Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 52 - Evidence - May 1, 2019 (morning meeting)
REGINA, Wednesday, May 1, 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 9:02 a.m. to give consideration to the bill.
Senator David Tkachuk (Chair) in the chair.
The Chair: Today, we are continuing our meeting on Bill C-48, An Act respecting the regulation of vessels that transport oil or persistent oil to or from ports or marine installations located along British Columbia’s north coast, the “Oil Tanker Moratorium Act.”
As a senator from Saskatchewan, I am delighted to be in my home province this morning to hear from witnesses on this bill.
Before we begin, I will ask senators to introduce themselves for the record.
Senator Miville-Dechêne: Julie Miville-Dechêne, Quebec.
Senator Busson: Bev Busson, British Columbia.
Senator Smith: Larry Smith, Quebec.
Senator MacDonald: Michael MacDonald, Nova Scotia.
Senator Gagné: Raymonde Gagné, Manitoba.
Senator Neufeld: Richard Neufeld, British Columbia.
The Chair: Dave Tkachuk, Saskatoon.
For our first panel this morning I am pleased to welcome from the Saskatchewan Association of Rural Municipalities, Ray Orb, President, and from the Regina & District Chamber of Commerce, John Hopkins, Chief Executive Officer.
Mr. Hopkins has to leave at 9:30 this morning, so he will testify first and then Mr. Orb. Then, if you have questions for Mr. Hopkins, you can get them over with and we can deal with Mr. Orb for the rest of the hour.
John Hopkins, Chief Executive Officer, Regina & District Chamber of Commerce: Good morning, Mr. Chair and members of the committee. Welcome to our Prairie oasis, a place where food, fertilizer and fuel dominate our economy and our way of life. Within an exceedingly short drive one can quickly understand the importance of agriculture, mining and energy to our community. Thousands of jobs rely on these vital sectors within our province.
Within our city these sectors also dominate with our steel mill EVRAZ, producing some of the best pipe in the world, and our Co-op Refinery, refining crude that is subject to some of the most stringent environmental standards in the world. Moreover, potash has a significant presence within our community with Mosaic. On the food side we have Viterra and AGT Foods, feeding the world. All of these companies are solid companies that provide quality employment opportunities for our residents, as well as give back to our community, province and country in many ways.
We are very concerned about Bill C-48 for a number of reasons. First, Bill C-48 proposes a ban on oil tanker activity along a portion of our West Coast, but no similar legislation exists or is proposed along our East Coast. As I am sure you all know, 85 per cent of all oil tanker traffic in Canada occurs along the East Coast, but that is primarily our importing oil from countries, some of which have little or no human rights standards, virtually no environmental regulations, and in some cases from countries that are clearly not friendly to Canada. Moreover, Bill C-48 will do nothing to address the U.S. tanker traffic that sails from Alaska each and every day.
Second, British Columbia has a rich and beautiful coastal environment with mountains, forests and the ocean. It includes a wide diversity of both fauna and flora. However, the same can be said about our eastern and northern coasts. All of Canada’s coasts, as well as areas like the St. Lawrence and the Great Lakes, are Canadian treasurers to be protected now and for generations to come. However, we are here to argue that all regions of Canada and all Canadians should be treated equally. There is no question whatsoever that the target of the tanker ban is Western Canadian oil, while at the very same time Eastern Canada a can continue to import oil from some of the most dubious nations on earth.
Third, Canada’s West Coast is clearly not the only coast in Canada that has navigational challenges, be they challenging tides, narrow passages or periods of inclement weather.
Fourth, since the Exxon Valdez spill, both industry and governments have come a long way in relation to protecting our coasts, which has led to the decline in marine spills. This is due to a variety of factors, including the regulatory environment, new technologies including double and triple hull tankers, and other world-class tech and prevention measures. No one can say with 100 per cent certainty that there will never be a tanker spill, but what I can say is it’s extremely unlikely. Should it happen, containment measures are far better today than they have ever been.
Fifth, over the past number of years there has been an ever-increasing call to diversify our export markets, particularly as they relate to our energy resources, given the fact that the United States of America is the number one oil-producing nation on earth. The stark reality is they do not need our energy anymore. If the American market is not our market for growth, we clearly need to access other markets around the world. The primary market for us should be in Asia, but in order to access Asia we need access to tidewater. Banning tanker traffic undermines tour ability to increase our market share, particularly when coupled with Bill C-69. Western Canada needs access to tidewater.
We are calling on this committee to scrap Bill C-48, or, at a minimum, to amend the bill so that access to tidewater is possible, while at the same time using the regulatory environment and state-of-the-art technology and processes to ensure the protection of Canada’s coastlines. One option that you may want to consider is particularly sensitive sea areas that are being used around the Great Barrier Reef and the Galápagos Islands, among others.
Thank you very much.
Ray Orb, President, Saskatchewan Association of Rural Municipalities: I would like to thank the Senate and Standing Committee on Transport and Communications for the opportunity to speak to Bill C-48.
Saskatchewan Association of Rural Municipalities, or SARM, represents the 296 rural municipalities that make up our province. Our provincial economy relies not only on the agriculture industry, but we have a strong oil and gas sector, producing 12 per cent of Canada’s oil behind only Alberta. The Saskatchewan economy depends on the development of oil and gas projects for economic growth, investments and jobs largely based in rural municipalities. RMs are home to many natural resource sector workers and businesses that rely on the continued development of these projects.
We produced over 485,000 barrels of oil per day in 2017. We have approximately 7 billion barrels of crude oil and 9.5 trillion cubic feet of natural gas remaining, as reported by the Canadian Association of Petroleum Producers. It’s important that pipeline projects provide sustained economic benefits to rural Saskatchewan and Canada as a whole, while bringing Canadian resources to tidewater in a safe and an efficient manner.
SARM believes that Bill C-48 affects rural Saskatchewan. The details and the purpose of that legislation will be applicable to any future regulatory or legislative amendments the government may make when dealing with oil transportation to the British Columbia northern coast. As an oil-producing province, the impact of this bill would see the limited use of northern B.C. ports for the transportation of oil and potentially limiting a future pipeline route like that of the northern Gateway pipeline that was rejected by the current government.
SARM supports energy infrastructure. We understand the economic and environmental benefits that infrastructure like pipelines offer RMs, the provinces and the country. We partnered with our sister municipal organizations in Alberta for a resolution that was adopted by the Federation of Canadian Municipalities to support energy infrastructure.
Saskatchewan’s importance to Canada’s oil and gas sector is essential. According to a study by the Fraser Institute, Canada’s lack of oil pipeline capacity cost the national economy $20.6 billion in 2018. As an example, in September last year Western Canadian oil production reached 4.3 million barrels per day, but only 3.95 million barrels per day could be shipped by a pipeline. Our inability to get our oil to global markets because all of Canada’s major tidewater pipeline projects have been cancelled or delayed is resulting in 99 per cent of Canadian crude oil being exported to the U.S. These revenue losses are substantial for our energy industry and the entire Canadian economy.
According to Statistics Canada trade data, the total volume of oil imported into the country from Saudi Arabia has increased by 66 per cent since 2014. Last year alone, Canadian companies spent $3.54 billion importing 6.4 million cubic metres of Saudi oil. Increased pipeline capacity could keep those dollars in our own economy.
It is important that the voice of rural Saskatchewan is considered when examining legislation that could impact our economy and sustainability. To that, we have some questions we would like to ask of the committee.
First, we understand that there is a concern regarding the environment along the northern coastline of British Columbia. We should be discussing that, but we would like to know how many oil spills there have been since oil has been moving along in that same area. Have there been any?
Second, is it not true that Canada is unable to stop international tanker traffic along the B.C. northern coast, but if this bill passes it will stop Western Canadian oil from getting to market?
Third, we would also like to know if it is true that modern ocean-going ships carrying oil are also required to be constructed with double hulls for added safety, and whether that regulation is being enforced to prevent oil spills. If not, then why?
It seems that sound principles of science should be considered and initiated rather than what seems to us to be an attack by the federal government on the oil industry to try to eliminate the oil industry, and to drastically hurt the economy of not only Saskatchewan but Canada as a whole.
That is why SARM is opposed to Bill C-48. We hope that it could either be reconsidered or rejected entirely.
Senator Miville-Dechêne: Welcome and thank you for your presentations.
I admit that I do not know much about oil in Saskatchewan. I understand that it’s 12 per cent of your economy. Where does your oil go? It goes west and east. You gave me statistics on the Western oil problems over a few years. Do you have more precise numbers or facts that could explain to us how the Saskatchewan oil industry is suffering from the situation? Can you really relate the problems of the industry here to the lack of pipelines in northern B.C.?
I need a bit of background information on your industry and how you are specifically affected by Bill C-48.
Mr. Hopkins: There are primarily two places where there is oil in Saskatchewan. One is just south of us here, the Bakken Play. It is a pretty significant play. It could be very lucrative for Canada, Saskatchewan, Regina, and the RMs within the area. That’s one play. The other one is in and around the Lloydminster area.
The primary destination for most of the oil in Saskatchewan is south because we do not have the capacity to really get it to Eastern Canada a, which is where we would like to see more of it go. The downturn in the oil industry has had an impact in Saskatchewan. The impact has not only been on the price, but on our ability to access pipeline capacity. This has led to a decrease in the price of Western Canadian Select and has had a significant impact in terms of our ability to continue to grow the industry within Saskatchewan. That will continue on until we see some more capacity opened up. Hopefully we will see Trans Mountain approved in the not too distant future.
It is really about increasing capacity. That is what we really need to Saskatchewan, as opposed to having a lot of oil on Trans Mountain. Probably not, but it will increase the capacity of the system overall in Western Canada which will help us get our product to market. As we continue to look at other projects down the road, I am not aware of any that are not already publicly known will help us to get our product to tidewater.
Perhaps I could just say that far too often I have heard that the environmental standards of Canadian oil, or how we have been acting as industry, are somewhat less than those of the rest of the world. On the contrary, that’s absolutely not true. We are leading the world, not falling behind. We are actually leading the world in terms of how we produce oil, the standards that we keep and our human rights. The list kind of goes on. It’s not like we are some backward country.
Mr. Orb: I would like to say that everyone here needs to know the world demand for oil is actually increasing, not decreasing. That’s why we need access to tidewater. The system of moving crude oil within our country is very complicated.
Although I do not have all the statistics with me, I can paint a picture of what is happening in Saskatchewan because of our lack of pipeline capacity. Any crude oil that goes to the United States is loaded on a railcar. I actually sit on a national municipal rail safety round table with Minister Garneau guiding us. They made some good changes to make that movement of oil by railcar much safer than unfortunately what happened in Lac-Mégantic a number of years ago. This is a huge concern to agriculture especially because we are in direct competition with the agriculture industry. We need to be moving our grain.
Our markets, as Mr. Hopkins has referred to, are in Asia right now. We need to move our grain through those ports in Vancouver and in Prince Rupert, and we need to move our oil by pipeline. This is something we need to get across. Obviously Kinder Morgan is on side with that. We thought Energy East was a good viable project. We think that it should be revitalized. We have been actually talking to municipal organizations across the country, including the ones in Quebec, to make sure they know how important the pipelines are.
Senator MacDonald: Over the years a lot of Maritimers have come west. I have had friends who went to Lloydminster and have not come home. They have been there for a while. I do not think people in Eastern Canada a appreciate the differences between the oil industries in Alberta and in Saskatchewan. My understanding is most of the oil is Saskatchewan is conventional oil, as opposed to the oil sands oil.
You touched on the rail. That was going to be my question. When it comes to getting your product out of the province, I assume you have to use a lot of rail. Rail is in constant competition with the grain industry to get their product to market.
How does that fluctuate on a seasonal basis in terms of your ability to get your product out of the province? Are there times when grain takes over and times when oil takes over in terms of use of the rail?
Mr. Hopkins: The rail industry or the rail sector in Saskatchewan is very important to the big three: agriculture which is very important, potash which is absolutely huge, and then energy. Essentially, they are all competing for the same lines.
Mr. Orb would know this a way better than I do, but not too long ago we had a crisis in Saskatchewan in terms of how we were to get our agriculture products to port. They were sitting there in sidings and in lots of cases in farmers’ yards because we couldn’t get the capacity. We are not building brand new railroads, either, so that sort of compounds the problems.
Having said that, I know the CN story a little better than the CP story. There has been some movement on behalf of the federal government to address some of that, but we continue to have this challenge. From our perspective, clearly what we need is more pipeline capacity and our ability to get our resources to tidewater.
I can’t stress enough that the number one oil-producing nation on earth is the United States. They do not need us anymore. Of course they will take it for a discounted price, but they do not need us anymore and we have massive opportunities in Asian markets.
That’s not to say let’s throw everything to the wind and do whatever we want to do. We have to do it in a way that’s very sensitive to our environment. We need to make sure we have all the protections in place. I would say, again, that Canada is one of the leaders in the world in terms of making sure those types of things happen. We have come a long way since Exxon Valdez, and we need to continue. Is it perfect? No, we need to continue to move in that direction. At least I am proud to say that we have industry, as well as other stakeholders, that are willing to come to the table and say, “Yes, that’s what we want to do. We will do this in the safest manner possible, using science as the basis or the foundation of how we get things done.”
Senator MacDonald: Because of the difference of the nature of extraction in Alberta and Saskatchewan, do you think you are being thrown into the mix a little unfairly when it comes to the application of criteria for managing emissions and things of that nature? Do you think you are being sort of dragged along?
Mr. Hopkins: To be very blunt, Bill C-48 looks like it’s very targeted to Western Canada, and in particular Alberta and Saskatchewan. It’s very targeted. That’s what the ban is all about. What else would it be about? I mean, let’s be realistic.
There’s a growing sense of alienation in this province and in Alberta about Confederation. Far too often now decisions are being made on a regional basis. Canada is not being put first. We need to get back to putting Canada first as opposed to regional interests. What is in the best interests of the country as opposed to what is in the best interests of this group or this specific area of the country? It needs to be what is in the best interest of the country, making sure that we actually look after the environment. The environment is absolutely vital. If the environment goes, we will have nothing.
As Canadians, I would say, we have shown the world how to do this. It is not the other way around. We need to continue to move ahead. Yet, far too often I hear, it seems like in the media, that Canada is lagging behind in terms of our protection of the environment. That’s not the case whatsoever. We need to continue to lead.
Senator Gagné: Since 2016 we have been hearing about Keystone, Enbridge and now Trans Mountain. I hope by the end of June we will hear if we are going to be building and when it’s going to start. There will be capacity if everything is accepted, but we know there could be certain roadblocks ahead.
The present government has made a policy decision to concentrate the transport of oil through southern British Columbia. If Trans Mountain and all the other pipelines are approved, will we have the capacity to move the oil and, on the other hand, to protect the northern West Coast of B.C.?
Mr. Hopkins: It will add to the capacity. That’s for sure. If we get Trans Mountain, that will be a step in the right direction. Energy East would have been an even better step in the right direction as far as we are concerned. Northern Gateway would have been a great project as well.
There is a massive opportunity for Canada, again, to show leadership in the world. The world needs more of Canada, not less of Canada. If we had more of our energy resources going to the rest of the world, I would say it’s better for the world, given the fact that we have some of the toughest regulatory and human rights environments in the world protecting the rights of workers, the rights of Indigenous people and the rights of women. The list goes on. The world needs more of that as opposed to less of that.
The more of Western Canadian oil that we can get to market, the better off all Canadians will be. I do not think Canadians really understand the magnitude of what we are talking about here. This dwarfs to a certain degree the auto industry, and people do not understand that the energy sector is absolutely vital to the Canadian economy. It’s 10 per cent of the Canadian economy. Yet, there are people in some parts of this country who are funded from outside of the country and have one objective in mind of keeping the oil in the ground. When we look at industry and the science of what we are doing, the way we have been doing it in this country, we are leading the world. We are not lagging behind. We need to continue to lead the world. The world needs more of Canada.
Senator Neufeld: How much oil from Saskatchewan would reach Trans Mountain? How much do you ship? Do you ship any west now, or is it mostly south to the United States? I am just not sure. Maybe you could help me.
Mr. Hopkins: I am not 100 per cent sure, but from my recollection most of our oil goes south as opposed to west. It’s not about how much of it would end up in the Trans Mountain pipeline, but how much capacity that would relieve so that more of our oil could go in other pipelines. Ideally we would like it to go east. When we look at the state of the energy sector in Canada, the fact is that we import most of our oil from the United States comes via pipeline. It is crazy; it is bizarre.
We are also importing oil from Saudi Arabia, and that has been increasing. What kind of relationship do we have right now with Saudi Arabia? We are still doing that, and then there are Norway and others. We should be doing our best as Canada to become energy independent of all of that and utilize energy we have in this country as opposed to importing it from some nations that are really the friendliest to Canada.
Senator Neufeld: I appreciate what you are saying. The oil that goes south to the U.S., is that discounted too or do you get the going price for it?
Mr. Hopkins: It would be discounted.
Senator Neufeld: All of it?
Mr. Hopkins: It would be Western Canadian Select. I could be wrong, but everything that I know tells me it would be Western Canadian Select price or it would be West Texas Intermediate. By no stretch of the imagination are we getting Brent. If we had the capacity to export our resources to Asian markets and to other markets around the world, we would be getting Brent price. That would be good for all Canadians.
Senator Neufeld: The oil out of the Bakken is light oil, so you are telling me that there is a deep discount on light oil out of Saskatchewan to the U.S. Is that correct?
Mr. Hopkins: From what I understand, we are re getting Western Canadian Select prices. That’s what we are getting. I could be wrong, but everything I have read tells me that is the price we are getting. It has come up a bit over the course of the last number of months, but it’s still a discounted rate.
Mr. Hopkins: I am sorry, but I have to go. Thank you so much for the opportunity to be here.
The Chair: Thank you for coming, Mr. Hopkins.
Senator Miville-Dechêne: Thank you for your energy.
Senator Busson: Thank you, Mr. Hopkins, for your input.
My question, then, will be for Mr. Orb. Having lived in the North Battleford area of Saskatchewan before and having driven the grid roads for a number of years, I couldn’t help but notice the wells in the fields and the proximity to a lot of small towns. Of course SARM represents all of these small towns, and Saskatchewan has been struggling forever to continue to make small-town living vibrant in that province.
We hear about big oil and big oil companies. Could you talk about what the oil industry means to the communities of Saskatchewan? How does that filter down to the rural communities and the communities generally across the province? Would you have some conversation with us about that, please?
Mr. Orb: Certainly. Just to clarify, SARM does not represent urban municipalities, small towns or villages, but we have a lot to do with the small towns and villages because of the fact that many of our farmers live in small towns and villages. Many of the people who work in the oil sector also live in those small towns, villages or RMs. Oil is extracted from the rural areas, and those municipalities are the ones that we represent.
It doesn’t matter to us if they are big oil companies or small oil companies. We have a number of small oil companies in Saskatchewan that are still doing exploration and producing oil. They are very valuable to our rural municipalities and to SARM for a couple of different reasons. The linear taxation is very important. Rural municipalities receive a lot of taxation where they have pipelines. Economic development in the area is spurred by the oil industry. In some cases they are very gratuitous as far as donating to local charities and things like that. The spinoff is enormous.
When the oil sector slowed down, 130,000 jobs alone were lost in Alberta and not quite that many in Saskatchewan because we do not produce as much oil. We are not as involved as Alberta, but we are still a good oil-producing province. To be clear, we have heavy oil in Saskatchewan on the western side of the province. We have two upgraders in the province. One is in the Lloydminster area and the other one is actually here in Regina. They refine oil so that it can be blended and to be used not only in the refinery in Regina but to be exported well. Unfortunately, much of that oil goes to the United States by railcar. That’s something we are not happy about. We would like to see Keystone, Northern Gateway and Energy East all performing what they need to do.
Senator Smith: Mr. Orb, through our visits to British Columbia, there were strong collective groups of people who supported Bill C-48. They were very sensitive to the way of life that has been provided to the Indigenous population and to basically risk aversion, with no desire to take any risk. It’s sort of like the not-in-my-backyard mentality.
What type of sensitivity do you believe the producers and citizens in Saskatchewan have to understand the mentality of what is going on with people in British Columbia? Do you have a sense of that? To me, it would probably be an opportunity, if people need to get together and really share their concerns, to find some form of a compromise. That seems to be what Canada was built on. I just wonder what is your opinion.
Mr. Orb: That’s a very good question and that’s something we as Saskatchewan people need to better understand. We work with First Nations in Saskatchewan. SARM actually works with an Indigenous task force in particular and with the Office of Treaty Commissioner of Saskatchewan. We wouldn’t be averse to sitting down and meeting with First Nations people along the coastline that we know have concerns. We know there are some as well even along the proposed Kinder Morgan route who are in favour of pipelines and economic development.
We listened to a chief of the Blackfoot tribe in Alberta who, as chairman of CAPP, the Canadian Petroleum Producers Association, stated that if these pipelines did not go ahead First Nations people would be adversely affected economically. He actually quoted the number and financial implications it would have.
We understand the sensitivity of not in my backyard, but the point has been made that the modern technology we now have does not guarantee complete safety. It certainly mitigates the risks to a point where people need to consider that projects like the Northern Gateway need to go ahead and the moratorium on tankers needs to be withdrawn.
Senator MacDonald: I want to go back to the Bakken Play in North Dakota that we discussed before. Forgive me for this, but I wasn’t aware that there was any development on the Canadian side when it came to the Bakken Play. Could you tell me what is going on there? It’s conventional oil. Are we developing it fully, or is the market working against us from developing the Play on the Canadian side?
Mr. Orb: I am not an expert on oil exploration or development, but I know the Bakken area in Saskatchewan is very relevant. It is very good, high quality crude. Some of it is being shipped to Western Canada now because of the reversal of part of the pipeline that actually can deliver some of that product into Quebec. A certain amount goes into Eastern Canada a. The rest, unfortunately, goes by railcar. It could be, and I think it is in some places, blended with other oil in Saskatchewan. Some of that goes to the southern United States. This would be the Brunt. This would be the majority of the oil shipped out of Saskatchewan right now because unfortunately that’s our biggest market, albeit at the lowest price. In some cases producers were actually getting an almost negligible amount of money for the oil because of discounts.
You could find this formation not too far from Regina. It’s in the southeast part of the province, not too far from here. It’s very good quality, and they know there is a lot of oil there. They have actually developed some better processes for extracting it from the formations, much better than it was even 10 years ago.
Senator Miville-Dechêne: I listened to your colleague Mr. Hopkins. I wanted to refer to the idea of climate change. He expressed that the worries of Canadians cannot be reduced to a big plot by American to shut down our oil. There are some climate change fears.
If we look at the figures, we are not in a position to reach our goals in Canada. Oil extraction is part of the equation. I am not saying at all that it is the culprit, but it is part of it in the minds of Canadians. What can be done? You are from an oil-producing province. As you said, it is not oil sands; it is regular oil. It seems to be that there’s no ongoing dialogue. It’s on one side with people saying that we need to do something for the planet while the other side feels unjustly treated in an important industry.
Mr. Orb: We really feel we are being unfairly treated right now because we have the federally imposed carbon tax. I have heard that only a couple days from now we are to hear whether the court challenge from Saskatchewan will prevail. The resiliency plan in Saskatchewan actually demonstrates how we can lower greenhouse gases and how we are actually doing it now.
We need to give the oil industry some credit because they have made a lot of changes. They have actually become more efficient. They have reduced and in some cases eliminated all the risky flare gases. They have actually incorporated it back into their production system to be able to dispose of that safely I do not believe they have been given much credit for that.
If we really wanted to talk about greenhouse gas emissions, and we actually talked about this when we talked about Bill C-49, we know what we have to do to reduce greenhouse gas emissions. We need to get the grain, potash and lumber products that we export on the rails. That actually lowers greenhouse gas emissions, compared to trucks on the highways and especially the road damage we incur in this province and across the country.
That’s one step, but the second step is to put the oil in the pipeline. That reduces greenhouse gas emissions when you take it off the rails and from the railcars. To put in a pipeline is much more efficient. The oil industry can prove that they will reduce greenhouse gas emissions if they simply have access to tidewater. They need more access to tidewater than they have now.
That is something we are cognizant of. We are concerned about greenhouse gas emissions. We can see that there’s climate change. We feel we are being a bit discriminated against in Western Canada because we are having to put all these products either on a truck or a railcar, in the case of oil. That does not make sense. We should be doing a better job of reducing greenhouse gas emissions.
Senator Neufeld: I was looking for some statistics, but there’s talk about climate change all the time. Maybe you will agree with me; maybe you won’t. All indications are that we will continue to use more oil in the world until 2050, before oil drops off and natural gas continues to rise.
If Canada were to eliminate all greenhouse gases from oil and gas production, I do not think it would change the weather or climate change. In fact it wouldn’t because we are only 1.5 per cent of the problem. It wouldn’t change climate change one iota. In fact it might get worse because we would then have to import all of our oil and all of our natural gas so that we could use it for what we need it. We will continue to use it. Canadians aren’t going to actually say some day, “Hey, we don’t need any oil and gas.”
If you look at transportation in Canada, it is the largest emitter of greenhouse gases as we speak. Even if you did away with all transportation across Canada tomorrow, you still wouldn’t meet the Paris Agreement. Do you agree with me a bit on that? People forget that we use it every day. It’s not just for powering our cars; it’s for a whole bunch of other things.
Mr. Orb: It is important to our country. I know in the agriculture sector there is a lot of fuel consumption and a lot of energy consumption. We also need to realize that we should be taking credit in Saskatchewan because of our farming practices and zero-till farming in particular. We calculated that every year. Actually we were part of a study. We funded a study with the Saskatchewan Soil Conservation Association, and we can now prove now that we are conserving and sequestering more carbon. Every time farmers in this province seed a crop, it’s equivalent to taking all the cars off the road in the city of Toronto every year. Instead of penalizing people in Saskatchewan, we should be giving them credit for this. We have mentioned this to Federal Minister Bibeau. It has even gone as far as the Office of the Prime Minister.
We see this 1.5 per cent or 1.6 per cent for which Canada is accountable worldwide, but we do not see the countries around the world like China or India adhering to any of the environmental rules. We are being discriminated against. We know we can do a better job as far as greenhouse gas emissions. We know we can be more efficient. At the same time we should look at not ruining our economy by being able to prove that we are the poster boy across the world, so to speak, as far as gas mitigation. We need to have a national conversation about this. That’s where we should go with this.
The Chair: It’s amazing we have to have a conversation about a product that prevents us from being in the 19th century, but it seems that we are. Thanks you very much, Mr. Orb.
For the second panel I am pleased to welcome from the City of Lloydminster, Mayor Gerald Aalbers; from the city of Swift Current, Mayor Denis Perrault; and from the town of Kindersley, Mayor Rod Perkins and Councillor Gary Becker. Thank you, gentlemen, for being with us today.
We will now hear from our witnesses, starting with Mr. Aalbers from the city of Lloydminster, our border town.
Gerald S. Aalbers, Mayor, City of Lloydminster: I am the mayor of Canada’s only bi-provincial city, Lloydminster, Saskatchewan and Alberta. It is my honour to speak to you on Bill C-48, this critically important issue that impacts the livelihoods of many Canadians families. As most of you know, Lloydminster is situated in the heart of heavy oil production in Canada. However, today, I am here also as a member of the Alberta Urban Municipalities Association and the sister organization in Saskatchewan, SUMA.
Lloydminster and all members of the Coalition of Canadian Municipalities for Energy Action are reeling from the devastating impact of this perfect storm of financial challenges. As an industry we have experienced the effect of low crude prices, differential challenges, a lack of pipeline capability and now, with Bill C-48, a potential ban on the opportunity to ship our oil to new markets.
As mayor, I have the privilege of representing a community that is proud of its petroleum and agriculture roots. In the past 30 years we have doubled in population all because of the economic growth and spinoffs of oil and gas production and agriculture. Whether our economy is allowed to flourish again and to grow into the future is left in your capable hands as you consider Bill C-48 and Bill C-69.
To provide you with some important context. I would like to share a few alarming statistics from Lloydminster and the surrounding area. Currently there are over 720 homes listed for sale, which represents 7 per cent of our total home numbers. Not so long ago we used to use a lottery system for the sale of new lots. Today there are 169 vacant lots waiting for development. Commercial and industrial vacancies have also skyrocketed. Many companies have had numerous rounds of layoffs.
Before I was elected mayor I worked in the oil and gas industry for 25 years in Saskatchewan, Alberta and British Columbia. I have seen hard times, and yet there is an incredible resiliency among those who work in this field. Right now they are struggling to make ends meet and in some cases they are failing. To be frank, I cannot recall a more difficult stretch for the oil and gas industry.
These adversities are not only being experienced in Lloydminster. It’s happening on both sides of the border in cities, towns and villages. The municipality of Lac la Biche in northern Alberta shared with me that they have lost 22 per cent of their population. Everywhere we look there’s an ominous lack of confidence reverberating through an industry that has long been the backbone of our provinces and a necessary contributor to the employment across Canada.
This past Monday I was flying back from Halifax to Edmonton. I met two brothers in their late fifties headed to work. They were from Cape Breton, making their way to Fort Mac. They shared that they had been working in Alberta for 17 years. Bill C-48 proposes to ban only Canadian tanker traffic along the North Coast of British Columbia. One would have to reason that Parliament feels that the North Coast of B.C. is more valuable than the South Coast. Incredibly, it seems it’s even more valuable than the East Coast of Canada and its many provinces and ports. Yet, the North Coast of B.C. will continue to see oil tankers from Alaska bound for refineries in California and then the return traffic of refined petroleum products via oil tankers back to Alaska.
Bill C-48 is a discriminatory bill as it would not stop international tanker traffic, but it would totally prevent and blockade Alberta and Saskatchewan efforts to get ethically produced Canadian oil to tidewater to emerging and existing markets. This creates a double standard, given that the current federal government supports the liquid natural gas industry. It allows and encourages oil tanker traffic from around the world to travel the St. Lawrence Seaway.
A National Energy Board publication released in April 2018 revealed that Canada’s largest refinery, located in Saint John, New Brunswick, almost exclusively relies on imported crude oil delivered by oil tankers. This shows that we are a country that believes that oil transported by tanker is not a serious risk to the environment. An ecologically safe and sustaining environmental approach is possible to protect our seaways and their fragile ports. A disturbing point presented in the publication was that in 2017 New Brunswick received over 40 per cent of its important crude from Saudi Arabia. Saudi Arabia has been in the forefront of the news for its poor treatment of those who are detained.
NBC News published an article on March 7, 2019, which highlighted that 36 countries are concerned about the human rights violations occurring within Saudi Arabia. This brings me to question why we are not using ethical Canadian oil that is produced while protecting the environment and while abiding by the highest industry safety standards in the world. Why are we allowing tanker traffic with Saudi Arabian oil but refusing to allow Canadian oil to reach tidewater?
Honourable senators, you have an important choice to make. You can choose to support Bill C-48, which seems to be only concerned about stopping Canadian oil and Canadian oil tankers on the West Coast, or you can choose to stand with the proud men and women of the Canadian workforce to help reignite our economy by saying “no” to Bill C-48.
Thank you, Mr. Chairman.
Denis Perrault, Mayor, City of Swift Current: Thank you for choosing to come to Saskatchewan to see how Bill C-48 will affect all of us. I know it’s not common for senators or for committee members to be travelling to hear how bills could possibly be changing all of Canada. I am very appreciative that you have opened yourselves up to that. It’s an honour to represent the city of Swift Current and to join my fellow Saskatchewan mayors who are representing their communities here today.
First, to give you a brief background, Swift Current is the sixth largest city in Saskatchewan with a population of approximately 18,500 residents, and growing. We are the economic, cultural and recreational hub of southwest Saskatchewan. We serve an immediate market of 55,000 people. We are located 240 kilometres west of here on Highway 1 and we intersect on Highway 4.
We are fortunate to have a very diverse economy bolstered by sectors such as energy, natural resources, agriculture and manufacturing. Much like the province as a whole, oil and gas play a huge role in our local economy. Much like you have heard, and no doubt will continue to hear from communities across the West, Bill C-48, if passed, will have a significant negative impact on the city of Swift Current and all of southwest Saskatchewan. Swift Current and the southwest have an estimated reserve of 2.7 trillion cubic feet, which opens up significant opportunities in our region beyond exploration and extraction to things like processing, refining, research and development.
An estimated 85 per cent of southwest Saskatchewan’s 30 million barrels remain in the ground, offering all of us a prime opportunity for enhanced oil recovery methods. These opportunities help position Swift Current as a highly sought-after community in which to live, to work and to invest, as evidenced by the unprecedented growth we have been experiencing over the past 10 years. However, Bill C-48 puts the opportunities we have in our region in jeopardy by putting an unnecessary burden on an entire industry, including an exceeding reliance on rail to transport our oil.
We agree with Government of Saskatchewan Minister Harrison when he stated before this committee in early April that there was no evidence to justify a tanker ban based on Canada’s exemplary history of oil tanker safety. We depend on energy sales and development. We need pipelines to the coast, and we need the capacity to ship it to other countries. We have one of the safest shipping regimes in the entire world. If we do this, we put ourselves at a complete disadvantage, as U.S. tankers will continue to come down through that exact area.
This is about punishing our energy sector and not about environmental protection, much as the carbon tax is a tax plan and not an environmental one. This area depends on exports. Our world wants everything below our ground and everything grown in our ground. We believe that oil and gas can be moved safely.
While we can put nearly two decades between now and the last time a significant incident involving a tanker in our waters occurred, the same can’t be said for rail safety. In fact, just around my community of Swift Current, we had two major rail incidents since January 1. In both cases, neither were oil but definitely could have been.
We also join the province in questioning the logic behind a coastal ban in Western Canada while no such ban exists in any other location in our country, as Mayor Gerald to my right shared with you before. Like our municipal brethren across Saskatchewan, Swift Current is invested in the growth of our natural resource industry. The natural resources found below us in Saskatchewan is wanted today and will be wanted in the future. They create local jobs and put food on the table for many of our families, both directly and indirectly. When oil and gas suffer, we all feel it. It is not just all of us here in the West, but all Canadians.
We are respectfully asking Canada and our sober second thought Senate to help our oil make its way to tidewater any responsible and safe that way it can. Sending it south at a discount, which is what we’ve been doing in the past, is plain wrong. What this means is pipelines. It means getting our oil not just to south B.C. but also to the north. It took decades for Saskatchewan to become a have province, and members in this room have the power today and in the future to help us stay as a have province.
I am here today to proudly stand behind oil and gas in our region and in our province, to stand alongside Saskatchewan’s municipalities and the province as a whole, and to respectfully ask all of you to please say “no” to Bill C-48.
Rod Perkins, Mayor, Town of Kindersley: I would certainly like to thank the senators for taking the time to come out here to hear our concerns. That’s very important and much appreciated.
First, I am the mayor of probably the largest town in Saskatchewan with 5,000 people. We are right in the middle of the oil field. We have oil every way around us 30 to 50 kilometres. We have pipelines two major pipelines within 30 kilometres of us, but you wouldn’t know it. They are buried. There are no problems whatsoever. We have feeder pipelines and flowlines going all over these oil fields, and no issues. To me, trucking or rail makes absolutely no economic sense and obviously increases the carbon footprint.
Second, having the U.S. as our major customer is pretty scary. Let’s think Donald Trump here for a minute, and we can see what we have had to deal with. To our minds, Energy East and Trans Mountain would give us the opportunity to go both east and west to sell to the world. Whether or not we like it, our Canadian dollar is a petrodollar. Many economists will say that it’s based on the oil price in a lot of instances.
I am very fortunate around my council table because I have an oilman with 20 years’ experience in it. I am going to turn it over to him because he can tell you first hand exactly what it has done.
Gary Becker, Councillor, Town of Kindersley: I would like to thank the Senate Committee for allowing me to speak with regard to this Bill C-48. Looking at the diverse group of speakers from both sides gives me faith to see democracy is alive and well in Canada.
My opinion of this bill is that it will do more harm to Western Canadian oil and gas, while holding a double standard and allowing imported oil to come in on Canada’s East Coast unabated. This bill is one of many aimed at land-locking Western Canadian oil.
Being on a small ag town council is my part-time job. My full-time occupation is owner and operator of a small independent oil company called Longhorn Oil & Gas. Longhorn currently employs 25 people in the west central Saskatchewan region. It is an oil company which produces approximately 1,400 barrels a day oil in U.S. measurement, 220 cubed metres a day in metric measurement and 220,000 a day in media measurement. As a small independent hands-on company, I believe I can give on the ground advice with regard to oil.
I would like to share a bit of my history and my upbringing because I believe they are relevant to this conversation. My background is being from a mixed farm in the Kindersley area. It was more out of accident and necessity that a person got into the oil business. The late 1980s and early 1990s were brutal times in the ag sector. Drought, low prices and relatively high debt loads accumulated to form a macro crisis throughout Saskatchewan. The feeling in ag back then was one of hopelessness with not much future. This reminds me of the exact mood in the oil and gas space today. The only difference is that government back then was trying to mitigate the hurt from the crisis, where today it feels government is the cause of the hurt.
My father was one of many farmers who was also in financial trouble. Through a Hail Mary move he bought some marginal wells on his land. It paid off. Although it was a relatively meager cash flow, it was enough to keep the family farm going through the tough times. Seeing what oil could do for cash flow, but being a farmer at heart, I attended a petroleum technologist course at SAIT in Calgary after graduating from high school.
After college I worked throughout Alberta in the oil at the same time as I farmed back in Saskatchewan. A familiar routine for many of my peers in that era was to work in the oil to subsidize the farm. This routine has not changed. As today four of my employees work full time for me while farming full time as well. In my opinion, the oil and gas industry is a major backbone to the Western Canadian economy. We in Canada are blessed to have been given a resource millions of years ago that has greatly lifted the living standard of all Canadians in the last few decades. It’s sad to see how oil has been vilified in the last decade through misinformation and propaganda campaigns. Oil, in its pure form, is actually a nutrient. Many old-timers I used to work with shared stories of how much better stuff grew where there were oil spills. The problem is the saltwater produced with the oil, not the oil itself.
I would like to share a story of my first-hand experience with an event that happened about 10 years ago. The landowner’s son was leasing a fresh source well on my property to provide water for the service side of the oil industry. The landowner is well known in the area and has a reputation with oil companies of being hostile and hard to deal with. The freshwater tanks on his land, filled from my source well, overflowed one night when someone forgot to turn off the well. There should have been no oil in the tanks being that it was a fresh well, but somehow over time a skim of oil had accumulated.
The night the tanks went over it was very windy. We estimated that about 3 to 5 cubed metres or 3,000 to 5,000 litres of oil covered an area of a hectare and a half. The landowner’s son did not want to pay for the cleanup. It would have cost $20,000 to $30,000 for dirt removal and replacement. This surprised me. If it was my fault, I would have had to clean the oil up ASAP and compensate until the land was back to original. I said fine because it was their land. This incident happened around the time of year when the grass was just starting to grow. It was about this time of year 10 years ago. As we monitored the area, to our surprise the area covered in oil was turning lusher and greener than the area not covered in oil. By July of that year the grass in the oiled area was a full foot higher and almost all traces of oil had disappeared entirely. Within a year there was no trace of any oil and the affected area was still lusher.
Having a tanker ban and limiting the access of Canadian producers to market will have monetary consequences to all Canadians through lower royalties to government. As a small marginal producer, I pay about 5 per cent of gross oil sales in royalties. Last fall, when the pipelines were full to the United States, I actually received negative pricing for my product. On the back of that handout, there was an oil statement from my marketer that shows the negative pricing I received. Instead of paying the typical $100,000 a month in royalties, I paid about $10,000 in December. Putting this in perspective with Canada producing about 3.5 million barrels a day, I estimate over $1.5 billion was lost in royalties alone in December.
It was also a shame giving all the cheap oil we produced for the U.S. when we should have been sending it to our peers in the eastern provinces. Some oil is making its way to the Eastern Canadian refineries by train, but we need a pipeline to get a significant amount of crude there, a.k.a. Energy East. I never understood the logic of Eastern Canada a buying high-priced Brent crude from unfriendly foreign governments when cheap Canadian crude is on their doorsteps. It just doesn’t make sense.
Not having access to markets has actually increased my company’s carbon footprint. As Enbridge mainlines have neared capacity limits, deep discounts for crude have been applied to crude with no other sales point. In the past year, over 50 per cent of my crude has been marketed to sales points far distances from where I normally sell my oil. The average truck ride at the local market is a 1.5-hour round trip, where my new sales point is a 15-hour round trip. There is nothing good about having to sell oil this way. It is a danger to travellers on the highway, hard on the provincial infrastructure and certainly increases CO2 emissions. I believe many other companies are doing similar marketing strategies. As the months where the price arbitrage is high, I see a lot of Super Bs throughout Saskatchewan hauling crude. This was never even considered until several years ago when the mainline logistics got out of whack.
I would like to thank the Senate Committee for allowing me to express my point of view regarding the negative consequences of Bill C-48. I would love to answer any questions and give the perspective of a small producer/farmer from Saskatchewan.
Senator Busson: I was very interested in all the conversations you were having with us about how the oil industry has added to the prosperity of your communities. Generally, it has increased the ability for Saskatchewan to be on the right side of the equation as far as the have and have-not provinces of this country. It reminded me that not only is Saskatchewan benefiting, but Canada generally is benefiting from our ability to facilitate the oil industry.
I come from British Columbia where there’s a diversity of opinions around pipelines, as you might see on the news, and the tanker ban specifically on the West Coast. I am not putting words in your mouths, but each of your communities has found a win-win balance. You talked about some of the risks of tanker cars and some of the issues around pipelines.
What would you say to the people in communities of your size in Prince Rupert and in Terrace and in the other communities in British Columbia where they are looking at pipeline and oil tanker traffic? What would you say to them about their issues and their concerns about trying to get their heads around their communities and what this would do to their communities?
Mr. Aalbers: I believe I can start this question and then I will let each of my fellow panellists comment.
I am an environmentalist at heart. I grew up on a farm in southeast Saskatchewan. My dad cared a great deal about any land. He came from Europe in 1948 as a war child. My grandfather brought his entire family over. He worked in the oil industry for 25 years before I got into the industry and had a lot of respect for the environment. We are environmentalists. We believe if there is an issue we will clean it up, but if we do it right the first time there shouldn’t be an issue.
Pipelines are constructed today to incredible specifications and requirements. I can tell you about some of the issues occasionally encountered by a former company I worked for 50 years ago. The technology today is incredible to ensure that pipelines are as safe as the day they were built. The technology is pigging. It’s called smart pig. A computer goes down the line and detects any error or fault. The chemical treatment to ensure corrosion on the outside is limited is kept in check. From the perspective of tankers, the technology is no different from what we started with. If we go back 25 years in the history of a cellphone to the technology we have today, there were improvements in the technology all the way along with double-hulled tankers, the proposal of tugs and remediation if the worst case scenario happened. It takes all players to come to the table. It takes the federal government to ensure that the proper protocols are followed. It takes ensuring that every tanker entering Canadian waters meets our requirements. Otherwise they do not come in from international waters. We make sure the tugs, the rescue, the buoys and all that equipment are there.
I have talked to people on Vancouver Island. We have family there that belong to the Canadian Coast Guard. They are saying the federal government has not delivered on the spill response equipment yet. That’s why people are concerned, and I would be too. If you have a promise from the federal government to deliver and to make it safe but the materials do not show up, who is to blame? We are being penalized because the federal government is saying on one side that they will do it. I appreciate they want to do it, but do it. If they do not do it, it will not happen. By the same token, they are saying that they can’t have tanker traffic.
I encourage people in Terrace and Kitimat, when they pick up a cellphone, to ask where that plastic came from. It came from natural gas. When they fuel up, ask them where that gasoline came from. It’s safely produced and transported today. Is railcar the best answer? No. Is transport truck? No, but we have no choice. Because of the finished product, have to have transport trucks.
If we look around, everything comes from hydrocarbons such pens and paper. The forestry industry does not use mules anymore to carry lumber. They use hydrocarbon as an energy source. If we look at the big picture, there is always the potential. There’s a potential that tomorrow we could have a world war. I hope that doesn’t happen, but I believe we have put the safeguards in place. Again, it moved to the federal government because if the safeguards are not being enforced at a federal level through Fisheries and Oceans, the Coast Guard and all the pieces they talked about, I would be concerned too. If all those safeguards are put in place, we believe it will work.
Mr. Becker: I would like to say that they have a 60-year-old pipeline and they are worried about issues. I have to replace my infrastructure when it gets old. Wouldn’t you feel safer with having a new state-of-the-art pipeline going through rather than one that’s near the end of its life? That’s my opinion.
The Chair: You are talking about Kinder Morgan, right?
Mr. Becker: It is Trans Mountain, that old line.
Senator MacDonald: I see the mayor of Swift Current is here. I want to put on the record that for my first full-time job out of university I went to Ottawa and got a job with Frank Hamilton, then Member of Parliament for Swift Current—Maple Creek. He has passed away. He was a wonderful gentleman. He was a war veteran and a fighter pilot. For a young guy from Nova Scotia who loved politics, he was a great guy to start out with. He was my first portal to Saskatchewan.
I have a question for you, Mr. Becker. I certainly appreciate your discussion here. You talked about our having a petro dollar, and we do. The Canadian dollar is a petro dollar tied to the price of world oil, but we have a 75-cent dollar. I remember in 2006 or so that it was almost up to $1.09 U.S. With a 75-cent dollar we should be kicking the hell out of the Americans when it comes to production of oil because most of the money should be flooding this way. However, it’s all flooding in the other direction. All the investment money and all the experienced people are starting to go the other way.
I am curious. You were saying how many people work for you. How many people did work for you? Have you seen a reduction in the people that work for you and in the people around you who work for other companies?
Mr. Becker: In December, I had to make the tough decision. I guess it would be 10 per cent of my workforce. I let two people go who directly worked for me. As a producer you have the service side but with less activity you use fewer people. Kindersley has been a bit different because they found new oil. We haven’t been as hard hit as Lloydminster. Lloyd has heavy oil and Kindersley has a light oil, so it has been a little more steady.
Kindersley hasn’t felt the pain as bad as a lot of areas, but know that Play is starting to peter off. We have all tightened our belts. For a lot of companies there has not been much profit margin and less money to the community. On marketing oil, a guy actually received negative pricing in December for some of his oil to the Americans, like negative. Most of my oil goes down the Enbridge mainline, as does most of the oil. It was something to see. I do not want to see that ever again. I was talking to an oil marketer. Oil sells in 10,000-cube batches. That’s what the refiners buy it in. He said that in December he sold a 10,000-cube batch and he got 48 cents a barrel. For the equivalent, the big batch of oil was $33,000. The price of oil came up today. It’s actually a decent price again. The Canadian differential on Western Canadian Select has narrowed, but I think the same batch that sold for $33,000 would be worth $6 million as of today, right now. There was some huge wealth transfer.
I believe for Canada it is about 4.5 million because we export 3.5 million barrels a day and we use a million internally. It’s something to see.
Senator MacDonald: As a Nova Scotian, one of my long-standing complaints in this country is the overall management of transportation infrastructure. They block pipelines or ostensibly block pipelines that come under the purview of the federal government. The federal government has the authority to put these pipelines through, but nothing can stop anybody from shipping all the oil they want on truck or on train. You can just send it all through. In a place like Nova Scotia, and I will use this has an example, it’s not necessarily oil but the way we manage infrastructure. They bring all kinds of stuff by rail to Moncton. Then they will put it on truck and send it to the Newfoundland ferry. They pound the hell out of the highways, and they are running right along a railroad that was abandoned by CN. This is the way they do things in this country, and it’s all coming out of the centre.
The decision to abandon that railway came from Montreal, and nobody challenged it. This is another example. I am curious. In Nova Scotia, we do not move a lot of oil by truck. We do not move any heavy oil in the province because all the heavy oil goes to Quebec. It goes to New Brunswick through our water. We get no benefit but we take all the risk.
In this province, since you do not have water, I am assuming from what you are saying that you send a lot of oil by truck. How much damage is that doing to the highways of this province?
Mr. Perkins: There is significant damage. You can see it on the highways in and around our area. They get beat up on a daily basis. We are not talking little trucks here. We are talking Super Bs that are 50 feet long? The highways are busy. We do not have a double-lane highway heading from us east or west.
Senator MacDonald: It is extremely dangerous for the travelling public.
Mr. Perkins: It’s just not economical either.
Senator MacDonald: I have had this discussion with provincial engineers in the department of highways in Nova Scotia for years. They have made very clear to me that if we got our heavy trucks off the highway, the highways would last 100 years. They said that cars don’t beat up highways. It’s heavy trucks that are beating up highways. The more heavy material you can put in a pipeline and get off the highways, you are going to save literally billions of dollars in infrastructure costs over the period of a generation. These are all arguments that should be put forward.
I want to put on the record that I have been around politics my whole life, both provincially and federally. I have been in the Senate now for 10 years. This is one of the most ridiculous bills, maybe the most ridiculous bill I have ever seen in my life. I will definitely not be supporting this bill.
Senator Gagné: I will be asking the same question I asked of Mr. Hopkins in the first panel. I believe that pipelines are probably the safest way to transport oil. I would like to discuss capacity. The question I asked the other panellist was about the decision to invest in the Trans Mountain. It’s a public policy to concentrate the flow of oil in southern B.C. and protect, on the other hand, the western coast of B.C.
With the Enbridge mainline, Line 3, the Keystone XL and Trans Mountain, we will be increasing the capacity of flow of oil. Would that capacity be sufficient to bring us to 2040 in the transportation of oil? I would like to have your comments on that.
Mr. Perrault: I will do my best. I humbly share that I am not an engineer. I am an accountant by trade. I can’t look to the future that far, but I can suggest that what we have currently is not working at all. The lines that you have suggested definitely make sense. They make far more sense to move our product, the product of all of Canada, east or west.
Thank you, Senator MacDonald, for sharing your concern for our infrastructure. Our roads have been desperately beat up by our trucks. Our rail is taking a real beating as well, to the point that it has now become dangerous to transport oil by rail. We need our other products to be able to get to market, such as agriculture that I am sure you heard the SARM representative mention earlier today. When you talk capacity, these pipelines definitely help with that. Specifically, with regard to Bill C-48, t’s a matter of getting it on the tanker and getting it to the absolute market.
You heard from my panellist to the left about the 15-hour return trip for him to get his product to market. That is absolutely ridiculous. If we believe that Bill C-48 is purely there for environmental reasons, that doesn’t make any sense to me. It costs not only money. It costs petro carbon and it costs the environment for us to be repairing our highways every year. It’s springtime right now, so we have potholes across our province. We have more paved road than most of the other provinces in Canada, specifically because we are quite rural with just over a million people in a very wide land mass. We are always looking for ways to transport, and pipeline absolutely makes sense.
To answer your question, I believe it will definitely help. Looking past 2040, I hope our country is absolutely thriving by that point, we are seeing record population growth, and we are looking at even other avenues to be able to get our product to market.
Mr. Aalbers: I will give my expertise and leave it to the other panellists to finish it off.
Our current pipeline system starts in most cases in Hardisty, Alberta, and leads south and southeast from there. It reaches Illinois. It reaches Chicago. Then it goes on to Cushing, Oklahoma, the hub. Basically we have one market. That’s basically what Canada has. That market purchaser, the United States of America, controls the price that we receive. Even though the price can be $100 a barrel, it was less than that and we were receiving below because of the differential in our heavy oil.
In the world market, my understanding is that we should be $10 a barrel less than West Texas Intermediate on the average day because they will buy it from Venezuela, Mexico or Brazil. Every refinery built in the United States of America requires our heavy oil or the Western Canadian Select. Refineries have been set up. West Texas Intermediate is great oil, but you do not get greases and you do not get lubricants. You don’t create asphalt or the heavy C atoms of the carbon chain from that oil. They have to take a blend of our oil, but when you have one customer they basically dictate the price.
We can talk about what is happening to canola in China right now. The price of canola is dropping as we watch it every day because a major market is disappearing. The important part about capacity is that capacity did not follow production and production will continue to grow. We are 15 per cent of the primary recovery today when the oil well was drilled. That is the primary recovery methodology of an oil well. That’s all we are getting, but there’s a lot more oil there. The technology has improved dramatically.
I will go back to my dad again. When the Bakken started to show up in the early 1990s, he said, “Son, it was there in the 1950s and 1960s, but we couldn’t produce it.” Every time they tried to develop a well, the well collapsed or caved in. Then come along multiple fracking, and what do we have today? It has also affected Texas. The Texas output has tripled. North Dakota went from 350,000 barrels to over a million barrels a day.
Capacity needs to continue to grow. It’s like automotive manufacturing. If you do not continue to increase it and the market demand is there, that’s where you fail. What happened was that we missed the mark. Production grew in the oil sands and in heavy oil around Lloydminster and Kindersley, Bakken Play, the fields that were developed in Duvernay, Alberta and B.C. We didn’t keep putting pipes in the ground. Then, all of a sudden it got stalled and it got stalled, and production finally reached a point where we had given away our oil.
I would like to remind the committee and the Government of Canada that oil is only taxed once. Whatever the wellhead price is that the producer gets, that’s what he pays in taxes to the federal and provincial governments. If that’s minus 48 cents a barrel, that’s what the Government of Canada and the taxpayers of this country get for our natural resource. Yet, if we are selling it for $70 or $80 a barrel, the taxes are incredible that feed every Canadian and subsidize health care and education. The list goes on.
Our federal government runs on taxes. It is either income that we are not paying if we are not working or corporate tax or revenue tax from oil and gas. It paved the roads of Saskatchewan and Alberta. It built the hospitals. It built the schools. Without it, we will not see that continue.
Mr. Becker: Canada has huge reserves in Fort Mac. If you build it, they will come. I think you could build all three pipelines, and probably within 15 years, if you had a country that was open and wanted its resources developed, you would be at capacity. I think West Texas Permian went from a million barrels a day to five million barrels. Even in Canada our pipelines are at capacity because we have increased by a million or two barrels in the last 10 years.
They will build that temporary pipeline and it will suffice for 10 years, but we have reserves in the ground of a few million barrels more a day. The choice is whether Canada wants to develop the resource or not. That’s basically the question. Do we as Canada want to develop our oil and gas or leave them in the ground? I mean that’s up to us as a country to decide. Obviously we know the opinion in half of the West. Yes, that is my opinion.
Senator Neufeld: I thank all of you, but thank you very much for your last answer, Mr. Aalbers, because I think it clarified a lot of things for a lot of people.
There were questions about talking to the people on the West Coast. Have you thought about going to the West Coast, to Prince Rupert and to the northern part of the province to talk to those communities as a group and explain the tough things that are happening so that you might work with them a little bit?
I come from British Columbia and I am not in favour of this bill, just so you understand that. The only pipeline on the north coast is a small natural gas pipeline. They have never experienced oil. They just haven’t. It’s easier for me where I live in Fort St. John. We have had oil and gas for decades. It’s easier for you folks for the same reason. The public understands it a bit more. When you go to the north coast, I have always found that not everyone is opposed. Quite a few are, but it is because they have never experienced it. They have never had it in their backyards. I think you can probably understand a bit that they would be a little fearful of it.
It would be good if communities from Saskatchewan and Alberta started visiting back and forth with those people on the north coast to explain what you know, what your problems, what happens in your communities, how much devastation is going on, how people aren’t employed and how your house prices are dropping. Those kinds of things may help it a bit.
In the end, we have to look seriously at northern B.C. to export from Prince Rupert. It’s a great port. It’s a deep-water port straight out to ocean. It is not like the tankers that come into Vancouver, around the bottom part of Vancouver Island and through the Juan de Fuca Strait, which is congested now as we speak. It will be congested later on. Prince Rupert is a growing port for all kinds of things and even a lot of other stuff from Saskatchewan.
I would like to know if you think that would be worthwhile. Have you thought about doing it? Is there some help that we can give, or I can give, to organize some of trips and develop a familiarity with what happens in the oil and gas industries in the rest of the country?
The Chair: The Port of Vancouver is congested because they are shipping out all that coal, which is a very clean fuel, to the rest of the world.
Mr. Aalbers: Absolutely some coal.
The Chair: Yes, exactly.
Mr. Aalbers: There is even a bit of sulphur that we produce.
The Chair: There’s a lot of irony in all of that.
Mr. Aalbers: I will take a shot at it. I would certainly be honoured and privileged to make that trip. I am sure some of the other mayors of Saskatchewan and Alberta would be more than glad to come out to speak to those folks.
I can tell you that Ray Orb, president of SARM, mentioned earlier that FCM, The Federation of Canadian Municipalities, is an avenue that we feel is very important. The municipal leaders across Canada from coast to coast to coast, from the territories down, will be gathering in Quebec City to discuss the Canadian Resource Coalition. This coalition of communities that support agriculture, forestry, mining and energy development, all key factors to this country, will explain how important each one of them is to each part of the country. They have relevance and are interconnected all the way through. Without agriculture, none of us would eat. Without forestry, none of us would likely have a home in most cases. Without mining, we would not enjoy everything from the iron, aluminum and steel in the vehicle we drive, to the oil and gas energy sources for those vehicles and to all those other industries.
We want to carry a message at the municipal level. As you can appreciate, every municipal leader at this table is a non-affiliated politician. We get elected by the people on the belief that we will lead them and our communities to the best of our ability for our individual communities. We have no political ties. From mayor to mayor, from councillor to councillor and from mayor to councillor, we are planning on having those discussions in Quebec City.
To go back to your original question, I would certainly accept your offer. We can reach out afterward to make contact. If that opportunity arose, I would certainly be favourable to it. I would travel on my own nickel because it is important to my family and me. My family has been fed from the oil and gas industry for 25 years. I am very proud of that. I am proud of my agricultural roots. By the same token, I do not want to put any more stress on our taxpayers than they already have today.
Mr. Perrault: We have had some real strong advocates in the West with very good and reasonable voices, such as a former politician from Swift Current, Saskatchewan, our former premier Brad Wall, and Brett Wilson, the illustrious dragon. We also have a new premier to our west with Jason Kenney and our premier here, Premier Moe. They have been very strong voices. They have tried to get the message across. We are hopeful that it can get past the borders of Saskatchewan and Alberta to the east toward Ottawa and to the west toward B.C.
Along with Mayor Aalbers, I would be more than happy to go and speak in places like Kitimat and Terrace. We could share what has impacted us, some safety issues and some concerns over rail and transport. I do not think they are getting the whole story. We all have some biased media. We look at very different news here in Saskatchewan than what they get the privilege of seeing. I would be more than happy to do that also on my own nickel. Senator Neufeld, I would be more than happy to work together with you to do that. Thank you for that opportunity.
Mr. Perkins: I too would do exactly that. It was kind of funny this winter when I was on vacation. I was talking to a guy who was new to our condo complex. I introduced myself and we started talking. He said, “I am from Vancouver.” I said, “You may not like me that much then because I am the guy that wants pipelines built out there.” He looked at me and said, “You know what, Rod. Three-quarters of us understand totally. The vocal 25 per cent are raising all the concerns.”
I have a deep concern that a lot of this is funded. I know it’s funded. It’s pretty ironic when you have The Rockefeller Foundation, which made all its money in oil in the U.S.A., funding groups to protest pipelines so that we can keep that oil heading south at discounted prices, rather than east or west where we might get world price. I would certainly, again on my own nickel, be more than happy to go out and meet with any of the leaders of those communities.
The Chair: The Kinder Morgan discussion that we had in the Senate in February of last year was interesting. I can’t believe it was so long ago. Even though the Government of British Columbia was fighting the pipeline and there were all those demonstrations, the Province of British Columbia in every poll we saw and studied was solidly in favour of building that pipeline. Even in the city of Burnaby and in the city of Vancouver the numbers were favourable to building the pipeline.
I do not know who’s wagging whose tail here, but there’s obviously something dreadfully wrong when politicians aren’t listening to their people in their own backyard.
Mr. Perkins: Yes, I totally agree.
Senator Neufeld: What is dreadfully wrong is that we have the wrong government.
The Chair: That’s part of it, but that will change, we hope.
Senator Smith: One of the subjects that I think you could participate in as leaders of your communities with the folks out in B.C. would be the diversification concept. Canada is a trading nation. We do not have the population, but we have great personalities as Canadians. On this whole concept of diversification, I spent 10 years of my life in the agri-food business. We used to travel over to Asia. It took us 10 years to do business with Japan and some of the other Asian cultures because the people are hesitant to build trust. Do you know what? Canadians are trustful people. It’s a strength but it’s a weakness, as the Americans have used us for the last 10 years and taken away our business by having a single-source supplier. To be able to go over to Asia means giving us opportunities to diversify our base of clients. I think you folks could play a big role in reinforcing that message. I have not heard a lot about diversification, diversifying your customer base.
I worked with Ogilvie Flour Mills, which was part of John Labatt. The reason that we outsold the Americans was that we had different values. We were more polite and people trusted us. It took us from six years to eight years to get the trust. I am astonished to see that we are so gullible. We accept that we are to send our oil down to the States. We accept that we are to continue selling at discounted prices. We need leaders like you folks to talk about pipelines, building capacity and diversification, and to sell that message to people to give opportunity and hope to Canadians.
I am just wondering what your thoughts are.
Mr. Perrault: When you talk about diversification, I think everyone around this table can hopefully see that we need to get our products to market. It’s not outside of our country that we need to convince. It’s unfortunately all of us as Canadians. If we are truly trusting of one another, I am hopeful that we can get to the point where we can have those conversations, again directly to the west on the corridor of B.C. and to the east in Ottawa.
I am hopeful that you as senators can share your sober second thought and your voice in the Red Chamber. We are trying very hard, through our provincial politicians and our federal leaders, to get that message out. I like your strategy and the strategy shared by Senator Neufeld to bring that message to municipal leaders and to be able to convince them.
Our customers to the south are more than happy to buy from us at a heavy discount. It would be great if we could get it going east and west at a fair price. I definitely take that to heart. All of us on this side of the table will be working hard and asking you to hopefully help us get that message out.
Thank you for sharing that with us. We are going to continue on.
Mr. Perkins: Certainly the end goal on any pipeline to the West Coast would be to diversify the customer bases in China, Japan or whatever. That is what you have to do. India has the largest population. We are getting a lot of them in our own country too. Maybe it doesn’t even hurt that much to have that connection, but it is tough to diversify if we do not have that pipeline heading that way. You can’t do it. You can’t ship stuff by train out there. It takes too long.
If you have a pipeline, you turn the switch on and you go.
Mr. Aalbers: The market has already done that. If you look at the players left in the oil sands such as KNOC, Korea National Oil Company and the national oil company of China that formerly owned Nexen, they are waiting. The companies in this country are that next market. If you look at the companies that have left, the U.S. companies that have already pulled out because Asian companies and other companies have stayed, especially Asian companies. I think the opportunity is there.
I would like to leave the Senate with an item I found very interesting. It’s from an article in the Financial Post on February 26, 2018, titled, “How Canada’s high value resources are blockaded from the inside out.” I will give you a synopsis of the story. In 1973, during the oil embargo, a Greek tanker was loading from the Trans Mountain Pipeline in Burnaby, B.C. and hauling crude oil through the Panama Canal back to Eastern Canada a to feed refineries. The first officer asked the Greek captain, “Why would a country so beautiful and so big and so rich as Canada not just send it across in a pipeline?” The captain says, “It is not for us to question. We are in the business of hauling oil.”
I will leave you with that thought. I encourage you to take a look at that whole article. I gave you a very quick synopsis. That article really touched me because I was a young fellow in 1973 and I do not remember the oil embargo. I am sure some of you who have a little more experience than I do remember it. The point is that this issue has been an issue since 1973.
The Chair: It was the Jimmy Carter nightmare.
Mr. Aalbers: I am perplexed by where we are at.
The Chair: It was the end of oil. I remember the end of oil lineups.
Senator Gagné: You mentioned the foreign companies that are extracting oil in Canada. Who is refining the oil?
Mr. Aalbers: From my knowledge they are selling it in the open market because they can’t reach markets. They might be able to enter into the pipeline system, ship to the U.S. as the producer, pay the shipping fee and load in refinery alley all along the United States Gulf Coast.
I wanted to mention that we could be selling to a U.S. customer that is, in turn, loading Canadian heavy crude or Canadian Western Select on to a ship, selling it somewhere else and taking the complete difference in price. I believe producers would love to have the option of being able to take their own. I am familiar with Repsol, a Spanish company that brought Talisman Energy. They are looking at producing refined products in Canada, but they do not know where they are going to do it because there’s a limited supply of refinery capability.
Mr. Becker: Most of the oil we are shipping is going down to the Gulf Coast in Texas and that’s where it’s getting refined.
Senator Gagné: Why aren’t we refining our oil?
The Chair: We went through this, actually.
Mr. Aalbers: I would like to take a crack at that, if I may.
The Chair: Go ahead. I kind of know the answer to that.
Mr. Aalbers: There are a couple different pieces to this, from my understanding. First, we haven’t had a new refinery built in many, many years. Come By Chance, Newfoundland, was the last refinery built in Canada many years ago. Second, if gasoline were to come onto the market today, it would never make it through Environment Canada because of its toxicity and all the issues.
We are producing and refining as much oil as we can basically consume, other than British Columbia that is suffering a shortage because there’s no way to get finished product there as it is. Basically we need pipelines to sell gasoline. Gasoline has a shelf life of approximately six months at the very outset due to the additives and all those pieces. Diesel fuels have a little longer shelf life. The companies that are looking to run their own refineries in China and in India are looking for the raw product.
It’s no different from what we have gone through for 110 years on the Western Canadian plains growing wheat. We have not exported enough flour. We should have been grinding it and milling it and keeping every ingredient in Western Canada. It all got shipped to the east or to the west as a raw product. Sometimes it was processed. Otherwise we sold it as a raw commodity. If gasoline were in a different format, in my belief it might be a lot easier. The markets are looking for raw crude oil because they have the refining capabilities. The environmental laws of India and China are a tad different from what they are today in Canada.
Senator Smith: You go to where the population is. That is the reason you didn’t have more bakeries in Western Canada. McGavin’s is the biggest bakery. You had little bakeries because you didn’t have the population and everything moved east. I mean that’s what happened.
The Chair: “Don’t say bread, say McGavin’s.” With that, thank you very much, witnesses. It’s great to hear from the mayors, and we expect the next panel to be just as interesting.
For our third panel I am pleased to welcome from Fire Sky Energy Inc., John Breakey, Vice President Land; from Independent Well Servicing, Brian Crossman, Field Supervisor/Marketing; and from Valleyview Petroleums Ltd., Matthew Cugnet, President.
Thank you for being with us today. We will now hear from our witnesses, and we will start with Mr. Breakey.
John Breakey, Vice President Land, Fire Sky Energy Inc.: Mr. Chair and committee members, thank you for the opportunity to appear before you. I recognize the privilege that it is, and I hope that the message today will help stop this dangerous legislation.
I live and work in the Estevan area of southeastern Saskatchewan. It has a diverse economy. Energy, agriculture and oil are big parts of the energy industry in that part of the province. Often we take for granted what we have and forget to recognize how we got here. We are meeting in a nice facility in Regina, in this country of Canada, where we feel safe. Whatever we want or whatever we need is at our fingertips. How did we get here? It is because we are in this country of Canada. In years past we have had strong leadership and good direction that have given our economic engines the opportunity to grow and prosper. Through that economic prosperity the infrastructures in Canada and some of the programs we have learned to appreciate are commonplace now. We depend upon them.
Our oil industry has been a big part of that economic driver. The record of the oil industry in Canada is the envy of every oil-producing country in the world. Not only do we lead in technological advancements, but we also lead in environmental stewardship and safety. It didn’t just happen. Some 20 years ago we had a different looking industry. We have evolved to the point that we are at now. It’s only reasonable to assume that we will continue to evolve, and 20 years from now we can look back and say that we are doing a better job more efficiently.
Legislation like this bill that targets a specific industry, our industry, one of the country’s main economic drivers, is truly a threat to the survival of this industry. Every Canadian should be concerned because the very things we take for granted are in jeopardy.
What is the real purpose of this legislation? Better yet, what is the government trying to achieve? To me the message is clear and to any potential foreign investors in Canada the message is clear as well. Canada is not prepared to maintain or develop its economic engines. Canada is not open for business. Is that the message we want to send out there?
This is clearly an obstacle. If passed, the potential economic benefits of our industry, our country and our citizens will be sent to foreign nations. Canada is a very large and diverse nation with limited population. We need to respectfully work together for the good of all Canadians in all parts of the country. How can the government put through this legislation and expect that it is for the good of all Canadians?
Brian Crossman, Field Supervisor/Marketing, Independent Well Servicing Ltd.: I believe I speak for all my colleagues in the Western Canadian oil industry. I would like to thank the Senate Committee for the opportunity to testify on this very important issue. It’s moments like this one that I remember how blessed I am to be a Canadian.
Independent Well Servicing is a privately owned company based in Estevan that has been in business for 15 years. Our primary focus is working on oil wells in southeast Saskatchewan. We are 100 per cent invested in Canadian operations and have had as many as 68 people working in our team at peak times. Currently we have 42 employees. We were a people-focused company doing our best to provide safe high-paying careers for our people, with room for advancement. We achieve this by providing our teams with the very best, safest and well-maintained equipment. Independent Well Servicing has hired people from every province in Canada. Many of these people are female, First Nations, minorities, LGBT and new Canadians. We have a very diverse workforce in our company.
This is not just about the microcosm of a tanker ban on the northwest coast of British Columbia. This is about a much larger picture. Realistically we are in a carbon-based economy right now and for the foreseeable future. The entire world needs reasonably priced and ethically produced accessible energy to both maintain our Canadian standard of living and to raise the standard of living in the rest of the world. By not allowing Canadians the opportunity to sell our products to the world, only allows other less ethical and less environmentally friendly countries to sell at a higher price to the rest of the world, including Eastern Canada. This ties our hands in the most unfair and unethical way.
Our own Canadian government allows U.S.-based groups to fund activists to protest and block the movement of Canadian crude oil to tidewater. These groups are funded by corporations that buy our oil at very cheap discounted prices and sell it again for large profit. Studies have shown this money lost to Canadians can be as high as $80 million a day or $29 billion a year. Without more pipelines to provide an economical and safe way to move oil by ship, we continue to sell our crude at a severe discount. This means that oil producers do not invest in drilling, do not optimize production and do not repair uneconomical wells. If Canada were able to ship and sell our oil and gas to the world markets like other oil-producing nations do, the amount of money that would be brought into the Canadian economy is staggering. This revenue could be used to invest in cleaner energy and environmental technologies instead of burdening every Canadian taxpayer.
This situation also means that oil producers have to cut costs somehow. These cuts are passed down the line to the contractors that perform work on the oil wells. It spirals outwardly, ultimately resulting in less tax revenue for all levels of government. This is not even factoring in the huge reduction in spin-off benefits for local business and charities. The community benefits created by the Canadian oil patch are too numerous to mention today, but among them they include funding for infrastructure, hospitals, schools, universities and parks. Some local examples are Crescent Point Place in Weyburn, the Edwards School of Business at the University of Saskatchewan, and various facilities in every oil town in Western Canada.
Over 50,000 merchant ships are responsible for the carriage of about 90 per cent of world trade. Some 4,300 of these, or less than 10 per cent, are oil tankers that move crude oil around the world safely and efficiently every day of the year. Modern tankers with the latest and best technology and construction would be the only tankers allowed in our waters. It seems somewhat disingenuous to allow all manner of materials to be shipped in and out of Canadian ports but not Canadian oil. Oil is shipped all the time down the St. Lawrence Seaway. Oil tankers regularly move oil down the West Coast from Valdez, Alaska, to the lower 48 states. Shipping off the West Coast should not be a problem if it is done correctly with safety being the top priority. Whales and marine life can’t tell the difference between an oil tanker and a cargo ship full of iPads from China.
As a side note, my wife Val is from British Columbia, and I have been salmon fishing at the Haida Gwaii. I personally would not be in favour of anything that I would believe would unnecessarily endanger the West Coast of Canada, no matter what was my career. If Canada had the opportunity to sell oil on the current world market, it’s very easy to see the benefits to our entire country. Without the revenue, investing in our children’s future is much more problematic. We need funding for schools, universities, hospitals, health care, infrastructure and much more. Where could we possibly get this revenue from? From oil revenues. We need funding to develop clean, long-term energy sources for the future. Where could we get this money from? Again from oil revenue. We are Canadians, not Saudi oil sheiks. We will spend our oil revenue on our children’s future, not on yachts and gold-plated Mercedes. We need to invest in Canada and control our own destiny and not leave it to the rest of the world. We need a plan, a good well-researched plan. Can we do it better? Absolutely. Will Canadians do it better? Yes, as we always have in the past and always will. It’s who we are. Canadians want a bright future for our children and our grandchildren. We are a country that cares about each other and cares for the rest of the world. If given an opportunity, Canada will always follow through and do the right thing, period.
Our company works primarily in the completion, repair, optimization and abandonment of oil and gas wells in southeast Saskatchewan. We have also performed workovers and repaired wells at potash mines, natural gas storage cavern wells and the soon to be completed Deep Earth geothermal project southwest of Estevan. The work is often complex and requires well-trained teams to perform all duties safely, efficiently, and to high environmental standards. As with all operations in the Canadian oil patch, we perform all duties safely, ethically and with full respect for the environment and all the stakeholders involved. This means using good and sound best practices, top-shelf training and the best available technologies to perform the duties safely with absolutely minimal environmental impact. We are a business, so obviously we do what we do to provide a good return on investment to our shareholders.
Having said that, we also provide a good standard of living to our employees and their families. We support our community through corporate donations to hospitals, schools and local charities. We pay taxes, which support our city, our municipalities, and the provincial and federal governments. To summarize, our company and other companies in our industry are economically, environmentally and socially responsible.
My story is that I started out as a floorhand or a roughneck on an oil well service rig in May 1985. I have worked hard, made my way up to a supervisory role and as a company shareholder with some outstanding partners. I spent three years working in the Siberian oil fields. As a side note, it was an environmental disaster when I worked there in the 1990s. There is simply no comparison to Canada as far as environmental stewardship goes. We are much better in every way. I have made a good living. I have paid a lot of taxes toward the greater good of all members of Canadian Society. I have been able to donate to many charities and put three daughters through post-secondary education.
I would like to thank you all for this opportunity. It’s greatly appreciated.
The Chair: I have a quick message. I got a call from the government relations person with Canadian Pacific that there have been four car derailments in the city of Swift Current carrying butane. He said that there are no safety risks at this time and that he will follow up with more details for the committee as the day goes on.
Matthew K. Cugnet, President, Valleyview Petroleums Ltd.: I would like to thank the members of the Senate for taking the time to travel throughout Western Canada to consult with the people directly impacted by Bill C-48. I hope it is very apparent how worried we all are about this bill which severely diminishes the ability of Western Canadian producers to access international markets.
Valleyview Petroleums Ltd. is a family-owned private oil and gas company from Weyburn, Saskatchewan. My father and mother founded this company in 1978. Today, we drill and produce our own oil wells with interests in Manitoba, Saskatchewan and Alberta. Some 85 per cent of our production is on our own lands.
I studied petroleum geology at the University of Regina, as did my wife Jennifer. We both have done oil field consulting, as well as potash mine developments throughout Saskatchewan and Alberta. I am a member of several industry organizations. As well I am working committee member on Wellbore Abandonment and Reclamation steering committee with the Government of Saskatchewan. In addition to volunteering on oil field outreach and public education, I am an oil field historian. I have toured and studied oil fields as well as participated in cultural and technical exchanges in Central Canada, Qatar, Dubai, Oman, Cuba, Ukraine, Romania, Poland and the United States.
Beyond oil and gas production, our family owns and manages interests in drilling rigs, service rigs, chemicals, nitrogen generation and underbalanced drilling. Additionally, our family has farmed the same lands in the Weyburn area for 117 years. My brothers and I support conservation tree plantings and wetland restoration. We are proud to have one of the biggest privately owned blocks of critically endangered native Prairie grasslands in southeast Saskatchewan.
I do not want to run over time, so I am going to jump around a bit. I encourage everyone to read what I have submitted. Throughout these consultations, I am sure you have heard passionate arguments for and against this legislation. I have come here today to speak against it and to offer some evidence that the bill is ill conceived and counterproductive to Canadian prosperity. It also carries a very high cost to the rural areas that depend on resource extraction.
I would like to educate the panel on what oil and gas contribute to Canada. I will be speaking to the economic aspects of Bill C-48 on behalf of me, my family, my employees, our neighbours and this country. Currently our affiliated group of companies employs between 110 and 275 people. At our peak we had 590 employees working under different aspects. Having said that, Valleyview is a small family-owned company. We produce oil from low volume, shallow and low risk oil wells that are uneconomic for larger producers. Some of these wells have been producing continuously since 1956. We were a minnow in this global ocean and one of the smallest oil companies on a national scale. While not the smallest provincially, we are a tiny piece of the world’s largest commercial enterprise. In a given day Exxon would spill more oil than our family company produces. Oil and gas producers are often vilified. In my experiences travelling Canada, and even visiting with family who live in Pierrefonds, Beaconsfield, British Columbia and Nova Scotia, there’s a tremendous amount of naiveté about our industry and what it contributes to Canada. I am going to speak quickly about some short statistics.
Valleyview, considering that we are one of the smallest oil companies in the world, locally pays $696,531 in the last three years into Weyburn and area. That is for the rental of our pumpjacks to sit on farmers’ land. That works out to an average of $232,000 a year to local farmers and ranchers. To our municipal government in the last three years, and keeping in mind that this is during the worst downturn in history, we paid $714,000 in property tax or an average of $238,000 a year. For extracting that oil, we paid royalties to mineral holders of $3,420,000, for an average of $1.14 million a year. Approximately $350,000 of that royalty payment yearly went to Canadian pension plans for Ontario teachers, municipal pensions, Quebec government employees and CN Rail. There’s an unbelievable transfer of wealth and prosperity from resource extraction in Western Canada that helps carry throughout Canada. Above and beyond the expenses we have to pay, whether we receive $10 a barrel or $83 a barrel or minus $2 a barrel, in the case of December, we pay these expenses every month of every year. Above and beyond, we pay an additional $3.038 million a year in operating expenses to the likes of Mr. Crossman to fix, maintain and operate our wells. This is Valleyview. We paid $10.6 million in operating expenses in the last three years. One can imagine what is paid by CNRL, Whitecap, Crescent Point and Cenovus that are 2,000 to 3,000 times the size of our company.
In terms of Bill C-48, as a farmer we spend a lot of time going back and forth in fields. We are starting seeding right now. As I was seeding yesterday, I was thinking to myself that it was a bit ironic in the 1980s Canada introduced a National Energy Program about which there are very strong feelings in the West. It started with good intentions. The original intention was American interests owned a disproportionate amount of oil and gas in Canada. There was a feeling that we were subsidizing American interests and not getting full value for our resources. It was before my time when I was born, but it was still a swear word as a child growing up in rural Saskatchewan. I find it interesting now that we are now not bereft but have no American companies operating or expanding their reach in Canada. They have all left, and we are voluntarily limiting ourselves to the American market for oil. Unwittingly, we have done the complete opposite of the National Energy Program. By locking ourselves in one market, we are forced to accept the differential.
Reliable Canadian oil may power generators for schools in rural India and refrigerate insulin in Laos. The emerging markets throughout Asia need access to cheap energy. We can supplant coal in China and charcoal in India, where there’s a direct correlation between the adoption of oil and gas and a reduction in deforestation in most developing nations. We have the opportunity to generate positive change throughout the world. Coupled with that, we can generate positive change here at home, whether it’s somebody working in Fort McMurray and sending money home to New Brunswick, or tourism in Quebec or manufacturing in Ontario. There’s always a lot of talk about diversifying our markets. At least where we live we are too cold, too far away, too distant and too small. We try to diversify as much as we can with value-added produce in the farming aspect of our family, but we are limited in our options. There’s a huge swath of Canada that can’t contribute. Beyond any implied or imagined risk, the export of our oil is crucial to ensuring Canadian prosperity.
I followed some of the proceedings of the committee, and I do find a pattern that the people who know the most about oil and gas, the people who work with it every day of our lives, are comfortable with the notion of pipelines as well as marine transport. I personally have pipelines running through my home yard next to my house. I am very comfortable sleeping at night knowing that the oil is moving. I find that the loudest voices and the most opposition are the least informed about the issues. I am sure there has been a lot of great testimony from the engineering aspects and marine transport experts that have all supported the possibility of shipping oil through the West Coast. It’s crucial to the financial health of our community, this province and all of Canada, most importantly, for us to develop our resource and get the best price we can.
The Chair: Next we will hear from Roy Ludwig, the mayor of Estevan. Welcome.
Roy Ludwig, Mayor, City of Estevan: I am here today to speak against Bill C-48. This is a bill that could potentially damage our chances of getting our product oil, which of course is oil, to world markets from the West Coast. At the very least, we need access within the shipping lanes from the West Coast to offload our oil from the Prairies to China and other international markets once we get the Trans Mountain Pipeline in place. That is another issue, but I guess I am not here to talk about it.
The issues we face cross political, provincial and even international boundaries such as our neighbour to the south, the U.S.A., that are also struggling with their ability to put pipelines in place. The main issue we are here to talk about involves commodities such as oil and jobs. Since 2014, hundreds of jobs have been lost in the oil industry, which is very daunting for a city of our size to cope with. Environment also comes into play. Although we want to be environmentally friendly, sometimes it’s getting to the point where we are re getting into gridlock and can’t even operate because some of the environmental regulations are so stringent.
Moving forward, somehow we have to reconcile environmental issues along with the transportation of oil. This issue is dividing our country between east and west. We need to put in place a comprehensive and cohesive policy that will allow us to transport our oil and at the same time allow our fellow Canadians to the east, and even some out west, to understand and agree with this need. We are as a country being seen as a place where big projects can no longer get completed. This is hurting our credibility on the world stage. Now we own a pipeline and we are still unable to get it completed. If we want to be seen as a strong and united country, we have to begin to put these differences aside. We pay tens of billions of dollars from Western provinces to Canadians out east in transfer payments, but we cannot get them to agree or understand the importance of a pipeline out east using Canadian oil instead of imported oil from countries with horrible human rights records.
This issue is not only about our ability to get our oil to the B.C. coast and then ship it. It is also to get a pipeline out east and west. Life is about change. We have to be willing to set aside our differences to do what is best for the country as a whole so that we can prosper together. This issue is about compromise. If we can’t get our product to market, then we won’t be able to afford the transfer payments that our friends out east have come to expect.
I have the privilege of representing the city of Estevan. It is a small city in the southeastern part of the province. One of our main economic drivers is the oil and gas industry. As I have mentioned before, we have been suffering from a four-year slowdown in large part due to the downturn in the oil markets as a result of our inability to get our product to market. We need to get our oil to tidewater on the West Coast and East Coast so that we can get the proper price for our oil instead of suffering a discount. Once we get it to the coast, we have to be able to ship it. Our employment numbers are down, especially in the oil industry. We need our local economy to stabilize in order to stop losing people and resources from our oil sector.
In closing, I am still optimistic in this great country that we can collectively set aside our differences and work toward the common good, in this case having the ability to get our commodities to market, enjoying the fruits of this economic sector and being able to share this wealth with the rest of our country.
Thank you, members of the Senate Committee, for allowing me the opportunity to speak.
Senator Gagné: Thank you for your presentations and for very interesting and compelling testimonies. All of you spoke against Bill C-48. Is it a definite no to Bill C-48, or would you consider amendments to the bill that would allow access to tidewater while at the same time ensuring the protection of B.C. coastlines? Mr. Hopkins mentioned the particularly sensitive sea areas. We have heard testimony around amendments that would allow a corridor to protect the areas around the Galápagos Islands and the Great Barrier Reef and other suggestions around having a periodic review of the bill. I would like to hear your comments, maybe starting with Mr. Ludwig who said in his testimony that it was a question of compromise.
Mr. Ludwig: In my opinion, we are all about anything that would allow us to get our product to international markets and at the same time be environmentally safe. I mentioned compromise. I think we can reach a solution, I really do, as long as we are not too much on one side or the other. If we are willing to look at the issue as a whole and work together, that is the biggest thing.
Mr. Cugnet: Any talk of amendments to Bill C-48 should really look at the overall shipping picture on the West Coast. There has been a lot of talk and focus on oil because of this act, but any shipment of bulk commodities off the West Coast represents a threat to marine health. A million pounds of potassium chloride fertilizer would cause almost the same level of devastation as a long-term oil spill. Sintered iron ore has caused algal blooms off the West Coast. Again, a lot of people do not fundamentally understand the risk threshold with which we already are comfortable for most commodities.
I think it was Mr. Smith who testified a week ago in Calgary or Edmonton. He spoke to the effect of shipping corridors through the Great Barrier Reef in Ecuador as well as the Straits of Malacca through Indonesia and Malaysia. It’s not an unheard-of concept with maritime shipping. I know on the West Coast in particular I did an outreach at Santa Barbara, which was devastated after a 1969 blowout. On the coast of Santa Barbara 200 barrels a day leak naturally into the ecosystem. If you are ever down there, you will see on those pristine, beautiful white Malibu and Carpinteria beaches tar and bitumen rolling up on them every tide. I think a lot of people are unfamiliar or unaware of that.
Probably one of the biggest things industry has looked to was the creation of the Marine Response Unit two budgets ago. Exxon Valdez was catastrophic. I am sure that has been cited several times in testimony before the committee. Two of the biggest factors that led to degradation of marine habitat were the large volumes happening instantaneously and, in hindsight, the chemical dispersants used to break up the oil. It has been 27 years since Exxon Valdez. As an industry now, and especially marine shipping, chemical dispersants do not have long-term impacts on an ecosystem. If there was a designated corridor with a marine response and a tanker ran aground, because it is always a possibility however small, there would be an immediate response and immediate containment.
The catastrophic volume would be limited, the aerial extent would be limited and the long-term implications of dispersants would be limited. All of that is much easier to maintain in a narrow designated corridor. It would be a great amendment or a starting point for compromise between both sides on this issue.
Mr. Crossman: I will pretty much have to agree with Matt Cugnet on everything he said. Definitely some amendments could be made. Safety is always of the primary concern in everything in the oil field. It’s what we do whether it’s out on the flatlands of Saskatchewan or whether it’s on the coast where we are moving the oil.
The technology is getting better. Things to include in that could possibly be having tugboats secure the tankers long before they get into the narrow passageways or anything like that. GPS technology has improved so much. Weather predictions are much better now too. We can wait it out sometimes before trying to ship things at the worst possible time. Definitely, there is room for improvement on that if they are willing to give that.
Senator MacDonald: I am going to direct my first question to Mr. Crossman. For the sake of information, all of you are Saskatchewan people and I am a Nova Scotian. All the things they are talking about on the West Coast, we have been dealing with for generations. Our fishing industry is seven times the value of yours. We do not want to lose it. We are not losing it. They handle six million tonnes on the West Coast, all in Burnaby. We handle 283 million tonnes a year. The problems are really exaggerated or the ability to manage it is really exaggerated.
In terms of amending the bill, I am open in principle to amending it. There’s no need for this bill. There’s no need to put a restriction on any part of the coastline of Canada. We would be the only place in the world with such a restriction. There are places on the East Coast of Canada in the Bay of Fundy and the St. Lawrence Estuary that are just as environmentally sensitive as any part of the West Coast. They handle petroleum every day.
Mr. Crossman, you spend a lot of time recovering depleted wells and fixing them up. I would like for you to expand on that a bit. How long does it take to finish off a depleted well and put it back in pristine condition? How much time and effort go into it?
Mr. Crossman: in my somewhat long time in the business, the technology has improved so much. To complete a well it could have been one or two weeks. Now we are doing it in three or four days, and a lot more efficiently and environmentally friendly. There’s no gas flaring or anything like that anymore. Everything is taken care of properly.
It is the same with the repair of oil wells, if it is a tubing leak down hole. By the way, when I say “leak,” this is inside the bore of the well. It’s not on the surface. We have to repair it because the oil has to come up through a tube to get to the wellhead surface. It works in a certain way and we have to fix them.
Senator MacDonald: You mentioned you were in Siberia.
Mr. Crossman: Yes, that’s correct.
Senator MacDonald: I have seen photos of the current oil fields in southern California which are like a moonscape. There are about 1,500 tailing ponds there. It’s probably the worst environmental mess in the U.S. It’s still there. How does that compare to how we handle stuff in Canada? How many abandoned wells would we be finishing off and taking back to natural state in Canada annually?
Mr. Crossman: I would have to check. I know some guys in the government that could tell me. A lot of the companies do it all on their own volition. As good corporate citizens, they abandon the wells when they become uneconomical. Basically they are cemented off down low. The casing is cut off and capped at surface. They do leak tests and everything to make sure there’s nothing coming to the surface. Eventually they take it all out and you can’t ever tell the oil well was ever there.
Senator MacDonald: You have seen a marked difference in the way governments inspect and regulations are applied when it comes to recovering abandoned wells and restoring them to a natural state.
Mr. Crossman: In Saskatchewan, and Matt Cugnet can tell you this, we are up against it quite a bit compared to Alberta. The average number in Alberta is 20 barrels a day, and I think we are re around six. We are as regulated as they are in Alberta. Small producers like Matt Cugnet and some other fellows I know definitely have a tougher time economically but they still do it. They still put the effort in and the money in. They are glad to do it because they are happy to be producing oil in Saskatchewan and contributing to Canadian taxes.
Mr. Cugnet: I will speak to that. I guess it’s how much time you have. I could go on about this for a week. There are 475,000 wellbore penetrations in Western Canada. You would have to check with the government for the exact number but of those about 160 are abandoned. Depending on the period of time, the government promotes it. One of the steering committees I am on right now is Wellbore Abandonment and Reclamation.
There’s a divide within industry in what we call our historical wells, which can become orphan wells. They were drilled prior to the advent of regulation or legislation concerning cleanup in pre-1970s. Those are most persistent and hardest to abandon and remediate. I do not know how long everybody is in Regina, but I would encourage them to drive past the University of Regina campus. There’s actually an abandoned well on campus.
Senator MacDonald: Is this an old well?
Mr. Cugnet: It was drilled in 1978 during the energy crisis.
Senator MacDonald: I am just curious. Why are the old ones more difficult?
Mr. Cugnet: Part of it is the construction techniques at the time. Our industry faces an ongoing study. The oldest wells in Canada were drilled in 1860 in Petrolia, Ontario, Lambton Country. I do not think a lot of people know that. Stony Point and Albert Shale in New Brunswick have original oil wells. In Gaspé, Quebec, there’s oil leaking into the St. Lawrence. The techniques and methods for the original wells were brought up from West Virginia by water well drillers looking for salt. There are wells going back to 1300 AD drilled for salt in China. There’s evidence of doing oil. The Seneca Nation in upstate Pennsylvania actually drilled wells for oil used as a tonic or a liniment. There’s evidence of bitumen refining in the Akron field and La Brea tar pits in California. It leaked to surface and the Natives there used it to waterproof wicker containers to carry water through the desert.
It’s an ongoing industry in that we have learned to extract and utilize these resources, but prior to the 1950s there wasn’t enough of a working understanding of cementing techniques and casing. We will drill a well now by law and cement all the potable groundwater off. We will then drill an additional 1,500 to 2,000 metres underneath. The construction guidelines of the Government of Saskatchewan are continually updated as information points come in. There are non-cemented wells with no surface casing at Turner Valley, Alberta, from 1914. Those are the wells that cause issues. In addition to not having containment of potable water from brine water, they also do not adequately cement to prevent corrosion. As that wellbore corrodes, it collapses in on itself.
My worst abandonment was $785,000. We were on it for 31 days. My quickest one was 2.5 hours, which was a well drilled in 2010 that was non-productive. As I say, we have abandoned between 25 and 35 wells at Valleyview in the last six years. The longer the well produced, the more likely it may have had a discharge of a spill. The surface reclamation, depending on the history of the well, can be from six months to four years. Independent environmental experts come in to assess the sites. They take ground sampling to look for brine contamination or hydrocarbons. Then the site is restored for growth and vegetation. As I say, that process is ongoing.
The last four years have been awful for the oil and gas industry. The receivership and bankruptcy rates throughout Alberta have skyrocketed. When a company is fiscally insolvent, its wells become property of an orphan well committee in Alberta and Saskatchewan. It’s currently entirely funded by industry, but what happens when 2,100 wells get dumped on the working committee? If you go to industry for payment, it’s too much all at once. There’s a feeling that these problems are mounting, but the wells sit suspended or inactive. It’s like a surge. It just takes a certain amount of time for the working committee to work its way through it.
The Government of Alberta mandated that the orphan well committee had 210 abandonments last year. Saskatchewan traditionally had under 10 orphan wells. I think we surged to about 45, and of those 45 we are down to about 20. A certain portion of the cleanup work is done each year to help spread out costs. Additionally, one of the problems we as an industry face is that a lot of people just do not understand what we do or why we do it. Today’s suspended well might be the productive well tomorrow at $110 a barrel. A large company may have a well that makes 10 barrels a day. By the time they pay for their office in Calgary, their staff, their pension and their overhead, they won’t make any money at $52 a barrel. At Valleyview we may be able to make money on that well, but when it goes to $30 a barrel we won’t. We will shut or suspend that well. To an outside person from the oil industry, there is a sitting well there that has potential for liability or damage. If oil goes to $110 a barrel, or in our case if we can get the extra $21 a barrel that an American producer gets for a similar quantity, all of a sudden that well is more productive. Maybe we get Mr. Crossman in. There are new completion techniques. There is new perforating. We try another zone. There are wells that we have that were sitting for 25 years. If somebody proved there was oil in a different stratum, we would go back in to re-perforate it and it would be producing successfully.
It’s a very tough problem for the government to manage. They want to encourage us to abandon them, but once they are sealed up with cement there’s no opportunity for them to generate revenue. It’s really a balancing act between the competing interests.
The Chair: That’s interesting.
Senator Busson: I really appreciated your perspective and your outlook on this bill and how you see your industry. I firmly believe in your comments around compromise and finding a win-win. Our country was built on the national interest. Having one region pitted against another is really not the Canadian way. I am encouraged with your attitude around that.
For my own knowledge and to ensure that I have this straight, we have been hearing about the negative pricing of oil that we are forced to sell to the States. Your company specifically, Mr. Cugnet, is forced to sell to the United States. For folks like us or me, who do not necessarily understand the details of that, I would like to know if there is a formula. Could you stockpile your oil at that level and refuse to ship it? Could you give us the negative pricing 101?
Mr. Cugnet: We produce our oil in central collection facilities. The ordinary person does not realize that for every barrel of oil we make on average in Saskatchewan we make 99 barrels of salt brine. We will separate the oil and the water and reinject the water back down underground. The oil then goes into a gathering system which connects with the Enbridge mainline at Cromer, Manitoba, where it goes down to Superior, Wisconsin. Once it gets into the American midwest there’s a refining complex from Minnesota over to Illinois, Indiana. They look for our high sulphur medium to heavier crude for heating oil in the wintertime and diesels, lubricants and greases in the summertime. Once that market reaches saturation point, our oil is capable of transferring on a Koch brothers owned feeder line from the midwest refining complex down to Cushing and the Gulf Coast refining complex. We compete with American light oil barrels, as well as Maya crude quality oil, which comes in from Venezuela and Colombia. The American Gulf complex can pit us, as buyers, against Venezuela and Colombia.
The farmers on the panel will remember when we had grain. Everyone’s grain comes off at the same time. We go to the elevator and they say that they will not buy Senator Smith’s grain for $6 because they can buy Brian Crossman’s for $5.50. He has cash flow concerns. He has employees to pay. He says that he will sell at $5.45. Ultimately what happens is that there is a glut of oil going into a concentrated area in the United States and we have to accept whatever price the refiner is willing to pay for it.
Above and beyond the existing pipelines, there’s Keystone XL which will bypass the midwest refining complex and go straight to Cushing, Oklahoma. That will allow us not to pay transport for each segment of the line and to direct our oil at a cost advantage to the American Gulf Coast. Additionally, the pipelines fill up. Some people sit on their oil at Hardisty storage terminal in Alberta. In December the tanks got full. Everybody had stored every barrel hoping for that recovery in prices. In September of last year our realized price with the Canadian exchange was about $73 a barrel Canadian. By December, not only were the refineries full but the tanks in Hardisty were full. In some cases you actually can’t turn off wells. The big SAGD or steam assisted gravity drainage projects in Alberta, have actually heated the ground to produce that oil and thin it. If they shut it off it will cool, o they have to continue producing. In order to clear their glut, there was a point in December that companies actually paid marketers to take their oil. If I had a barrel of oil in the gulf complex or in the Illinois complex, I was still receiving $46 a barrel, but to get it from Hardisty, Alberta, to Cromer, Manitoba, I was paying somebody $2 a barrel to take the oil.
Senator Miville-Dechêne: I want to direct my question to Mr. Cugnet. You know your field very well, but I was wondering about maritime security. You said that it could be mitigated if there’s a spill in a corridor. We have been told by a few experts that the maximum oil that can be recuperated is 15 per cent when there is an oil spill, so they are not into reclamation of most of it.
I am saying that because you also alluded to the fact that the people who knew about the oil business were the ones who were less afraid, and the people who didn’t know about it were more ignorant about those things and were the one who had more fear. However, when we went to B.C. we met quite a few Native tribes. We heard from witnesses who mentioned that double-hull tankers were much safer than at the time of the Exxon Valdez incident. There has been between 2000 and 2010 one big spill a year from double-hull tankers across the world of millions of litres in the waters. Obviously this is known, this is a fact, and they want zero risk.
I am not saying they are right or wrong, but they want zero risk. They are at the end of the chain, so they are the one taking the risk for the fishery, not the investors. I am not saying your life is not complicated and difficult. I see that it is. What do you make of that? It’s not a question of ignorance or not knowing the issue. It’s a question of not wanting an extra risk because there are no tankers at this point in the particular zone.
Mr. Cugnet: In response to that, everything carries risk. About 62 million to 63 million barrels a day currently transits the ocean by tanker. One spill a year of even a million litres would represent one twelve thousandth of the total.
Senator Miville-Dechêne: It’s your perspective. Their perspective —
The Chair: Let him answer the question.
Mr. Cugnet: It’s okay.
Senator Miville-Dechêne: No, I am not interrupting.
The Chair: Just go ahead and answer that question.
Mr. Cugnet: I can appreciate their concern. As I mentioned earlier, 252 barrels a day is leaking into the water on the Pacific Coast in Santa Barbara, California. That’s 73,000 barrels a year, which works out to 2.4 million litres. We underestimate how resilient Pacific ecosystems are to oil and gas. I can submit photos of wonderful humpback whales migrating through the kelp beds up to Haida Gwaii on the way to Alaska.
The one point I would like to highlight is that oil tankers are transiting these waters already.
Senator Miville-Dechêne: They are going around the voluntary exclusion zone.
Mr. Cugnet: Are they?
Senator Miville-Dechêne: They are not going into the region we are talking about.
Mr. Cugnet: At Seward, which is a similar ecosystem, there are coastal Aboriginal communities on the Alaskan side.
I live on a farm. We have a dam immediately beside us. We didn’t want it there. We didn’t like it, but we understood that for the greater good of the people in our community we had to live with it. I guess I would caution, as the other senator said, that Canada is a nation that shares. We share the risk and we share the reward. It’s similar to someone living along railroad tracks. It’s about building a consensus so that one area, in our case a large area, is not held hostage by a 21-kilometre strip of coastline. I hope that helps.
Senator MacDonald: I have a couple quick questions just for ease of information with regard to previous questions. We have 100 million tonnes of petroleum or heavy oil going through Nova Scotian water to feed refineries in New Brunswick and Quebec. We take the risk. We get no benefit. It’s part of being a Canadian, right. You have to share some risk in this country to build the country.
I wanted to get back to cleanups because I am very interested in them, especially since you have some international experience. You describe what you have to do to clean up a wellhead. Could you describe what they do in places like Siberia, Nigeria, Algeria, Saudi or the rest of these countries?
Mr. Crossman: I can speak to Siberia. We were west central Tyumen region, quite a bit north. It is really cold in the winter and really hot in the summer. I haven’t been there for quite a few years now. My last tour over there was in late 1996. I have some friends that have travelled over there, and they told me that things hadn’t changed a whole bunch. They are in muskeg, so they have the flowlines. I will just use this for an example here. They get leaks a lot. No offence to the Russian people. I have friends who are Russian. The quality of their work and their construction of equipment is very secondary or subpar compared to what we do here. They will have a flowline leaking and they will have lots of them over the course of the winter. In the springtime, when it’s thawed out, they can get out there with the Cats to dig it out and fix the flowline leak. They can push it all the muskeg contaminated with oil into a big pile.
In Canada we recycle that land. We take it. We get the oil out of it and we put it back. It takes millions and millions of dollars and lots of effort. Over there, I have a picture of the rig I was operating, a Beta 49. On the day I took that picture there was a big cloud of black smoke behind it because they had just torched it. Everywhere I looked the day I took that picture there was a big cloud of black smoke. I could look 360 degrees and not miss it. I couldn’t believe that was how they ran their oil patch.
We brought our own equipment over there. We had our proper blowout preventer units and everything. All were properly trained. They had nothing of the sort over there. I had seen stories and heard stories. Not too far from where my rig was, you would see major spills from a blowout because they couldn’t contain the well. They weren’t following proper well kill techniques when you go to work on these wells like we do in Canada. I renewed my blow prevention certificate two weeks ago. Every five years I have to go to school again. If you go to these other places, they are not doing that unless there are Canadian companies or American companies doing the work over there.
My friends that have worked overseas in all the world, the Canadian oil field people are in the highest demand because they care and they do things right, just like we do here in our own country. We do things the right way all the time. Canadian oil field workers are the same everywhere they go, right from engineers down to floorhands on a rig.
The Chair: Thank you, witnesses. It has been a great hour.
(The committee adjourned.)