it out of the country with the intention of leaving Canada. I will not generate tax revenue for a government that has clearly demonstrated that it does not want me or the industry in which I have chosen to work.
The proposed Bill C-48 and Bill C-69 send a clear message to the global investment community that Canada is uninterested in energy development. The hypocrisy of Bill C-48 is undeniable. This eliminates exporting Canadian energy from the West Coast while allowing energy imports to come into the East Coast unabated from jurisdictions that are much less regulated. No reasonable thinking Canadian could look at this scenario as anything but a measure to stop the development of our resources. If Canada is truly concerned about energy consumption, then impose the same restriction on all sources of energy that access our shores, whether it be exporting or importing. Or better yet, why do we not look at our energy industry for what it truly is? It is world leading, it is family supporting, it is tax generating and it is charity enabling.
Due to our work as Rally Canada towards community advocacy, we interact with people daily, and daily we are asked two questions. The first is, are our efforts and are our voices being heard in Ottawa. The second is, what can we do to start discussions around separation. Albertans are typically fair-minded and have done little over the past several years to further our causes or to make the rest of the country aware of our grievances. This being said, we are tired of being taken for granted, and if our country does not want us, we will take our entrepreneurial motivation and generate options that are beneficial to us elsewhere. I hope the seriousness of these conversations are understood and respected.
I would like to close on this one thought. During the recession that has extended in Alberta for the past four years, there has been an estimated hundreds of thousands of layoffs, and that does not include a significant number of people that are now underemployed.
New development, new construction, requires significant energy resources to do so, or fuel, gas, diesel fuel. The bulk stations in Drayton Valley state that their sales are down 80 to 90 per cent from 2013 levels. Millions upon millions of litres of fuel have not been consumed in this downturn, and yet there is no mention or acknowledgment of the reduction of this carbon footprint anywhere. Apparently the data has somehow missed this point, but why? We need to ask ourselves that question.
Many who work in the new development side of the industry would carry diesel fuel with them to their work sites, which would be consumed in various processes and equipment, with the average volume being approximately 500 litres each per day. We have literally taken the equivalent of several large cities of vehicles off the road and all we are told is how our carbon footprint is unsustainable.
This example does not exactly tie in to Bill C-48 discussion but it does provide some context of how the conversation, the reality and the dreams of an ideological government have obviously been decoupled.
Thank you for your time, and I would gladly accept any of your questions.
Senator Miville-Dechêne: Thank you for your presentations. Obviously, there were a lot of emotions, and I understand deeply how you feel and how the industry is facing difficult years.
I want to get your opinion on what a professor and expert in such questions, Andrew Leach from the University of Alberta, said here this morning. He said that if there is an expansion of TMX, he does not think, considering the level of the demand or production in Alberta, that another pipeline in northern B.C. is necessary.
I am wondering if I could hear you on that, considering that obviously, many factors have contributed to the problems in the oil industry. Are we putting too much emphasis or not on C-48 as opposed to other factors?
Mr. Schmidt: I can take the question. In our analysis, and I work with CAP and I have seen the CAP forecast as well, and I would conclude that you need more than TMX to go forward, quite clearly.
I would say this because we have the third largest reserves in the world, and I would also disagree with Professor Leach when he says that the reserves are always increasing. That is not the case. Production is increasing. If you actually look at world reserves, we are not increasing them that much. A lot of the Permian work that is done in the U.S. is quick production, high decline. It will not last that long, and it will not be that long before we will be looking back here.
I want to raise one more point. You asked regarding Bill C-48, are we kind of chasing a red herring, is it really needed? I answered the first part. If you look at market demand, it is going to be up from now to 2040 by about 33 per cent in India and China. So the West Coast becomes very important for us to retrieve a good price for our product, as opposed to about a 13 per cent decline in North America for energy in that same time frame. The West Coast access is critical.
Ms. Manchak: I would just like to echo the comments made but also highlight the need for diversity.
So currently Canada exports 99 per cent of our oil one customer. When we think of the long-term sustainability and future of the industry who as young professionals I am speaking on behalf of today, we need diversity, diversity of markets, diversity of customers. That is how we will grow opportunities and really excite people and want them to stay in this industry long term due to its vibrancy and diversity.
Senator Tannas: I would just like to go back to Senator Miville-Dechêne’s question. I thought I heard Dr. Leach say if we got TMX, Line 3 and Keystone XL, that that would match the projections of CAP, including new oil sands projects, et cetera.
That is what formed his view, that we are almost there with what is needed in terms of getting it to a market, right? Maybe it is not the perfect market, but getting it to a market. I asked him, though, instead of an amendment that says, “If we get all those things, boy, we would be pretty happy,” why wouldn’t we put forward an amendment that this bill only come into effect if we do get all those things? They are all up in the air, right? I don’t think he was prepared to answer that, for whatever reason.
I would like to ask you that question, Mr. Schmidt. What would your thought be if we had that kind of pipeline capacity, number 1?
Number 2, looking forward to where the demand is going to be in the world, if that became the scenario and we bottled ourselves up and committed ourselves to that, do you see arbitrage opportunities for our friends in the United States that are prepared to have a pipe and a port and what that might do to our competitiveness, or the fact they could put the screws to our prices and literally enjoy huge profits off the arbitrage as they then ship it from their ports or process it and ship it from their ports?
Mr. Schmidt: That is a good point. If my numbers are correct, with all three of those going in, it would match the CAP forecast.
However, I have been waiting for XL, and we are not there. It just takes one thing, as you know, to tip these pipelines off the edge, just like it did Energy East. Clearly, it is in the best interests of Canada, to build on my co-speaker here, that we diversify the economy. Why would you build a pipeline into a market that is actually going to drop its demand? It does not make any sense. You want to get that product to a market that increases its demand and in interests of sovereignty, the U.S. is all too happy to have us keep it here. I would not consider the avenue of going through the U.S. in order to get to Asia as someone that is going to be pipeline friendly for that project.
Senator Simons: I am grateful to Ms. Manchak and Mr. Cameron. We have heard a lot in the last few hearings we have had about capital flight but you raise a really important question, which is human capital flight and the loss of trained engineers and technologists who do this work for us.
I have a question for Ms. Manchak and then a question for Mr. Schmidt, if I may.
Ms. Manchak, we have just heard testimony from witnesses from the interior of B.C. who are worried about not just oil tankers but about pipeline safety as Alberta crude and dilbit move through their territory.
I wondered if you could speak to sort of the safety of new generation pipelines and what risks they may or may not pose.
Mr. Schmidt, it seems to me that when we were in Saskatoon, you explained to the committee on Bill C-69 the way in which First Nations are particularly disadvantaged because of the way their agreements with the federal government are set up. Could you explain it to my colleagues on this committee, because that was a new point for me then.
Ms. Manchak: I think it was mentioned earlier today, but risk management is something that is inherent in life, and as a professional engineer, risk management is something that is day to day in my education, my work experience. I cannot escape it. It is daily life.
Pipelines are the safest, most efficient way to transport crude oil and natural gas. That is fact. We know that.
The advances that we have seen with marine safety, double-hulled tankers, it is all a form of risk management, and we are looking at how we can essentially use our resources and do so in a reliable and safe way.
I graduated from the University of Alberta, and faculty halls there, research centres there, all have the emblems of oil, energy, pipeline, resource companies that have taken it upon themselves to fund the research that we need to advance our industry. Going to the University of Alberta, you see that and you cultivate that excitement and that vibrant attitude toward our energy industry. That is where solutions come from, and the next generation of leaders, and something that we try to attract to YPAC and to the pipeline profession through YPAC. There is a piece where you have to look at direct funding and who is really advancing this and how far we have come as an industry.
Mr. Schmidt: To answer your question on why First Nations are affected, I did submit an article, and oped, to the Financial Post which you may have seen that outlines five items, but I will be quite brief.
First, after being on the board of Indian Oil and Gas Canada, I am aware of their policies, and typically, they want to get a better deal for First Nations, which means that they increase the royalty over and above what is on Crown acreage. When you pay more royalty and you are making a business decision, the first place you pull capital from is the higher royalty properties, and First Nations lose out substantially there. We in Alberta right now are in a curtailed environment. The provincial government imposed that curtailment on First Nations which they should never have done. They have no jurisdiction in that regard but they did it anyway. When it comes to my investment decisions, I am not going to put money into properties that have a high royalty. They got hit particularly hard there.
Second, there is lots of Statistics Canada data available to suggest that the last persons that are hired on projects and the first to get laid off are First Nations. There is a number of reasons for that. It is a reality.
Last, a lot of First Nations businesses are associated with the construction side of our business, not so much the operations side. They will be in things like camp security, pipeline security, catering, that sort of thing. I think in Saskatoon, you actually heard from a company that was involved in camp and pipeline security. Those businesses, because of capital flight, get hit particularly hard.
Let me just take a moment on equity. Equity raising in Canada has gone from about $14 billion down to $10.5 billion, down to $600 million last year, to zero to date. They are gone.
Without equity raises, companies like myself do not invest in the communities that we are hearing about like Drayton Valley.
Yesterday, Macquarie Bank shut down all their sales and trading, shut down all their research. This includes offices in Toronto and Calgary, and they are going to leave a few bankers.
You are starting to see the effects, as you said, in the Calgary community too, and they are quite devastating.
Senator MacDonald: Ms. Manchak, I will start with you.
We were in Calgary a few weeks ago with Bill C-69. The Energy Committee had a very good presentation from a young woman engineer on behalf of her industry, which is the pipeline industry, and now you are here and it is really good to see you here speaking out.
You touched upon something that we have not talked about much. We talked about the loss of investment. There has been $100 billion worth of investment pouring out of the country. Obviously, there is a brain drain that is either going on or is going to go on. We spend a lot of money in this country educating people, and we do know that the younger people are when they leave, the chances of them coming back are less and less.
Maybe you and Mr. Cameron can help with this. Do you have any data, statistics or any information on how many young people are leaving the oil patch and heading to the U.S. to pursue their fields? Let’s say they are engineers in the oil and gas industry.
The Prime Minister said he wanted to grow the middle class, but we didn’t mean he meant to grow the middle class in the United States. Can you respond to that?
Ms. Manchak: Thank you, senator. I would like to share a personal anecdote that I think best represents my answer to that question.
I am born and raised in Alberta, educated in the Alberta public education system and the University of Alberta for my undergraduate degree. However, I am now in the minority six years later, in the sense that when I was studying at the University of Alberta, the energy industry was the place to be: rewarding work experiences, challenging assignments, support to explore other areas of Canada through work and opportunity really to kind of bind Canadians together. I met classmates from Ontario, B.C., all over on work terms and so forth. When I say I am the minority, it is that I have not been laid off yet. I have found work in my industry that I am technically qualified to do.
Many of my classmates were not able to secure full-time engineering work or they have been through not one but multiple rounds of layoffs and have had to change sectors, and then ultimately many have left Alberta or Canada.
I think it is sad when I look to the future, and that is why I was inclined to get involved with YPAC and really look to the sustainable vision for our future of the industry.
Mr. Cameron: When I was leaving North Dakota, I ended up striking up a conversation with the border guard when I was coming back into Canada in the first part of November, and his words to me were, “What is happening?” He said he grew up in Estevan, he has worked at the border for many years. He said that he didn’t know what had happened, but he could lick our finger and stick it out the window and sense that the winds have changed. He said that in the last four weeks, so that would have been October of last year, he would have seen anywhere from maybe two to three guys like me crossing the border looking for opportunities, that now it had gone to as many as two to three an hour. That was when our differential price was at its maximum and everything came to a stop.
He said that he was astonished by the number of people that were coming south who were happy to go south because they are welcomed with open arms. We are a valuable commodity south of the border. Their industry gets it. Or sorry, their country gets it. Ours doesn’t as much.
The Chair: I would like to follow up on some of the discussion that we had today on pipelines and the fact that if we have the U.S. and Kinder Morgan it will satisfy our needs.
Wouldn’t it be more important that we have independent sources of export rather than depending on the United States through Keystone?
You never know what is going to happen down there for one thing, and you never know what kind of price you are going to get. Wouldn’t it be better for our country if we were able to ship oil east and west, to have independent sources and a variety of customers to get the price of our oil up and get the maximum price?
I mean that makes so much sense and that is what I do not understand about any of this. Help me out here. I know we can be satisfied with going through Vancouver, where my grandchildren live. No one seems to care that oil is going through there, but also that we have another source on the West Coast and we should have another source on the East Coast.
Mr. Schmidt: The world has just totally changed with the advent of horizontal multistage technology and how that has made the United States into an energy superpower. They have done it quite quickly. They have done in ten years what it took us 80 to get to. It is a phenomenal change.
I want the Senate to understand this clearly. We have the same opportunity here in Canada. It just isn’t an oil sands opportunity. More capital can be deployed in the tight gas and oil sector in the province.
The Chair: Right into Saskatchewan.
Mr. Schmidt: Absolutely. Anyone with my expertise will tell you, it is not a rock problem, it is a policy problem.
I think you are bang on in that the strength in Canada will be the diversity of the markets. We can no longer rely on the United States to be our best customer because they are shipping oil like crazy.
The only thing that is saving us right now is they need our heavy oil because of the Venezuelan situation and the Mexican Mayan crude. Those refiners down the Gulf Coast need our crude. That is why there is demand, but there is no more demand beyond that. Diversification for Canada is important. As I mentioned earlier, you really do not want to have to go to the United States to create a market when they would just as soon contain you and get that $85 million a day deduct that we seem to be able to live with. The West Coast, in my opinion, is a most important access point for Canada.
The Chair: Al Capone understood the importance of distribution. You would think that we would. How ridiculous is that, right?
Senator Busson: Thank you all for appearing. That is one of the focuses that we have to remind ourselves of all the time, especially when Mr. Cameron was talking about how Albertans are taking it on the chin. Well, unfortunately, you are experiencing the toothache, but the patient is Canada. This country is losing out, and for some reason, it seems like only the West is paying any attention to the pain right now. I believe it really has to be refocused and reshaped as a Canadian problem.
I also want to comment on something that Mr. Schmidt said. You gave some historical background to the business losses over the last period of time as things have unfolded and that business really needed a win-win. We are talking about all the different pipeline projects that are not happening.
One of the other witnesses this morning talked about the fact that he felt it was important, even if a port on the West Coast north of Prince Rupert was maybe five, maybe ten years down the road, that there be conversation around that, as the positive view to that would be a huge symbolic gesture, a huge symbolic move forward for investors to see that Canada was open for business.
With your conversation around a corridor and the fact that we really needed a win-win, do you think that the symbolic voice of this committee or the government opening the northern West Coast to a port, to a pipeline, to a gateway, to Asian markets, would make a difference to the business community?
Mr. Schmidt: That is a very important question and I am glad you asked it. I talk with investors in New York and my largest shareholder is out of Atlanta, believe it or not. That is not very common, because most U.S. investors have sold off their Canadian equities, and are deploying them there.
I would say there are a lot of Canadian funds now that used to have limits to how much Canadian you are supposed to keep. They have had those limits relaxed because of better investment opportunities. So even Canadian funds are looking south, let alone me trying to attract an American investor back.
So when I read those capital equities, that is basically what juniors take to raise money, and it gets turned into work. When you close that off, then we just do not have that. What would it take to get that back? Would your suggestion create some momentum?
I would say that amendments to Bill C-69 and Bill C-48 with a corridor could make that change. Investors view those , right or wrong, as a hostile government against business. As I mentioned in my remarks, it is designed to slow things down and shut things off as opposed to create an economic environment and find that balance.
I want to say this to the Senate: You are trying to decide today, not on a project but on whether we should even look at and open up a case for scientific evidence-based things to happen. The market would welcome that.
We are not saying there are tankers on the West Coast, if you vote this down, or put in an amendment for a corridor. We are saying we are willing to open up and try and bring people together to find a solution. It is so important to bring in the Indigenous people on the West Coast who are opposed to this to get some understanding about how safety is managed, and I have seen that work. I have done these kinds of things.
The Chair: Thank you very much, witnesses. Thank you, Mr. Schmidt, Ms. Manchak, Mr. Cameron for your rather moving presentations today, and it is the reason that we are here in the City of Edmonton.
For our third panel this afternoon, I am pleased to welcome Amit Kumar, Professor, NSERC Industrial Research Chair in Energy and Environmental Systems Engineering at the University of Alberta; and from Cenovus Energy Inc., Al Reid, Executive Vice-President, Stakeholder Engagement, Safety, Legal and General Counsel.
Thank you for joining us today. We will now hear from Mr. Kumar and then Mr. Reid.
Amit Kumar, Professor, NSERC Industrial Research Chair in Energy and Environmental Systems Engineering, University of Alberta, as an individual: Good afternoon, senators, and everybody in the audience. It is a pleasure to be here and thank you for giving me the opportunity to share my thoughts on the critical topic of transportation of Canadian energy resources to international markets.
My name is Amit Kumar. I lead a research program in energy and environmental systems engineering at the University of Alberta. I am an energy engineer by training. My comments today will be focused on the greenhouse gas emissions and costs associated with transportation of bitumen and synthetic crude oil.
Our work includes assessing cost and environmental footprints of energy systems with a focus on GHG emissions and water footprints in a product’s life cycle, that is, whole chain of energy production, processing, transportation, conversion and end use.
My research group has evaluated the life cycle GHG emissions in different modes of transporting bitumen and synthetic crude oil or SCO. We are particularly focused on what portion transportation related GHG emissions contribute to the overall life cycle. So life cycle includes extraction of bitumen to convert it to gasoline or diesel or jet fuel, processing, transportation, conversion in the refinery and finally end use. Our research has been on the transport of bitumen and SCO by pipeline and truck as well as oil tankers to Asia Pacific.
GHG emission from combustion of transportation fuels contributes to about 70 to 80 per cent of overall life cycle GHG emissions. Transportation emissions are a mere 4 per cent. Transportation emissions per barrel of crude are lowest for tankers, followed by pipeline, then rail and finally truck.
We have looked at transporting bitumen or SCO produced in Alberta by pipeline to the B.C. coast and then shipped to Asia Pacific destinations to be converted to gasoline, diesel or jet fuel based on transportation by Aframax carriers. Shipping emissions are only about 6 to 7 per cent of the life cycle GHG emissions of using liquid fuels in Asia Pacific destinations.
If we shipped all the Alberta bitumen, roughly 2.84 million barrels per day that we produce, to Asia Pacific destinations to produce liquid fuels, the GHG emissions from shipping would be below 0.05 per cent of Canadian GHG emissions which is 722 megatonnes per year. Hence, this is negligible.
Size of the carrier plays a key role in the cost of transportation per barrel, due to economy of scale benefits. Cost of transportation of bitumen and SCO by tankers per barrel is cheapest compared to pipeline, rail and truck.
Large capacity tankers help in significantly reducing the cost of transportation, hence ultra large crude carriers and very large crude carriers are most favoured. These large-scale carriers will help to lower delivery costs of bitumen and SCO to Asia Pacific, by about 30 to 40 per cent per barrel compared to Aframax carriers, and hence, would make our resources more competitive.
In summary, the tankers have the lowest transportation cost in GHG emissions per barrel of crude transported and are one of the most effective ways of transporting bitumen and SCO. Thank you very much.
Al Reid, Executive Vice President, Stakeholder Engagement, Safety, Legal and General Counsel, Cenovus Energy Inc.: Good afternoon, and thank you all for coming to Alberta as part of your study.
My name is Al Reid. I work for Cenovus Energy. We are a Calgary-headquartered oil and gas company. We are Canada’s largest in situ oil sands producer and we employ over 3,000 Canadians.
Developing Canada’s oil and natural gas resources safely and responsibly is part of our corporate mission, and it is integrated into everything we do. That includes addressing greenhouse gas emissions and ensuring that the local communities near our operations benefit from those operations. For example, over the last 15 years, we have reduced our oil sands GHG emissions intensity by one third, and since launching as a company in December 2009, we have purchased over $2.7 billion in goods and services from Indigenous businesses.
All credible projections show that a growing middle class in Asia will continue to drive strong demand for oil and gas with global consumption of oil projected to grow by millions of barrels a day by 2040, but nowhere more prominent is that than in Asia. Canada can choose to help satisfy that growing demand by providing global customers with the world’s most responsibly produced oil or we can choose to sit on the sidelines and watch competing jurisdictions reap the economic benefits of that growth. Really today, we have no further place to look than just south of us. We should not be confused on this point. Working people the world over will continue to buy oil and gas, and if it is not from Canada, it will come from somewhere else.
This is a multi-billion-dollar opportunity for our economy and it is an opportunity for Canada to become a global supplier of choice for sustainably produced oil and natural gas.
The shortest and most economic path to reach new Asian customers is through B.C., and Trans Mountain has only one export pipeline that was built in 1953.
Cenovus currently ships approximately 11,500 barrels a day on that pipeline under a firm contract, and we will ship significantly more than that when the system is expanded and completed, and we will be one of the largest shippers on that expanded pipeline.
Some people believe that this one pipeline and its planned expansion will provide sufficient access to global markets for Canadian oil, but it will not. The Trans Mountain expansion is an important project. As I said, we are large shippers on it, and it will provide much needed access to tidewater, but it will not provide access to a deepwater port. That difference is very, very important.
The Westridge Marine Terminal at the terminus of the Trans Mountain pipeline is not deep enough to load very large crude carriers or VLCCs. The terminal can only partially load smaller Aframax ships up to a maximum of 600,000 barrels. Compare that to a VLCC, which can transport 2 million barrels. Shipping costs for a VLCC from Prince Rupert or Kitimat, and these are estimates, would be between $1.50 and $2 per barrel. By comparison, an Aframax from the Westridge dock would cost between $2.50 and $4 a barrel to ship the same crude. Cutting your shipping costs by as much as half is a big deal in our world, and if you do the numbers, if you are shipping a half a million to a million barrels a day, that is a lot of money on a daily basis that you are leaving behind.
However, it is more than simply a cost issue. Many international refineries prefer VLCCs, which can unload 2 million barrels within 24 to 30 hours, while unloading a smaller Aframax cargo occupies the same ship berth for 18 to 24 hours, so 2 million barrels as opposed to 600,000 barrels. This becomes a significant problem when you are trying to negotiate regular deliveries rather than the infrequent test shipments we have made in recent years. These costs and inefficiencies add up making it harder to market Canadian crude through Burnaby. It can be done and we have shipped cargos to Asia, but to be truly internationally competitive, we need the economies of scale that come from access to northern B.C.’s deepwater ports and VLCC carriage.
Unfortunately, Bill C-48 offers no pathway to reasonable compromise. It simply closes the door to Alberta’s primary export and it appears indefinitely. I find it difficult to believe that we are discussing a potential new Canadian law premised on a simple assumption that shipping oil in northern B.C. is so uniquely challenging that our government will not allow the best marine safety minds to even attempt to find a solution.
We can do better than this legislation, which should be at a minimum allowing for regulated, safe oil shipping corridors. If that reasonable compromise cannot be found, I respectfully submit that this bill should be rejected outright.
So thank you for taking the time to listen and I look forward to your questions.
Senator Simons: Every time I think I understand all of these things, I learn something new. So Aframax carriers and VLCCs, they sound like rats of unusual size from the Princess Bride movie.
It is terrific that you are both on this panel together and your presentations dovetailed so nicely. I want to ask a question of each of you.
Mr. Reid, you are saying that the large tankers, the ultra and the very, simply do not match up with TMX at its Burnaby Port.
Mr. Reid: That is correct, and that was always the attraction of Northern Gateway to the industry in Alberta that opportunity to ship through deepwater ports on very large crude carriers, or VLCCs.
South of the border, the U.S., and I am sure you have already had those numbers today, has essentially doubled its production since 2008 and will continue to grow that. The other thing that is going on in the U.S., and I checked some industry statistics the other day, is that there are 15 proposed marine export terminals in the U.S.
That is the kind of development that is going on in other places since shipping was allowed from the Lower 48 for the first time a few years ago, and that market has grown very quickly. With the continued growth in oil, and U.S. producers seeing what is going to happen in demand in North America, as opposed to other parts of the world, you can see that they are responding to that very quickly. Canada, on the other hand, is not responding to that.
Senator Simons: Dr. Kumar, I certainly understand your point that if you can put more content into a larger ship, it will have a lower GHG footprint because it is literally an economy of scale.
Doesn’t that enlarge the degree of risk? I can’t imagine how catastrophic it would be if an ultra large supertanker were to rupture and start to leak.
Mr. Kumar: If you think about the technologies which developed from low technology readiness level all the way to your commercial scale, these are the tankers which are being used currently around the world. It is not the first time we would be doing this.
My perspective is if it is being used around the world with all the safety standards, why can’t we do it in Canada? Why do we need to ban this here if you could get the benefit in terms of the cost per unit compared to the smaller carrier — significant benefit, 30 to 40 per cent, even Al said 50 per cent, and also reduced GHG emissions? If you are looking at economics that make our resources competitive, the lower environmental footprint and the fact that they are being used commercially, why wouldn’t you do it?
Senator Simons: I just wanted to know if there is anything that makes the large ships safer than the smaller ones or if they have similar safety engineering. I know you are not ship guys.
Mr. Reid: I am not an expert on marine shipping, but I do know that there would be no carriage in anything but a double-hulled ship, and certainly they would have tugs and pilot ships and state-of-the-art sonar, GPS, those kinds of things.
When I look at it, the possibility of something happening is no greater with a large ship than it is with a small ship. I would say with a large ship that would have a heavier investment in technology as well as the same types of escort tugs and safety equipment around it, you are safer.
Senator Tannas:
Dr. Kumar, we heard from Dr. Bergerson, and I gather her work would overlap a little bit with yours. I have a question about GHG gases in the oil sands and the potential for replacing natural gas with nuclear electricity. In your opinion, is that something that is approaching viability, given the advancements in nuclear technology? We kind of talked a little bit about that. That would effectively, if we could do it, pick up half of Canada’s commitment in the Paris Accord.
Is that something that you are looking at or are hearing about from others or is it just pie in the sky?
Mr. Kumar: No, I think the perspective of nuclear is very interesting and very realistic for the oil sands, because GHG emissions would be impacted significantly. Modular reactors could help in providing the heat needed for the oil sands and reduce the GHG footprint significantly. It could definitely be a game changer.
Senator Tannas: Thank you.
Mr. Reid, Cenovus used to be EnCana?
Mr. Reid: Yes. The history of Cenovus is that the Alberta Energy Company and PanCanadian Petroleum merged in 2002 to form EnCana, and then in November 2009, EnCana split itself into what remained and Cenovus. EnCana at that point in time took all the natural gas, because it was mostly a natural gas producer, and Cenovus had the heavy oil assets in Foster Creek and Christina Lake, as well as other projects that we have undertaken since then.
EnCana, as you may know, senator, now has about 80 per cent of its assets, possibly more, located in the United States, and only about 20 per cent remain in Canada.
Senator Tannas: That is where I’m going. Essentially, your company can trace its roots back to the railway?
Mr. Reid: That is correct.
Senator Tannas: It is in all respects a Canadian success story all the way through, including some of the early work that was done by the Alberta government and by other pioneers in Alberta who have built your company.
Tell me, in the last six months, how much money have you invested in new capital in Canada and how much money have you invested elsewhere in the world?
Mr. Reid: Almost all of our assets are located in Alberta. We have oil sands in Alberta, two operating projects and two more that are development projects. Those projects have been stalled for the last number of years because of where we are with market conditions. We also have some natural gas assets in British Columbia, because the deep basin trend that we operate in extends across that border. We have refining assets in the U.S. in a 50 per cent joint venture with Phillips 66.
Our capital budget today is the smallest capital budget in our history. I used to run an operating asset and my capital budget at the time, 2013-2014, was double what our capital budget is today, and that was for one asset. Our capital budget is as small as it has ever been. New growth capital in the oil sands, on a 1.3 basis it might be $100 million because we are finishing off an expansion project that we cannot turn on because of where we are with market access and curtailment. In the U.S. refineries annually — do not quote me on this — I would say our capital in just ongoing maintenance and debottlenecking projects would be about $200 million.
Senator Tannas: For every dollar at the moment, the lowest point, you’re investing $2 in the U.S.?
Mr. Reid: That would be in new capital. With ongoing maintenance and sustaining capital, the capital that we will invest to make sure that we keep our oil sands facilities full, will be another billion dollars. So we have $1 billion that we will put to work in the deep basin and the oil sands to sustain maintenance capital, safe and reliable operations capital.
Senator Miville-Dechêne: Mr. Reid, I want to come back to the deepwater ports in northern B.C.
I read parts of Northern Gateway’s assessment of the different ports up north. They have chosen, as you know, Kitimat. Kitimat is not really in the running now. You probably know there was a plebiscite and the mayor is against it, so Kitimat seems to be a little bit out of the game.
Three other ports were discarded by Northern Gateway; Port Stewart, Port Simpson, Prince Rupert, for different reasons.
In the case of Prince Rupert, the mountains are too difficult for a pipeline, and in the case of Port Stewart, there is ice a part of the winter.
So what are your thoughts? What if Bill C-48 does not go through? Is a project viable in northern B.C. in terms of being able to use a deepwater port for those giant tankers that you are talking about?
Mr. Reid: Yes, I believe that it is still a viable option. When you put together a pipeline proposal, you look at different routing options. Obviously, like all things, you are trying to find the shortest distance between two points. That would have led, to the best of my knowledge, to the choice of Kitimat, which I still think is a viable option. Certainly, we will see when another project comes forward what they choose for a deepwater port destination. I do think there are some more pipeline construction challenges with going to Prince Rupert, but I would not call those challenges insurmountable. The Trans Mountain pipeline goes through the Rockies between Edmonton and Vancouver. We like to pride ourselves on our own Rockies, but there are some pretty significant mountains that have pipelines in the U.S., so I do not think it is an insurmountable problem. That just wasn’t the pipeline that was proposed.
Senator Miville-Dechêne: What about issues of timing? You are all talking about a crisis that is happening now in the oil industry, and we all know that approving projects takes years and years. Is there still time? Where are we in terms of timing to build this pipeline up north to take advantage of those markets?
Mr. Reid: Enbridge Northern Gateway was an eight-year process to get to when it was approved before it was cancelled. Right now, there is not an active proposal. Eagle Spirit would have appeared before the committee, and we have spoken to Eagle Spirit about their plans. I was sitting in the gallery for the previous discussion about when we will need another pipeline project. Assuming that we were to get all three — Trans Mountain, Line 3 and Keystone XL — we would still need an additional project by the end of the next decade, so sometime between 2025 and 2030.
I would say that two or three things have to happen. One, you would have to get investors willing to come back to Canada. That is a very, very profound crisis right now, and you heard Mr. Van Wielingen this morning.
Right now, you have a crisis of confidence in our industry with investors. You know, when Northern Gateway was cancelled, Northern Gateway wrote a cheque for $650 million. When Energy East was cancelled, TransCanada wrote a cheque for $1 billion dollars. You had Trans Mountain leave. Essentially, one of the biggest, most successful pipeline companies in the world said I cannot do business here. Then you have things like Bill C-48 and Bill C-69. The first thing that has to happen is bring back investment or there will be no projects.
Second, before we put forward any of these projects, whether we build an oil sands project or a pipeline company builds, and I have in my distant past a history of building pipelines, there will be two to three years of environmental studies, consultation, all of those things that happen before an application is filed. Then there is an application process to get through, and I would say three years is being optimistic. That puts you at six, and then you build for two more. That’s about when you need another pipeline.
I would say three to four years for commercial upfront work, consultation, build that application, three years for the application process, then you have to build it and that is two to three years.
This is something that we should be thinking about now. However, there will not be another pipeline until we can raise the capital, the equity and debt capital that is going to bring people back to our industry in Canada.
Senator MacDonald: Thank you both for appearing here. I have questions for both of you.
Mr. Kumar, I appreciated your presentation on UL carriers and VL carriers. My understanding is the VL carriers can get through the Suez Canal. Can they get through the Panama Canal?
Mr. Reid: If I may, I am not sure if VLCCs can get through. I know there is one class that does not go through the Panama Canal.
Senator MacDonald: I know the ULs cannot go through any canal system, the biggest in the world.
Mr. Kumar, it was very interesting the way you explained the impact they have on GHGs and things of that nature. For a UL you need a particular type of port to manage them, so you have to build infrastructure. You cannot load them out in a channel somewhere, they have to be loaded in port. We have two ports like that in the country. One is Prince Rupert in that area, and the other one is at Point Tupper in Cape Breton. It is extremely deep water created by the Canso causeway; ice free, relatively slack tide and right on the major shipping routes. If we were to build a facility like that in Prince Rupert and were able to export 2 million barrels at a time, would we need one on the East Coast? Could we still use one?
To you, Mr. Reid, if we were not taking bitumen east but taking crude oil, stuff that is used in, let’s say, the Suncor refinery in Montreal, and we have reversed the 9 Line, exports of that crude from Alberta would go from 12 per cent to 50 per cent of their oil imports. How much of that particular level of crude are we producing in this country? Are we producing enough to feed our domestic markets and to feed those refineries in Eastern Canada? Could we send 100 per cent? Could we fill the capacity of those refineries in Eastern Canada that are getting Alberta light crude?
Mr. Kumar: On the East Coast side, if I take a step back and think globally about the demand and how it would grow, we have the potential to provide a significant portion of our crude, bitumen or SCO, around the world.
If we create a mechanism or a pathway to export our crude to international markets, the demand would be there. On the east side, it would even help in lowering our costs compared to the west side.
I definitely think that the demand for crude and bitumen around the world is there. It is more of how much market share can we capture. That is what I would like to say in respect to the expansion of our capacity for exporting to international markets.
Mr. Reid: Production today in Canada, in round numbers, is about 4.5 million barrels a day; 4 million of those barrels, and again rough numbers, are produced in Alberta, and 3 million of those are oil sands. Alberta has probably got about a million barrels a day of conventional production. Three and a half million barrels today are exported because that is where the markets are, that is where the pipelines go to. That means that a million barrels a day find a home in Canadian refineries.
Certainly, if you look at the CAP production forecast, which I think talks about going to 6 million or 7 million barrels a day by 2035, assuming we can attract capital back to the country, there is lots of oil for both export and domestic use. Canada has the third largest oil reserves in the world. Certainly, the opportunity to continue to develop those to meet both domestic and international demand is really one of the best opportunities of any country in the world.
Senator Smith: Mr. Reid, if we progress moving forward with the option of a corridor concept and that becomes the solution, in that corridor there would have to be a spill response capability. Outside the Burnaby area, up the coast, the response capability is limited.
For a company like yours, if you were exporting X thousand barrels a day or per period, how does the idea of contributing financially to that response support concept sit with you?
Mr. Reid: I believe that the way it works is that the pipeline would make commitments to have that response capability in place. That would have to happen before you could export. You have to have the ability to respond to those types of events in the event that it becomes necessary.
When I look at what our industry went through last fall, a report today from the Fraser Institute said we left $20.6 billion on the table because of oil price differentials last year. There were points last fall that we were paying people to take every barrel we produced away.
When I look at that, and then at what we would have to contribute to a spill response to make sure that if we are going to export our projects, it is done responsibly, it seems to be a fairly small price to pay. Cost is always important in every business, but that is a cost that will be built into the pipeline tolls and we are going to have to pay one way or the other. It is a small cost when you look at the cost to the economy of not having good market access and having a single customer who has become, in addition to being our biggest customer, now our biggest competitor for the growing international market and the demand for oil.
The Chair: We have had a lot of discussion about having corridors. When I was Chair of the Banking Committee, we did a study on a national corridor for the purposes of pipelines, highways, railroads, and a number of senators have raised the idea of a corridor as a potential amendment to this bill.
How would we go about that? In other words, would we have to identify the environmentally sensitive areas first so that we do not make a corridor through an area where there is no chance to ever building a pipeline? Wouldn’t you have to study where pipelines are? As you say, Kitimat was one option but there may be two or three others. How would we know where two or three other corridor paths would be unless we did extensive studies, which would take years?
Mr. Reid: That’s right, you would have to —
The Chair: That does not count the pipeline study that you would have to do. I mean you have to go through that process too.
Mr. Reid: Yes. I’m an Alberta boy, and when you start to talk about how you would do a study in a marine environment, I’m getting a little bit out of my depth.
Generally, there would be mapping in all of those areas. There would be charts that mariners would use to safely navigate.
You would have to devise a corridor from a particular port and you would say that a ship would go to this heading and then that heading, until they were out in open water and the risks incumbent with working in those near-shore environments are gone.
Part of that would be looking at particularly sensitive marine areas or sea areas. You look at those and then devise something that would weave its way through those as well as the various shipping conditions in terms of reefs, currents and those kinds of things.
As I said, I am a little bit out of my depth talking about that, no pun intended.
The Chair: I don’t think any of us have that depth.
Mr. Reid: Certainly, I think it is possible. I have done lots of pipeline routing over the years and you can do it on a terrestrial basis. You look for sensitive environmental indicators, for different soil conditions, all those kinds of things. So I think it is quite manageable.
The Chair: It is April 30 and the bill is sitting before us. How can you even begin to even think about things like that and try to finish this off by the middle of June? It seems to me a ridiculous task, and we shouldn’t try to do it. My view is not the committee’s view, so I will just go from there. I just know it took us almost two years to do our corridor study and we had 50 years of history from the previous study in 1967. I wonder who was Prime Minister in 1967. If we would have done a corridor study then, we would not have any of these problems today.
Mr. Reid: Senator, I don’t think you have to define a corridor for the act. I think you have to define the ability to have a corridor in the act, and the corridor would be designed to meet the specific conditions of a project request, and that would be the proponent’s job.
The Chair: Right.
Senator MacDonald: On the impact of the carriers when it comes to managing oil, especially on the East Coast because we carry so much oil, what percentage of our oil would be carried by vessels that are less than VLCC in size?
I suspect almost all of it, maybe the odd VLCC going to Point Tupper, but I don’t know.
Mr. Kumar: Probably it is not VLCCs. I would say it is more —
Senator MacDonald: Suezmax, that size? I’ve seen those.
Mr. Kumar: See, the ULCCs are much larger. VLCCs could work, but I can’t give you a definite answer.
Senator MacDonald: There is no question that the bigger the carrier, the less the ecological impact?
Mr. Kumar: The bigger the carrier the more economically advantaged it is. Shipping costs are lower, much less fuel is used and, as a result, less GHG emissions, compared to smaller vessels. That is based on fundamental science.
Senator Neufeld: Thank you, gentlemen, for appearing.
Further to Senator Tkachuk’s question about a corridor, and I agree with you, Mr. Reid, that you don’t have to identify it in the piece of legislation. You just have to open it up so that the government would start doing work. At least that is what I understood, do the scientific work to decide where you could actually go.
To do that scientific work for a corridor would be 100 per cent more than the scientific work done to say we are going to close off all tanker traffic on the coast. Would you agree?
I think it was a back-handed promise made in the election campaign with the thought it would win votes, instead of really being scientific. I don’t think there was one bit of science behind saying we are going to close off shipping from the north end of Vancouver Island to the Alaska border, unless I am wrong, and you might be able to help me out there.
Mr. Reid: As I understand it, senator, a campaign promise was made on September 10, 2015, in downtown Vancouver, and then there was an instruction in a mandate letter to the Minister of Transport on November 12, 2015, to implement the moratorium.
To my knowledge, if there was going to be a risk-based assessment or a scientific study of the need for that, or the requirement, that would be a very difficult period in which to do it. At that point in time, of course, there would be no government to give instructions to Transport Canada to do it. To my knowledge, that has not been done since. I am not aware that there has been a risk-based assessment that would say this is a necessary step, or that there has been a scientific study.
Senator Busson: We talked a little bit about the Port of Prince Rupert and other port possibilities for the export through a pipeline. It is interesting for those of us who come from British Columbia because Prince Rupert is kind of this ethereal place in the middle of nowhere, and it’s quite surprising that its proximity to Asia has made that port and that harbour quite a viable and exciting place from a commercial perspective.
Does the advantage of proximity to Asia of Prince Rupert, Kitimat or even Port Simpson as a port of choice make a difference as far as the marketing of our oil to that market is concerned going forward ? Is proximity an important factor and would that be an argument that we ought not turn our back on?
Mr. Reid: A lot goes into a decision as to whether or not you are going to source your crude in from a particular location. If you are providing crude oil, the refiners will want to know the type of crude oil they are getting — do they have the kit that can actually process that into products, what kind of products will they get for that, what price will they get for the products.
A really important part of that is your shipping cost, and then you are talking the shorter the distance, the less the shipping cost. So that is a real advantage for Canadian ports on the West Coast.
That will certainly factor into the economics. People might say $.50 cents a barrel or $1 a barrel doesn’t really matter, but if you do that several hundred thousand times a day, 365 days a year, for a period of 15 to 20 years, those are big numbers. They will go into the economic analysis that gets made by the parties buying that crude in Asia.
Mr. Kumar: I would just add that it is also the size of the carriers that can go into these deep-water ports on the Asia Pacific. That has a significant impact on shipping costs, which are lower from those ports.
The Chair: If there are no further questions, thank you, Mr. Kumar and Mr. Reid, for your presentations.
For our final panel today, we are pleased to welcome the Honourable Jason Kenney, Premier of Alberta, and the Honourable Sonya Savage, Minister of Energy.
They were both sworn in this morning. Congratulations on the election victory and good luck to you. Thank you for being with us today.
The floor is yours, Premier Kenney. It is nice saying that, let me say it again. Premier Kenney.
Hon. Jason Kenney, P.C., Premier of Alberta, Government of Alberta: It is actually the first time I have heard it, funnily enough.
Thank you very much, senator and honourable senators. Welcome to Alberta, except for Senator Simons, whom I thank for welcoming us to Edmonton. I really appreciate the opportunity.
Before I begin, I would like to introduce Alberta’s Minister of Energy, Sonya Savage, who has a deep background in energy issues. I have invited some special guests to join me, including Bob Blakely, the outgoing president of Building Trades, one of the largest consortiums of trade unions in the country; as well as Calvin Helin, the lead proponent of Eagle Spirit Energy Holdings Ltd. and the Eagle Spirit initiative in northern British Columbia and Dennis Perrin of CLAC, another major union especially here in Alberta that has thousands of employees in the energy sector. I am expecting to be joined by my fellow Notre Dame Hound, Stephen Buffalo of the Indian Resource Council, another great advocate of our vital energy industry.
[Translation]
First of all, Mr. Chair, I would like to thank the committee for deciding to come here in Alberta, because I know that wasn’t its intention at the start. I am delighted that you decided to hear Albertans’ voice directly. They are very concerned about the future of their energy industry, which is a driver of Canada’s economy and prosperity.
[English]
I am delighted that you have chosen to be with us here in Alberta.
Albertans have elected a government that will protect their interests and fight for them when things get tough, and these are tough times.
I want to thank you, Senator Tkachuk, for accepting my request formally to articulate our government’s position that Bill C-48 presents a grave threat to Alberta’s and Canada’s economic interests.
Not only do we disagree with Bill C-48 in its current form, we do not agree with the bill, period. We do not believe that it can be remediated. We believe it must be scrapped.
Simply put, this legislation is an attack against Alberta and this province’s vital economic interests. It affects no one else. It is not only discriminatory, we believe it is unconstitutional. The federal government has not considered any research or science in its assessment and implications of a tanker moratorium. As many analysts have noted, a double standard is at the heart of the bill before you. Bill C-48 does not affect shipments of liquefied natural gas exported out of British Columbia. If this legislation is about tanker traffic, then tell us why would it not apply to B.C. natural gas.
Also by restricting oil exports from strategic deepwater ports, Canada has limited access to Asian markets that will lead to increased costs and longer shipping times. This creates a major problem for Alberta and Canadian suppliers in shipping our energy to the rest of the world.
I have to admit, I am confused by this legislation. If it is so important, why are we not looking at other Canadian coastlines? According to Transport Canada, 85 per cent of the 20,000 oil tanker movements off Canadian coasts occur on the Atlantic coast. We all know what type of oil currently travels via the Atlantic Coast: OPEC oil, Saudi oil. In fact, a report last week indicated that Canadian imports from the Kingdom of Saudi Arabia have increased by 66 per cent in the last four years. Those are oil imports which have Canadian consumers indirectly subsidizing a dictatorial regime with one of the worst human rights records in the world, which too often treats women like property rather than people, and which has exported extremism around the world; as well as imports from Venezuela and other countries that have radically lower environmental human rights and labour standards than we do in Canada.
Additionally, oil tankers regularly travel through the Bay of Fundy to Irving refineries in Saint John, and I am sure like you, senators, I have seen that myself firsthand. The Bay of Fundy, of course, a well-known environmentally and culturally sensitive area, so why would this legislation not apply to the Bay of Fundy? Why does it only apply to an area of our West Coast that would only be exporting Alberta energy?
Canada has an excellent record of tanker safety. The last time we had a significant oil tanker spill was in 1979, not on the West Coast, but off of the East Coast near Nova Scotia. Of course, since that time, 40 years ago, there have been radical improvements in tanker safety and marine safety technology, none of which is given any consideration in Bill C-48. This bill ignores these critical facts. The fact that we do not have many oil spills and that technology has advanced greatly is apparently of no interest to the minister who drafted this legislation.
If the goal of this bill is marine and coastal safety, I do not believe the ban will achieve the desired outcome. This is a cut-off-your-nose-to-spite-your-face approach. Loaded oil tankers will continue to travel the British Columbia coast between Alaska and Washington. Again, this ban only impacts products coming from this province, from Alberta.
We know that foreign vessels will still have the right of innocent passage through coastal waters under international law and the right to load and unload crude oil just north of the proposed banned area in Alaska.
We also know that Mr. Helin’s consortium, the Eagle Spirit, have actually lined up prospective interest from some investors to pursue an Alaska inlet route which would ultimately pass through Canadian waters, but would circumvent the restrictions implied by Bill C-48. So what is the point?
If these tankers pose risks, as the federal government maintains, then I ask you this: Why would Canada take on the risk of these foreign tankers without receiving any economic benefit from potential exports off of B.C.’s north coast?
It is hypocritical and contradicts the federal government’s Oceans Protection Plan which aims to safeguard the coast while growing the economy. Prohibiting shipments from strategic ports that enable access to new markets beyond the United States seriously harms Canadian jobs and Alberta’s economy in particular.
It harms Alberta’s economy because it holds us hostage against our own economic prosperity. I can say this: Alberta will not stand for this and I will not as premier stand for this. Should this bill be passed in its current form, we will launch a constitutional challenge of Bill C-48. We will rightfully fight and stand up for this province. We will fight for the right to export our valuable exports to international markets and get a proper value for them which is in the manifest interests of all Canadians from coast to coast.
[Translation]
Alberta has contributed more than $600 billion in transfers to the rest of Canada since 1957. We are the largest fiscal contributors to the rest of the country, and we Albertans are proud of the role we have played in the federation’s prosperity. Today, there is a crisis of confidence among Albertans toward the federation. A survey recently indicated that 50 percent of Albertans support secession. There is a national unity crisis that will be exacerbated with the passage of Bill C-48.
[English]
We will not allow the political ideology at the heart of this bill to interfere with jobs, our way of life, our prosperity.
I want to discuss certain things that are of greater concern to us in this bill. First, prohibited substances. Canada is stacking the deck against Alberta once again. There is no rhyme or reason to the list of prohibited substances. One could argue that the federal government does not even rely on its own research conducted by Natural Resources Canada. Our bitumen is not more dangerous than other products that currently flow through the Port of Vancouver.
The fact that condensates such as propane are under this ban is frankly ridiculous. British Columbia can ship liquefied natural gas but Alberta cannot ship propane? Isn’t it premature to be adding specific prohibited classes of oil, products or materials directly in the legislation? This is again a constitutional attack on Alberta and its energy industry, and Alberta will not stand for it. Passing this legislation will be detrimental to investment here where there is already a crisis of investor confidence but also in Canada, across several sectors beyond just oil and gas.
The approach of this bill would actually discourage, in our judgment, technological advancements in the energy industry to increase safety in crude shipping.
As a united country, we have an opportunity to be a global supplier of choice with the highest environmental standards and responsible development and reclamation practices.
Let me pause on this to say, let’s all be honest; Bill C-48 is clearly the direct result of the foreign-funded campaign of special interest groups to land lock Canadian energy which took formal shape at the meeting hosted by the Rockefeller Brothers’ fund offices for the tar sands campaign in 2008, a campaign which has received tens of millions of dollars of funding from foreign foundations with the explicit and prejudicial goal of land locking Canadian energy. Since the launch of that campaign, the United States has doubled its oil production and has now become a net exporter of oil.
Global demand and consumption of oil has increased by 10 per cent from 90 to 100 million barrels per day. The International Energy Agency projects another 10 per cent increase in global demand in the next 25 years.
Either Canada will play a role in satisfying that demand with the energy produced here at the highest environmental, human rights and labour standards on earth, or we will surrender those growing global energy markets to some of the world’s worst regimes. Why have these organizations inspired the federal government to bring this legislation forward? Because they identified Canada as the weakling, as the pushover, as the kid in the schoolyard easiest to bully. They knew full well that they could not reduce increases in U.S. oil production, Venezuelan, Saudi, Qatari, Iranian or Russian energy production or shipments. So we now find ourselves in the ironic situation of being amongst the major energy producers the only liberal democracy with the highest standards, and yet we are surrendering future energy markets and hundreds of billions or trillions of dollars of value to regimes that export extremism, conflict and violence around the world. That is the real practical effect of bills like this together with the broader context of Bill C-69, the killing of Northern Gateway and the killing of Energy East.
The federal government has admitted that it has not fully researched the area as defined within the legislation to understand what makes B.C.’s north coast particularly vulnerable to shipping and other marine activities. This is significant. We cannot just say let us just cover the whole area. The government needs to do it right. Further research needs to be done before an area-based ban can be in place.
We cannot say that the government officials have had conversations with provincial officials. At the very least, we need extensive meaningful consultation and not just between governments but also with First Nations people like those represented by Mr. Helin and many First Nations across Western Canada and northern British Columbia who want the opportunity to be partners in responsible resource development to move their people from poverty to prosperity.
I can inform the committee that the Government of Alberta, just sworn in today, will create a litigation fund to support First Nations groups like Eagle Spirit to assert their right to be consulted by the federal Crown before it shuts down economic opportunities, to help First Nations defend their economic rights.
As well, we will create a Crown corporation called the Aboriginal Opportunities Corporation, backstopped by an initial investment of $1 billion, to facilitate First Nations’ financial participation and co-ownership in major resource projects including those prospectively off the north B.C. coast.
We cannot shut the borders on our economic prosperity. Passing this bill means fewer investment dollars, not just for Alberta but for Canada. We will see company after company continue to move capital and good paying jobs out of this country. We have seen the flight of tens of billions of dollars of capital from Alberta to fuel an unprecedented energy boom in the United States in Texas, North Dakota and Colorado.
I will just close, Mr. Chair, by saying that if this bill passes in anything like its current form, it will be yet another devastating blow to investor confidence in an industry that has been a critical engine of Canadian prosperity and fiscal federalism, and so on behalf of the Government of Alberta, I plead with this committee not to report this bill back to the Senate or to indicate that it will require a fundamental rewrite.
Frankly, we do not think, as I say, that this bill is salvageable, and I remind the committee that you heard from former Premier Notley I think by teleconference three weeks ago, who initially in November of 2016 I believe did not understand the full negative implications of the moratorium now being enshrined in legislation, but who clearly has come to learn that this bill would have a devastating impact on Alberta and Canadian prosperity.
This is not a partisan question in Alberta. There is a massive consensus from left to right, from people in all sectors, that this bill must be defeated, and if it is not, that the Government of Alberta will challenge it as being unconstitutional.
I am happy to cede to any questions.
Senator Simons: I got my hand up first because when Premier Notley came to testify on Bill C-69, I did not get a chance, and forever enshrined on the Senate tape is a reflection of that disappointment.
The Chair: I want you to know, Senator Simons, that Senator Neufeld had his hand up first, but because you are from Edmonton, I allowed you to go first.
Senator Simons: There is so much gentility around this table. Thank you, gentlemen, all.
I have a question for the premier and also if I may, a question for the minister.
You say that should this bill be passed, Alberta will launch a constitutional challenge. Can you tell me a little bit more about how you think that challenge would take legal form?
Mr. Kenney: Well, we will take legal advice from our Department of Justice. I can say that we believe the impact of the bill is prejudicial, it targets Alberta. We believe it violates the economic union which is implicit in the British North America Act, the Constitution Act, 1982.
To select one particular product from one province for frankly prejudicial blockage from a Canadian coast we believe is prima facie a violation of the economic union, and at the very least, we believe we have a very strong case to make and we believe it is the responsibility of the Alberta government to make such a case.
Senator Simons: My next question is for the minister.
Ms. Savage, you spent much of your career working for Enbridge and for CEPA. We have been trying to figure out if there is any way that there is a compromise in this bill in terms of siting pipelines further north.
I do not know how involved you were in Enbridge’s Northern Gateway project. Presumably there were reasons that Enbridge selected Kitimat and a more southerly port as a route, and I am wondering if you can shed any light on our efforts to try to figure out if there is a more northerly route maybe through Nisga’a territory, maybe through Lax Kw’alaams territory, that would allow us to protect that part of the B.C. coast while still allowing Alberta a point of access.
Hon. Sonya Savage, Minister of Energy, Government of Alberta: Sure. I did. In a previous role, I worked on the Northern Gateway pipeline for about nine years, and I do not see there being a compromise on this bill.
Basically, the whole northern coast of Canada is off limits, and pipeline companies choose routes based on complex engineering, routing requirements, and those routes, the ports out of Kitimat and Prince Rupert and areas around there are the ideal for siting a marine terminal.
The way I read it is exactly why those ports have been chosen to be cut off, because those are the exact ports where Alberta would be exporting oil from. As the premier has just said, this is aimed directly at Alberta and Alberta product. There is no compromise.
Senator Neufeld: Thank you both for appearing.
Congratulations, Premier Kenney. Ms. Savage, congratulations on your new role. You will, I think, have your work cut out for you, but I am sure that, knowing you for the years I have, you will get the job done. We have faith in both of you.
I want to go back a bit to 2013, when the previous federal government announced a world-class tanker safety system, I think specifically for Vancouver, but there had to have been discussions at that time that that world-class tanker system would be across the whole coast of British Columbia.
I just want to know from your point of view, premier, whether that in fact was what was studied.
Mr. Kenney: I don’t believe it has been, senator, and that we find truly perplexing, given the commitment of the federal government to invest significantly in that marine safety plan which they described as world class, world leading, the best in the world.
Why make that investment? Why emphasize that marine safety plan and then completely obviate it with contradictory legislation? It implies a lack of confidence in the government’s own safety plan.
Permission to speak bluntly, senator? I do not think this is about marine safety. I think this is about politics. This is basically a private member’s bill initially proposed a decade ago by now Minister Joyce Murray from Vancouver Quadra who represents a particular constituency that she believes for political reasons is opposed to the idea of these exports.
That is why, as Premier of Alberta, I think Albertans are so aggrieved by this, in that there is actually no compelling scientific case. Albertans are sensitive to environmental concerns. Albertans want to conserve our natural environment. Albertans do not want to jeopardize marine safety, but Albertans also understand that any kind of economic development or export of resources implies at least some notional risk that we have always accepted as a resource developing and exporting country. So we do not understand the rationale of this bill.
Senator Neufeld: Also First Nations consultation, at least what I have been able to find out, has been very little or none. More walking in and saying, this is what you are going to get. I do not know if you have heard the same things.
In fact, we heard from First Nations this morning about the effects that a tanker ban would have on their operations and their livelihoods in Alberta, just south of here a little bit.
When we did Bill C-69 hearings, I am on that committee also, we heard from quite a few First Nations in the Fort Mac area, to the effect that, what are you doing with BillC-69, you are going to put us back into poverty when we are just getting out of poverty and starting to live a life like everyone else. It is not just a matter of big oil. This is about people. This is, I think, about the average person, whether you are First Nation or not being able to actually work in the field that you want to work in.
Mr. Kenney: Thank you, senator. I would like to point out to members of the committee who may not know this, that Alberta enjoys by far the highest level of employment and the highest levels of incomes amongst Indigenous people of any province in Canada, and there is one reason for that: the oil and gas industry.
Communities like Fort McKay have been progressive partners with the energy industry and are increasing their ownership stake. We seek further to facilitate that through the Aboriginal Opportunities Corporation that we will create to provide a financial backstop for Aboriginal community investment in pipelines and in major resource projects.
What I do not understand is why the federal government seems to believe that the Crown’s obligation to consult is only enjoined by the minority of First Nations who are opposed to resource development and why the federal government seems to believe that the economic rights of First Nations people to move their people from poverty to prosperity does not enjoin the Crown’s duty to consult. We believe it does and that is why we will set up a special litigation fund to support those First Nations who want a chance to move out of economic stagnation, to participate in projects like this.
[Translation]
Senator Miville-Dechêne: Thank you, minister and premier. I have followed your arguments, but I want to hear from you on what you said about British Columbia. From my point of view, one of the major differences from the east and other regions of Canada is that in the north and in British Columbia, there are 34 per cent Indigenous people. Furthermore, 9 of the 11 coastal nations have very clearly stated — and we have just come from British Columbia — that they wanted to impose this moratorium to protect fishing and the fish. It’s their way of life; it’s their decision. They don’t want oil, they want to protect their resources. You and I both know that the only ones running a risk with the pipeline construction are the nations on the coast. Of course, it is a not a huge risk, but it is there, because we know that between 2000 and 2010, there were 10 oil spills of double-hull tankers throughout the world. What do you tell these Indigenous groups, who have very clearly stated — we’re talking about nine out of 11 coastal nations — that they wanted to impose this moratorium to protect their way of life, which is not the same? I understand that you want to develop and enrich the nations in Alberta — I understand that, and it is one of the largest contradictions and greatest difficulties with this bill — but what do you tell these Indigenous people who, with full knowledge of the facts, say that they don’t want to run any risk?
Mr. Kenney: First of all, I will say that I respect them; of course, it is essential to consult them on any issue. However, ultimately, there are risks in every way of life and in all economic developments. The essential questions are aimed at determining what the risk is and what science tells us. The federal government is obligated to provide scientific evidence of a significant risk associated with these exports. Sorry, how do we say that in French?
Senator Miville-Dechêne: We call them “déversements.” You and I both know that boats — double-hull oil tankers — have caused the spills. So, there is a risk. These nations are saying that they don’t want their fish to die in oil spills. That’s what they are saying.
Mr. Kenney: I would say that the only way to eliminate the risk for the environment would be to have no economic development. However, we are living in a complex modern society, with the strictest environmental standards in the world. I would say that they are even stricter than those in the United States and the OPEC countries or Russia. So, I would tell these Indigenous communities to have faith in the federal and provincial governments’ environmental protection standards, including for the seas and the ocean. For each project, just like each pipeline, for example, it obviously has to go through several years of review and examination, which is another problem. So, I would say yes, there is a theoretical risk in any economic project, but if we want to profit from economic growth, we have to accept a certain degree of risk.
Senator Miville-Dechêne: Thank you.
[English]
The Chair: Wouldn’t the greatest risk of all be to take no risk at all? Without risk, there is no economic activity.
Mr. Kenney: I think that is a rhetorical question, senator.
Senator MacDonald: Premier, it is great to have you at the table on your first day as premier. Welcome. I think a comment, an observation and then a question.
The comment is, I think your initiative in regard to the Aboriginal development is a fabulous idea. We were out here the last few weeks on both Bill C-48 and Bill C-69. I saw no lack of initiative, no lack of desire from the Aboriginal communities to get involved in the oil and gas industry. In fact, I saw just the opposite. They were really keen to get to work.
Second, in terms of my observation, when it comes to managing risk, we manage 6 million metric tonnes of oil on the West Coast of Canada. We manage 283 million metric tonnes on the East Coast, including five operating wells on the Grand Banks of Newfoundland, which is the greatest fishing bank in the world, and the size of the fishery on the East Coast of Canada really in terms of value dwarfs the size of the one on the West Coast.
You can do it both. We have proven you can do it both. I think you can go forward with the confidence that it can be done.
The question I have for you, the lack of pipelines is not just an Alberta issue. Canadians know it is a Canadian issue. The unity of the country is a Canadian issue, and people in the East are concerned about the unity of the country because of this impasse.
I know it is early in the day, early in your mandate, but have you reached out yet to any of your provincial counterparts and discussed any of these issues with them? I am just curious if you can fill us in.
Mr. Kenney: I certainly have. I am not sure what submissions you have received, but I can certainly say that the Governments of Saskatchewan, Ontario and New Brunswick all share our concerns. I believe that Premier Pallister does broadly share these concerns. Of course, there is a small oil and gas industry in southwestern Manitoba.
I was speaking to Premier Bob McLeod last night from the Northwest Territories, and they were affected by a federal moratorium on oil and gas exploration in the Beaufort Sea and, while they may not have a dog in this particular fight, they feel that this is frankly arrogance by the federal government blocking economic development through our energy industry.
I will be meeting with Premier Ford in Ontario on Friday, and intend to raise this matter with him.
Senator, I should say that I am sure that the crisis in the Alberta energy sector has affected your home region of Cape Breton. I want to thank the people of Cape Breton on behalf of Albertans for all of the remarkable, talented, hard-working women and men who came out here to contribute to building our economy, and I think many of them helped their families and friends back home as well.
Much of that opportunity is no longer there. This is a national question. As I said in French in my opening statement, there was an Angus Reid poll less than a month ago which indicated that 50 per cent of Albertans said they would support secession today. That is an order of magnitude higher than the support for secession at the height of the National Energy Program and its economic devastation in the early 1980s. It is an order of magnitude higher than it is in Quebec today.
Now, I grant, it is just one poll, but others have indicated troubling levels of deep alienation, and sure, within those numbers there are some people blowing off steam, as a way of expressing frustration.
As the Premier of Alberta, and quite frankly, I said this to the Prime Minister on our first call two weeks ago, as leaders, it is our obligation to take that seriously. If this bill passes, it will be seen by many of those Albertans — this province having been a great partner in the federation, been a great engine of prosperity, shared hundreds of billions of dollars through fiscal federalism, as Alberta being blocked in and pinned down every time we turn around. If we cannot listen to the voices of federalists in Alberta who are simply asking for fairness in the federation, this could take a troublesome turn. I hope that does not happen.
Senator Busson: Thank you both for appearing here today on probably the biggest day in your life, for a while anyway.
Mr. Kenney: I am sure, yes.
Senator Busson: It is an honour. Just for clarification, I am not asking this question to be argumentative of the minister or to cause any kind of controversy around the subject, but we had previous witnesses, one of the witnesses is the gentleman who is behind you from Lax Kw’alaams, the CEO of Eagle Spirit, talking about ports like Metlakatla, Lax Kw’alaams, Prince Rupert and Port Simpson as points of exit for a pipeline from Fort McMurray to Asia.
One of the things that some of the other witnesses have suggested as a win-win for the environmentalist groups that see this as their cross to die on, is a marine corridor out of Prince Rupert or Kitimat or further north may be worth entertaining.
Is that something that’s off the table, as far as you are concerned? I know you have addressed my colleague’s question from a different perspective, but I just wanted to get clarification on your point and on your point of view.
Ms. Savage: That seems rather contradictory, because if Bill C-48 is about safety and about oil spills, then setting a marine corridor kind of contradicts that.
Right now, Bill C-48 applies right across the whole northern coast of B.C., and if the legislation is about safety, which I do not believe it is, but if it was about safety, how can you say creating a marine corridor equates with marine safety?
I think we should just be honest about the bill, that it is not about safety. Tanker safety has been improving decade over decade over decade around the world. These projects, if they are to go forward, have the most world-class safety features attached like double-hulled tankers, tugs, tethered tugs, additional pilots, safety navigation tools. There has been literally over a billion dollars poured into marine safety.
Bill C-48 is not about safety. It is about politics. I don’t see why putting in a corridor would meet with the safety. I mean, there just should not be a tanker moratorium over the north coast at all.
Senator Tannas: Congratulations to you both.
Premier Kenney, I know that you are a long time student of federalism, of Parliament. I would be interested to know what your thoughts are on the role of the Senate in situations exactly like this.
Those of us who have different perspectives but are from the same place and who came to Ottawa as senators to look out for the regions, regardless of whether or not we agreed with what was being done. On the issue of the majority ganging up on a region, could you give us any guidance that we can take back to our colleagues as we talk and think about how we are going to stand on this bill when the time comes?
Is there any advice you want to give us, any inspiration that you can load us up with that we can go back and spread amongst our colleagues?
Mr. Kenney: Thank you for the question, senator. I would say that this is exactly the sort of bill that the founders contemplated when they decided to establish a bicameral legislature with an upper chamber representing regional interests.
I had the privilege of serving in Parliament for nearly 20 years, and I cannot recall off the top of my head a government bill from several different governments in different parties that had such an obviously prejudicial effect on the vital economic interests of one particular province. It seems to me that this appeals to the raison d’etre of the Senate, which is to be a voice for the regions of the provinces to ensure basic fairness in the federation. I would ask senators to reflect on the very structure, the essence, the purpose of the Senate, which is to be a voice and to reflect those regional concerns.
I speak to you not only as the Premier of Alberta but a premier who was elected with 55 per cent of the vote two weeks ago, in large part because of bills like this.
Let me be blunt with you. We won the largest number of votes ever cast in an Alberta election and the dominant issues were policies from the Ottawa government which are undermining our vital economic interests. I would say to some of your fellow senators that if they want to avoid a deep chasm from developing in this federation, then please listen to the voices that range from the NDP to the Conservatives, from labour unions to businesses, from Aboriginal leaders to the overwhelming majority of Albertans. Please, please give this serious consideration.
Let me frame it this way.
[Translation]
If there were an economic crisis in Quebec right now, and 50 percent of Quebecers supported secession according to the polls, do you think that the federal government would have tabled a bill to block essential exports of the Quebec economy? Not a chance. It’s impossible to imagine a situation like that. The question that I am asking all the senators of all political stripes is the following: Would it be conceivable for Ottawa to treat Quebec in a similar way? I don’t think so.
Senator Miville-Dechêne: Since this is the second or third time you have broached the issue of Quebec since you have been here, and we are dealing with Bill C-48, which really don’t have much to do with Quebec, I wonder if you are implying, in your last response, that Quebec is favoured by the federation and that Quebec is treated differently than Alberta. What do you mean, exactly?
Mr. Kenney: Senator, first of all, I would like to say that I love Quebec. Albertans love Quebec. Tens of thousands of Quebecers have moved to Alberta to share in our prosperity, and we are proud to have shared hundreds of billions of dollars with the rest of Canada. Most of those funds go to the Government of Quebec, which receives $13 billion in equalization a year. Alberta is the largest contributor. These are the effects of the federal tax system, and we have no problem with that. All that we ask is to be able to develop the resources that help cover the costs in the federal tax system.
I spoke to Premier Legault, whom I respect a great deal. I hope to have the opportunity to meet with him personally so that we can find common interests. I’m not looking to cause trouble; quite the opposite. I spoke French on the night of my victory speech two weeks ago, to say that I was renewing the historic alliance between our two provinces. All I am saying is that if there were a national unity crisis in Quebec right now, I know that, as a former federal minister, the government in Ottawa would not table a bill like this, which would be a gift to the PQ.
Senator Miville-Dechêne: However, would it not be constructive at this stage to talk about your point of view concerning climate change, about adopting a plan to fight climate change or to impose a carbon tax, if you want to convince the country that Alberta’s oil is what people need to buy exclusively? Wouldn’t that be a more constructive attitude to have?
Mr. Kenney: My position and that of our government consist of acknowledging the scientific reality of climate change and the role of human activity. This is why we are proposing a practical policy to reduce greenhouse gases, including a rate for major industrial emitters, and I have told the Prime Minister that I am open to any discussion on these kinds of details. Senator, the carbon tax imposed by the previous New Democratic government did not get social approval for exporting Alberta’s oil. Northern Gateway was cancelled, Energy East was cancelled, and at the beginning, Keystone XL was cancelled, there were the disputes with Trans Mountain, and we have not made any progress with the carbon tax.
Senator Miville-Dechêne: Thank you.
[English]
Senator Smith: Just an observation, sir, in terms of hearing from the witnesses over the last couple of weeks, especially those who are for Bill C-48.
Basically, the message that I have received, and maybe some of our colleagues have received, is you can do what you want but not in my back yard. I guess from a strategy perspective, it may offer an opportunity with some of the Indigenous participants in the last few weeks. We have talked amongst ourselves about the opportunity of how do you get the Indigenous population here. We heard of some of the shortcomings that exist today with 28 per cent unemployment just down the road in the southern part of Alberta amongst the oil producers who are Indigenous.
Then you go out to B.C., and we see the Indigenous people there split, with probably a higher number that are for Bill C-48. How do you use the strength of your relationship with your Indigenous partners to try to influence your other Indigenous partners to get rid of this not-in-my-back-yard attitude?
All of the people who are for, many of whom are activist type of folks, and we respect that, have to be made to realize that there has got to be more than just protecting the fish. There has to be the other side, the economic opportunity for people.
Mr. Kenney: So a couple of things. My observation, senator, is that many First Nations are conflicted and ambivalent and have rival groups within the. Very typically, one group is pro-development and another is anti-development. That is the case in the prairies as well as it is in many British Columbia First Nations.
One of the challenges is that many of these First Nations do not have the financial capacity today to participate in a meaningful way in resource projects, and we hope to change that through the creation of this new Crown corporation called the Aboriginal Opportunities Corporation, that will provide financial expertise to First Nations who are interested in prospective financial participation, and a certain level of back-stopping so that at least they can get commercial rates of credit, for example, or perhaps equity participation in pipelines and other projects.
Second, senator, I would say quite frankly, and I believe there is a lot of research to support this, that at least some of the opposition in some First Nations in British Columbia has been encouraged and funded by these foreign-funded special interests. I will be blunt with you, sir. We intend to go right after them. We will no longer be a piñata for these foreign-funded special interests. We are going to launch a public inquiry into the sources of foreign funds into the anti-Canadian energy campaign. We will challenge if necessary in the courts the charitable status of groups which we think have been in flagrant violation of charities laws in this respect. We will ban foreign money from Alberta politics and support your colleague Senator Frum’s efforts to do the same through her private member’s bill.
We will make it clear to multinationals that are boycotting Alberta’s energy sector like HSBC that we will boycott them. We will challenge them in every way possible. We use every legal tool at our disposal to defend our vital economic interests. Where is this money coming from that is paying for much of the activity that you have just described? I think First Nations people have a right to know.
Senator Simons: While we are being blunt, you and I and everyone on this committee knows that this was a quid pro quo.
When the Prime Minister announced the approval of TMX, the trade-off was as he said to the people of British Columbia, you may not like TMX, but here, I will give you this tanker moratorium and then we will have TMX.
We do not have TMX. We do not know when we are going to have TMX. I don’t see as an Alberta senator how I could support Bill C-48 at a time when TMX is not approved.
Let’s imagine for the sake of argument that TMX does get approved and before we have to vote on this bill. Would that answer some of your concerns or would you be equally concerned about the strangulation of Alberta’s oil industry?
Mr. Kenney: Thank you for the thoughtful question, senator.
I do not really mean to say this to be churlish in a partisan way, but my predecessor was at least initially opposed to Northern Gateway and raised no objection when the Prime Minister on November 29, 2016 announced the moratorium on the north coast as well as the vetoing of Northern Gateway. I think that was a huge mistake. I think we need to pursue an all-of-the-above strategy. Whenever I am at one of these rallies and people start chanting, “Build that pipe,” I say, “No, no, build those pipes.”
It was a mistake to put all of our eggs in the fragile basket of Trans Mountain, and basically Alberta and the federal government surrendered to President Obama’s veto of Keystone XL in October 2015. The federal government created conditions that led to the cancellation of Energy East after major investment and six years of work. The federal government killed Northern Gateway, brought in the moratorium in this legislation, and as you have identified, we are no closer to getting TMX done.
That was the mistake, and we should be pursuing all possible avenues of egress. The position of my government will be to support any credible proposal to do so. There are proposals about trains up to Juneau and others about down and over to Port Angeles and Hudson’s Bay and the Lakehead. There is of course technology about the solidification of bitumen. We will support any avenue of egress so that we can get a fair price for the products that we produce at the highest standards on earth.
The Chair: Thank you. I know you both had a long day. I want to thank both Premier Kenney and Minister Savage for coming here today.
I thank all the witnesses who appeared before the committee today in Edmonton, and from the Province of Alberta.
We will reconvene tomorrow at 9 a.m. in Regina at the Hotel Saskatchewan.
(The committee adjourned.)