Standing Senate Committee on Transport and Communications

Proceedings of the Standing Senate Committee on
Transport and Communications

Issue No. 3 - Evidence, May 11, 2016

OTTAWA, Wednesday, May 11, 2016

The Standing Senate Committee on Transport and Communications met this day at 7 p.m. to study the development of a strategy to facilitate the transport of crude oil to eastern Canadian refineries and to ports on the East and West coasts of Canada.

Senator Michael L. MacDonald (Deputy Chair) in the chair.


The Deputy Chair: Honourable senators, today the committee is continuing its study on the development of a strategy to facilitate the transport of crude oil to eastern Canadian refineries and to ports on the east and west coasts of Canada.

Our first witness today is Theresa McClenaghan, Executive Director and Counsel, Canadian Environmental Law Association. Ms. McClenaghan, please begin your presentation, and afterwards the senators will have questions for you.

Theresa McClenaghan, Executive Director and Counsel, Canadian Environmental Law Association: Thank you very much for inviting the Canadian Environmental Law Association to appear in front of you tonight. I am the executive director and counsel with the Canadian Environmental Law Association, to which I will refer to as CELA.

CELA is a 46 year old, nationally incorporated, not-for-profit environmental clinic. We are also an Ontario specialty legal aid clinic. We use and advance environmental law to protect people and the environment.

There are three topics I would like to address this evening. The first is major energy projects environmental assessment, the second is pipeline liability for spills and the third is public participation in major energy project licensing and approvals processes.

First, with respect to environmental assessment, environmental assessment should be, at its heart, all about social license, which is the topic you are studying here tonight. If it's done well, environmental assessment helps to determine that the positive impacts and benefits of a project, proposal or set of activities outweigh the negative or adverse impacts on the environment, health and socio-economic well-being of the affected region and people, a\nd it ensures that the best option that advances sustainability is the one that's pursued.

Recently, Bob Gibson, Meinhard Doelle and John Sinclair published a very good paper stating that Canada needs to move to next-generation environmental assessment.

There are some key aspects to environmental assessment that I would like to mention tonight because they are often not adequately considered under the present processes of environmental assessment in Canada. If you're asking the question about the lack of social licence for projects, I dare say it would be because of people's concerns, in part, around some of these issues.

One of those is the question of need for a particular project. This is a fundamental question that asks: Is the project needed? Projects are not isolated. If the project need is not strongly demonstrated, there is little reason to even proceed to considering adverse or positive impacts.

The definition of need is itself an important question and all too often the question is asked — if it is asked at all — in terms of the proponent's definition of its desire for a particular project, and from the perspective of the public that amounts to a tautology. What the public and NGOs like my organization expect is an objective evaluation as to whether the particular project itself is needed. For example, are there other resources elsewhere that would fill the need?

Another question that is not often asked sufficiently is: What are the alternatives to the project? This question asks if there are other ways to achieve the end goal of the project. For example, in the case of obtaining the energy services from crude oil, the question would be, what other options might exist to obtain those heating or transportation services?

We advocate considering those options broadly in that way, and considering the impacts and benefits in the context of the precautionary principle of intergenerational equity, full life-cycle analysis of the impacts of alternatives and long- term sustainability. Contrary to expectations like this from the public, for example, the availability of renewables was not included in the Joint Review Panel review of the Northern Gateway Pipeline proposal.

Another question that is often confused with alternatives to is the question of alternative methods. That question allows for the comparison among different modes of transportation. It's not a substitute for alternatives to, but it does compare different ways of carrying out the project and asking which ones would have the most benefit and the least impact.

We've also seen a lot of controversy around descriptions of the project. In particular, if the project is defined in too limited a way, then the public is frustrated because they don't see an assessment that examines the kinds of issues they think should be examined. To use a non-pipeline example, I was recently involved in a project near the Great Lakes, but the Great Lakes were not defined as the subject area.

There is quite a bit of conflict in these cases over the factors to be assessed. If the terms of reference don't include the types of factors that the public expects to be assessed in an environmental assessment, then the process loses credibility with the public. For example, in some of the pipeline projects, there is advocacy to include both upstream and downstream impacts of the project on climate change. To this point, neither of those types of questions have been asked.

Similarly, in examining adverse effects, there is consideration of issues like mitigation and adaptive management, and our concern is that those types of concepts have been used in ways that result in approval of projects that still have uncertain risks and impacts, with resulting vague promises to monitor and see whether those impacts are manifested. The ability to impose terms and conditions to mitigate impacts is not an excuse for avoiding a precautionary approach or an approach that ensures intergenerational equity, but that doesn't always happen.

We are also concerned about incomplete assessment of cumulative impacts, and related to that, many of us are advocating the need for strategic-level reviews of the impacts of projects. For example, Dr. Gibson of the University of Waterloo, who I mentioned earlier, has outlined an approach that would pursue a tiered system, starting with regional environmental assessment, then strategic and then, finally, project-specific environmental assessment. Otherwise, what is happening is we have project-by-project evaluation, and we don't ever get to the point where the public or the environmental community feel that cumulative impacts are really being truly considered.

There is also a concern around accident risk. In particular, recent Federal Court of Appeal jurisprudence in the non- pipeline context that I've been involved in has resulted in what we think is a significant shortcoming of the CEAA in connection with evaluating accident risks. We think amendments are needed to ensure that the effects of worst-case scenarios are evaluated in accident situations, especially if there is potential for highly adverse long-term or irreversible harm, even if the accidents are deemed improbable.

There has also been a concern in recent years about the identity of the decision maker. More responsibility in major energy project environmental assessments has shifted to the National Energy Board and the Canadian Nuclear Safety Commission, respectively, who are also the licensing bodies for those projects. Concerns of the public and us, as intervenors, have arisen about objectivity, independence, the potential for regulatory capture and the potential that environmental assessment concerns are minimized in favour of technical licensing matters, with which they are long familiar.

The last point on environmental assessment that I want to make is about public participation. Meaningful participation by Aboriginal indigenous communities, the general public and stakeholders is required at every single stage. It requires upfront notice, timely access to documents, appropriate comment periods, adequate funding to participate, use of nontechnical language and diverse consultation techniques.

The next point I wanted to address more briefly is that of pipeline liability. We care about that because while liability provisions can't prevent all of the potential damage to ecosystems, to people and to property, they are nevertheless an important consideration and we think help generate appropriate care.

Last year there were amendments by way of a bill called the Pipeline Safety Act, Bill C-46, which was passed and received Royal Assent and takes effect next month, in June 2016. This bill amended the National Energy Board Act and the Canada Oil and Gas Operations Act.

CELA, my organization, takes an interest in liability provisions. Some of the provision CELA was looking for were included, such as express recognition of the polluter pays principle as the basis for the liability provisions. It also expressly stated that pipeline operators are now subject to unlimited liability if they are at fault or negligent. Similarly, if shipper suppliers or contractors are at fault or negligent, there is unlimited liability. These are important provisions that we support.

There is also recourse by government against the pipeline carrier or at-fault party in various pieces of the statute and provision to increase resources available by way of pooling of funds.

Third party claims for damages can be made. There is provision for interim awards to third parties which can be a very important factor.

Regardless of fault or negligence, there is absolute liability to a specified minimum level, as well as minimum insurance or financial assurance requirements for operators authorized to ship over 250,000 barrels a day in one or more pipelines. The minimum absolute liability and financial assurance they have to provide is $1 billion. The National Energy Board may specify a greater amount for a particular project or operator.

We think there could be further improvements to the liability regime, however. One issue is the sufficiency of that minimum insurance or financial assurance provision. It is important to have an absolute liability provision. We think the minimum insurance requirement should be increased given the kinds of impacts we've seen on certain accidents in the past.

We also think that there should be consideration to increase those amounts because of something called non-use value — in other words, damages to the ecosystem. In that case, the non-use value can be the kind of thing that is covered by the absolute liability, but the government claims and the actual property damage rank in preference to the non-use liability. We don't object to that preference, but we do think that if we didn't increase the minimum insurance, you might never have any funds left for the ecosystem damages.

The last item on pipeline liability that I'll mention is that it doesn't include risk rating as a factor in deciding what amount of financial assurance or insurance to provide. For example, the potential for environmental damage, the type of location and the accident history are the kinds of things that should be considered in addition to the type of material being shipped. At the moment, as I mentioned, the only factor is the volume. If it's over 250,000 barrels a day, it's a billion or more; otherwise, it's to be set by separate regulation.

The last item I wanted to deal with is public participation in major energy project processes. Earlier I mentioned the importance of robust public participation in environmental assessment matters. A particular issue has arisen because of amendments to the Canadian Environmental Assessment Act in recent years. This is a provision in section 43 of the act as it now stands about affording participation rights to interested parties.

In particular, in section 2 of the act now, it says that either the responsible authority or the review panel has the obligation to determine in their opinion whether or not the person who wants to participate in the process is an interested party; whether they are directly affected by the carrying out of the designated project; or if the person has relevant information or expertise.

Our concern is that the way that that has been interpreted, in particular by the National Energy Board, has narrowed the participation in the hearings, and unduly narrowed it. In our submission, we and other NGOs and members of the public argue that all Canadians are directly affected by the decisions of the major energy regulators such as the National Energy Board. We would also argue that having a highly engaged public and large numbers of people wishing to weigh in on tribunal decisions is a very excellent problem to have compared to past decades when we had the National Energy Board toiling away largely in obscurity.

We also think it's important to note that an engaged public is a necessary counterbalance to the potential for regulatory capture and to the potential loss of independence that can arise if the same voices appear in front of the tribunal repeatedly, particularly if they are predominated by the regulated industry.

I'd be remiss if I didn't also refer to the separate rights of indigenous peoples and the need to respect constitutional, Aboriginal and treaty rights, duties to consult, inherent rights such as self-government and Canada's recent commitment to the United Nations Declaration on the Rights of Indigenous Peoples, none of which I am addressing this evening.

To wrap up, I think we have the backbone of excellent environmental decision making in Canada with the promise of good environmental assessment, strong liability regimes and a culture of public engagement. Unfortunately at present, in my opinion, these promises are not being met, and the public has been enormously disappointed by their recent experience of decision-making processes under the Canadian Environmental Assessment Act and elsewhere. The comments I have provided point to some of the areas where there are higher expectations for better processes and better decision making.

Thank you. I would be happy to attempt to answer any questions you may have.

The Deputy Chair: Thank you very much for your presentation. We'll go first to Senator Unger.

Senator Unger: Thank you for your presentation. It was very interesting.

I know that many environmental organizations are opposed to anything that prolongs or encourages technological or economic dependence, say, on fossil fuels. Is that really the position of your organization? Do you just oppose anything that continues fossil fuel exploration, development and use?

Ms. McClenaghan: We haven't taken any express position to that effect. Our interest is for environmental assessment decision making that takes into account all of the impacts of a project and an intergenerational perspective.

Having said that, we would absolutely agree that the issues that we face globally from climate change are of the utmost urgency, and we strongly support transition to a renewable energy system in Canada.

Senator Unger: But you acknowledge that we're not anywhere close to that at this point in time?

Ms. McClenaghan: Absolutely. We would have to accelerate the rate at which we are finding new solutions for various needs, as I mentioned. For example, heating or transportation are two big needs where right now we rely heavily on fossil fuels. We can get there, but we have a long way to go and we have a lot of work to do. We have to accelerate our efforts. We have to put a big investment in new technology and advance the rate of change through all the means at our disposal.

Recently, someone in the U.S. media used the phrase "it needs to be like a moon shot.'' The kind of effort that was put into getting humanity to the moon in the 1960s is the kind of effort we need to transition to a fully sustainable energy future.

Senator Unger: In the meantime, I always find it ironic that people who oppose the hydrocarbon industry don't hesitate to hop onto jets and get in their cars and go from location to location, all the while consuming byproducts of this industry, probably most of which they never think about.

But, as you stated, we are studying the development of a strategy to facilitate the transportation of crude oil to eastern refineries where they very much would like the business because of the creation of jobs, mainly, and ports on the West Coast. Do you think it's possible to successfully develop such a strategy?

Ms. McClenaghan: The questions I would want to see asked are whether new projects are needed, for one thing, and whether the impacts of the projects are being considered broadly, as I mentioned.

I don't know the answer to that question about whether a strategy for additional transportation to the East Coast can be achieved. The current indications are dim, because the processes to this point have really disappointed the people who are looking closely at the project in terms of the general public.

Senator Unger: You start off talking about need. I'm from Alberta, as I told you earlier, and Alberta owns its natural resources. As you know, having been born in the southern part of Saskatchewan, which is also landlocked as Alberta is, we need to be able to get our resources to tidewater. We need the revenue that comes from that. We need the jobs that are created from that product. My last question is this: Why do your needs or the needs of this organization that you associate yourself trump our needs?

Ms. McClenaghan: Nothing I've said has said that anybody's needs trump anybody else's. The point about environmental assessment is that you take into account the benefits and impacts to everyone affected. In terms of Alberta, there is very interesting work underway to diversify the economy and to increase the proportion of renewables, just as there is all across the country and as there is globally.


Senator Boisvenu: Ms. McClenaghan, do you understand French? Do you need interpretation? I will speak slowly. I want to begin by thanking you for your presentation.

I spent 10 years with the Government of Quebec as a senior executive at the department of the environment. I participated in seven or eight environmental studies conducted by the Bureau d'audiences publiques sur l'environnement (BAPE). Over the past few years, I have noticed that environmental study projects have been looking more like political battlefields than exchanges of information and dialogue between Canadians who are concerned by those projects and those who promote them. Over the past few months — and I am thinking of the Energy East Pipeline project — social acceptability has become something of a promotional vehicle for people. I echo the comments of my colleague, Senator Unger. That social acceptability has become a promotional vehicle for those groups and enables them to oppose nearly anything related to the use of natural resources. I am not just talking about natural resources, but also about mining, which is generating controversy in Quebec. Anything to do with natural resources has become a social taboo, an economic taboo, as if we had to go back 2,000 years to chop wood, and so on.

Your group defends the values associated with environmental protection. Which groups are members of your organization? I am thinking of groups such as Greenpeace, David Suzuki's group or Mr. Guilbeault's group, Équiterre. Are they part of your association?


Ms. McClenaghan: CELA is an environmental legal clinic. We are funded by the Ontario legal aid plan to represent groups and clients who have concerns about processes, approvals and impacts, to participate in law reform and to participate in public legal education.

We do often partner and work with other environmental organizations like the David Suzuki Foundation, Greenpeace and others either on case work or law reform initiatives, but we are not a fundraising, membership-driven organization.


Senator Boisvenu: Can organizations such as the Quebec Mining Association or the Canadian Association of Petroleum Producers join your organization?


Ms. McClenaghan: The only members, per se, are the members of the board of directors. We would not represent for-profit corporations because it's contrary to our mandate.

That doesn't mean that we don't pay attention to what people are advocating. One of the things we do pay attention to, for example, is jobs for youth and employment opportunities. I very frequently advocate, as I did the day before yesterday at a project run by the Ontario Centre of Excellence, that in Ontario's cap-and-trade program, with an industrial strategy for use of the cap-and-trade funds, they need to be looking for opportunities for youth jobs.


Senator Boisvenu: In 2016, how do you explain — in projects for developing resources such as oil, mines and forests — people with no knowledge of the projects immediately opposing their implementation? They use any means to oppose the projects, even in hearings. As an example, we held public meetings in Quebec on the use of shale gas that resulted in very heated debates, where it was nearly impossible for the promoters to provide information or have a dialogue with the communities. Those little groups infiltrated the meetings, and it was impossible to engage in dialogue. What is your opinion of those so-called "green'' groups infiltrating the meetings?


Ms. McClenaghan: I mentioned earlier in my remarks that there is an opinion within the environmental community and the environmental academic community that we need to move to next-generation environmental assessment — and this is, in part, in answer to your question — because what we've seen over the years is that the original promise of environmental assessment, as I mentioned, has not been met in people's eyes. As a result, they are skeptical about the processes. This is the reason that people then resort to whatever means they can pursue to have decisions made.

Years ago, in Ontario, we had something called the Intervenor Funding Project Act. Under that act, the public would form a group and apply for funding for expert witnesses, like hydro geologists and lawyers. They then obtained documentation about the project early on. The experts met each other to make sure they had a proper understanding of the proposal. It amounted to very stringent peer review. Any issues that could be resolved were resolved ahead of time, and then the hearing proceeded on whatever remained outstanding. I was involved in many of those hearings, and, in my opinion, people became very well informed through that process. The decisions that resulted were much better than the decisions that were going to be made if the public had not engaged. Unfortunately, what's happening now is that we have people without recourse to adequate resources for that type of assessment of impacts, access to the same level of expertise and legal counsel.

In addition, people are concerned because, even if serious issues are identified, all too often those issues are dismissed in the final reports of the joint review panels or the responsible authorities, as the case may be, on very flimsy analysis, if I may say so. Not always, but this often happens. So, again, the public then is left feeling very defeated by the official process.


Senator Boisvenu: What is your assessment of the experience in Norway, which managed to turn oil development into a driver of economic development and collective wealth, helping it adopt social programs and provide its citizens with benefits? What is your take on the Norwegian experience?


Ms. McClenaghan: It's an important point because this question about distribution of benefits and distribution of impacts is an extremely important question to consider in environmental assessment. If the benefits are mainly falling to one set of parties and the detriment is mainly falling to another set of parties, you have a major inequity. Or, if the benefit is mainly falling to the current generation and the disadvantages are being left to impact future generations who have no say in the project, then, again, you have a major inequity.

I haven't looked at the Norwegian situation in terms of oil and gas, but I know that there have been differences, for example, between how some of the European countries have approached establishing renewable energy, and the acceptance of renewable energy is greater because of the distribution of benefits there.

Senator Eggleton: Thank you very much for being here.

We've had a few witnesses from the oil industry that have expressed concern about the federal government's announcement in January that it wanted to have an assessment of upstream greenhouse gas emissions during the review of the environmental assessment process. These witnesses have suggested that that move encroaches on provincial jurisdiction, and they said it may lead to eventual court challenge. What's your take on this?

Ms. McClenaghan: It may well lead to an eventual court challenge, but I think that the ultimate result would be that the federal government would be found to be within jurisdiction to include those impacts. The interprovincial pipelines are federal jurisdiction, and so consideration of all of the impacts of those projects is well within federal jurisdiction.

That being said, the Supreme Court, in various cases, has ruled that environment per se is not a federal versus a provincial matter and that both spheres have proper realms where they should exercise their jurisdiction, and even when you have something that is exclusively federal jurisdiction, there are still spheres where the province can and should exercise its jurisdiction to make sure that its water-taking permit regime is applied, for example, or other types of legislation.

We live in a federal country where municipal, federal, provincial and First Nations governments all have important roles to play. There's an interesting analogy to the Supreme Court's decision in the succession case, which you may remember. The court said in that case that all of the levels of government have an important role to play, so I don't think we get too far by just saying it's out of jurisdiction, end of story. The question is: Should the impacts be assessed?

The other thing I would say is that there are provisions in both the federal and the provincial environmental assessment regimes, and most other pieces of environmental legislation, that do allow for accords or harmonization agreements or joint cooperation agreements, and we absolutely endorse that. There's no reason not to set up those agreements and pursue the dual assessments together.

Senator Eggleton: Secondly, the federal government has also announced in the last few days its agreement with the UN Declaration of the Rights of Indigenous Peoples. How do you think that changes this whole process of dealing with these pipelines?

Ms. McClenaghan: I think the change is extremely important from a point of view of indicating the will of the Canadian population and government to seriously engage with Aboriginal and indigenous peoples and their rights and not just to have processes that pay them lip service, if they even do that. That's one significant thing arising.

We already had a situation before that where we had constitutionally protected Aboriginal and treaty rights under section 35. We already had inherent rights of First Nations, particularly in Western Canada, in many cases, where there were unceded lands, but that's true in many places across the country. And we already have a long history of First Nations managing their land.

There have been examples of nation-to-nation or government-to-government agreements over the years, which have often gone very well, and we've had many cases where we've had negotiations about how there is going to be co- management of resources.

I think it's evolutionary, but also revolutionary, to have the official recognition of the UNDRIP.

Senator Eggleton: Finally, you've presented a letter to the Ontario Energy Board on the Energy East pipeline, indicating concerns about natural gas and the effects of the proposals on natural gas consumers. Can you elaborate on that, please?

Ms. McClenaghan: Yes. Our involvement in that project was by way of invitation of the Ontario Energy Board, which was asked by the Ontario minister of energy to advise the Province of Ontario as to the position it should take on that project.

I also am very engaged in the Low-Income Energy Network, and we are very concerned about access to energy and energy prices by rural and low-income Ontarians in particular.

In many cases, there isn't access to natural gas, so there was interesting analysis by economists for the Energy Board expressing concern that, if one of the lines is converted to crude, there might be constraint on the ability to add new supply to additional areas of rural Ontario that don't presently have supply. That's basically the concern.

Senator Eggleton: How much of this involves reusing natural gas pipeline?

Ms. McClenaghan: In that project, the proposal is to take one of the TransCanada pipeline lines and convert it from natural gas to crude. So they're going to reconstruct a section of it. They're going to upgrade a section of it, and they're going to reuse a section of it.

Senator Eggleton: Your concern is that this does affect consumers, and you're particularly concerned about low- income.

Ms. McClenaghan: And rural.

Senator Mercer: You are in a difficult spot. You come from the Canadian Environmental Law Association, with concerns about law. Our discussion here is how we facilitate or come up with the answer of moving a product from Alberta and Saskatchewan to the coasts, in particular to the East Coast, which is my concern. We find ourselves sometimes at odds, so don't let us intimidate you too much. We're trying to find a way to do our job. I don't think any of us believe that we are going to be out of the oil business any time soon in this world, and we happen to be in the oil business big time in this country.

We need to talk about a couple of things — like Lac-Mégantic, like the oil spill in the lakes in northern Alberta from trains. We need to talk about the Exxon Valdez. We need to talk about those types of environmental disasters that have happened in the past.

If you would accept the statement that we are going to move product out of Alberta and Saskatchewan to market, the question then becomes, how do we move that product as safely as possible? Would you agree that moving the product by pipeline is safer than train and safer than trucks?

Ms. McClenaghan: What I would say about that is that I don't have in front of me a proper environmental assessmen,t the way I'd want to see it conducted, that's an actual proper comparison of alternative methods. I think that should be done.

I already gave comments earlier about needing a broader alternative to assessment, but then once we get down to the specific point where we're talking about particular types of projects, like pipelines, or getting product to market, as you say, then we need an alternative methods analysis.

Done properly, it would engage in questions like: What are the adverse impacts? Who does it benefit? What can be done to mitigate those impacts? Where are the risks falling? All of those things are the things that would be outlined in a proper EA.

I mentioned earlier that the commentary from the environmental and academic community looking for improved environmental assessment or next-generation environmental assessment is calling for a tiered approach. You'd start to set out some of those regional or strategic questions first, and then once you work your way through those, then you'd start to look at the particular projects and the alternative methods analysis.

Senator Mercer: That all sounds pretty good, but it also sounds like it's going to take a lot of time. One of the problems with our energy sector is that we've got one main customer and, by the way, a customer who doesn't pay the same price as is paid in the rest of the world. They pay the crude price as opposed to the price that you would pay if you were buying it from the Middle East.

With that knowledge and understanding, I don't think anybody around here is against doing a proper environmental assessment. It's a question of time. The reality of this country today is that our economy is driven by what happens in Saskatchewan and in Alberta and in the energy sector. What happens in downtown Toronto or in downtown Montreal or downtown Halifax is really driven by what's happening in Fort McMurray and elsewhere in Western Canada, and has been for some time. We only have to watch what happens at the gas pump.

How do we get around this? I'm not suggesting that we not do environmental assessment, but there's got to be a way where we get this done in a quickly and that crosses all the Ts and dots all the Is, that is not being done as an impediment but is being done as a complement to us maintaining a very important industry, not for Alberta and Saskatchewan but for all Canadians.

Ms. McClenaghan: I have several points. First, I would never advocate environmental assessment taking a long time just for the sake of taking a long time. We too have, in various studies, like the House of Commons' study on environmental assessment, made submissions about how environmental assessment could be made more efficient and more satisfactory in many ways for all the participants. In fact, it's very tough for the public to participate in an environmental assessment that's drawn out too long. Can people take time off work, can they really participate, et cetera. If they're paying experts, can they keep fundraising to pay those experts. So it matters to everybody to have environmental assessment that is done in a proper time frame.

However, for something like pipeline projects, I noted that some of the projects are proposed to have a lifespan of 50 years, so we do need to take some time up front to make these decisions properly. Once that investment is made, it's there for a long time.

If things are changing economically so that we end up with stranded assets, which can happen in various scenarios, then you start to worry about do you have the proper maintenance on those assets, for example? Is the risk going up because of that? And things can change very fast economically. It's a yo-yo in terms of oil prices lately, and we've seen that.

The economy is diversifying, and the fact that we have a situation where the fossil fuel context has a big impact on the whole country is not necessarily the way it's going to be in 15 years or in 20 years. We have to start thinking about what we should be doing to make sure we're part of next-generation energy when it's not fossil fuel dependent,, and a hint of that comes from the fact that in 2015 renewable energy investment globally exceeded fossil fuel investment globally.

Senator Mercer: I'm not suggesting that the world is not changing, that eventually everybody is going to be out of the oil business, because we're going to have to switch to something else. I do think, though, that my crystal ball doesn't tell me that we're going to be out of that any time soon, and we need to survive in the market and diversify.

You made recommendations on how to make environmental assessment more efficient. Efficiency for one person is not efficiency for another. Efficiency for the producer, for the oil companies, is getting to the end, where they're able to move the product. Efficiency for some environmental groups is when they stop moving product from the oil fields to the market. Is there a happy medium where we're doing a proper environmental assessment but also moving product to market as quickly as possible and getting the best price for Canadian producers?

Ms. McClenaghan: I wouldn't presume what the answer is. Let me first say that yes, there are processes that could work much better for everyone.

Second, in terms of what is the outcome, if you did a strategic environmental assessment or an assessment of alternatives for energy services, I'm not sure that the answer is going to be new pipelines. I'm not precluding that that would be the answer.

Senator Runciman: Your association calls itself the Canadian Environmental Law Association. Can you tell us a little bit about that? What's your national membership? Where is your head office?

Ms. McClenaghan: We're located in Toronto. As I indicated a few moments ago, the only membership is our board of directors. CELA was formed in 1970, which you'll remember was the year of much environmental activity, and it was formed at the U of T by U of T students in response to the formation of Pollution Probe, who realized they needed lawyers to take on their cases. We're federally incorporated and we do take a very active and a 46-year-long interest in federal law.

Senator Runciman: We have limited time. You're only made up of your board of directors. Where do they reside?

Ms. McClenaghan: The current board resides in Quebec and Ontario. One member is in Quebec and the rest are in Ontario.

Senator Runciman: Downtown Toronto?

Ms. McClenaghan: No. Some are in Toronto, yes.

Senator Runciman: I'm just curious about some of the things you said earlier with respect to the rights of all parties. You talked about narrowed participation, narrowing it to directly affected or relevant expertise, and you felt that that was very restrictive. That's your association's view and your view too, I guess.

You said everyone is affected, so that seems to suggest opening the doors wide open, and I wonder how realistic that is. It strikes me, and maybe I'm being too cynical here, as a strategy to bog down the process. We see, as Senator Mercer mentioned, delay after delay and organization after organization, and we know that delays cost money and discourage investment.

I tend to believe that obviously we have to take every step necessary in terms of protecting the environment, but at the same time I think there are folks out there who are simply adamant, and we've heard testimony to this effect, and will never be persuaded that building pipelines is the right thing to do. Whether you are one of those or not, I have no idea.

I am curious about your suggestion with respect to participation in this process, implying that we should open the doors. When you say everyone is affected, that strikes me as limitless participation. The Ontario Energy Board and the National Energy Board have to set some guidelines on these things. How do you see those guidelines being drafted?

Ms. McClenaghan: Yes, I do agree it should be open to everyone, absolutely, believe it or not. I think that's very manageable.

I said earlier that there are multiple ways to allow for consultation and participation. You can do town halls, facilitation and mediation. In the case of the Walkerton inquiry, for example, there were about four different mechanisms of obtaining input. It was quite a good model.

The Canadian Nuclear Safety Commission, which I appear in front of regularly, considered the approach that the National Energy Board adopted and changed its mind, so anybody can write a letter to the Canadian Nuclear Safety Commission about one of its projects. There's no reason that that couldn't be adopted by the National Energy Board.

It's a different question about what level of participation people want, and it may well be that you would have a range of levels of participation, just like land-use tribunals would have, where somebody is a full party and they've got a set of responsibilities that go with that, while someone else is a participant and someone else comes to a public night to state their view.

But in no way do I see any justification for any Canadian to be denied the right to participate in these processes.

Senator Runciman: Are you fully funded by the Ontario government?

Ms. McClenaghan: We're primarily funded by Legal Aid, through a MOU with our board, and Legal Aid has a MOU with the Attorney General.

Sen Runciman: Does your organization have a view on foreign funding of opposition to development of Canada's natural resources?

Ms. McClenaghan: We have no official position, but I think the concerns that were expressed in recent years were inappropriate and exaggerated.

Senator Runciman: You don't see a problem with that. That's the way I'll read that.

Senator Black: First of all, thank you very much for being here. I was a little late, and I apologize for that. Being a lawyer myself, I very much appreciate the thoroughness with which you have approached your task today. While we, on the face of it, might disagree, I respect your point of view.

In addition to having a mark against me being a lawyer, I was an energy lawyer, so I'm very interested in your point of view because the environment is key to the energy industry, and maintaining it.

Have you had the opportunity to review the transcripts of people who have appeared before you here?

Ms. McClenaghan: No, I haven't. I often would do that, but I did not have a chance for this one.

Senator Black: I'm going to highlight a couple of things we've heard and then ask you a question arising from something you said.

You made the point that people are skeptical, which would mean, I presume, the environmental community is skeptical, but you can define it if it's more broad than that. I'm going to give you some information that has come forth in testimony, and I hope you can explain to me, after hearing that, why people would still be skeptical, including me.

We have heard that, in terms of safety incidents, pipelines are 99.98 per cent safe. We have heard that oil transportation by trains is 98 per cent safe, which is to say that in all movements of oil by train, 98 per cent are completed without incident.

We have heard that the pipeline industry is the largest employer of Aboriginal youth in Canada.

We have heard that billions of dollars of investment flows into the energy industry, which, of course, as I think one of my colleagues indicated, supports schools and bridges and prisons and legal aid organizations.

We have not heard but we take note, of course, that the Northern Gateway pipeline has asked for a three-year extension, just in the last couple of weeks, because their 31 Aboriginal partner groups require time to review their proposed line and, I would suggest, end point.

On your point of possibly denying natural gas to poorer and rural communities in Ontario, we heard just yesterday from a representative of the Canadian Association of Petroleum Producers that they understand this is a potential issue that they are monitoring closely, naturally, because there's an economic opportunity there. It goes without saying that for that gas to be delivered, it will require pipelines. People are alert to this.

We know that 700,000 barrels of oil a day are imported into Atlantic Canada and Quebec from countries such as Nigeria, Algeria, Libya and Saudi Arabia, which many people would suggest do not have the environmental standards and credibility that Canada has.

We note that both the NEB and CEAA, both of whom I have worked with very closely for decades, have international reputations for thoroughness. In fact, most recently we would have seen that, with respect to the Petronas LNG application in British Columbia, CEAA has been so thorough that they've come back to the proponents suggesting that, "No, your issue with sea grass is fine, but we need to look at some marine mammals.'' and that has been extended willingly because we want and need to get the environment right.

Of course, we're aware of ExxonMobil's 2016 review that, whether we like it or not, the demand for oil and gas will increase between now and 2040, not necessarily because of Canada but because of jurisdictions outside of Canada.

Given our safety record, the fact that we import oil from jurisdictions that do not respect either human rights or the environment the way Canada does, and given that we have world-class environment and regulatory organizations — of which you and your colleagues are not only intimately involved, but in which your participation is welcomed because your point of view is critical to success — I'm at a loss to understand how people can be skeptical. That's what I'm hoping you can help me with.

Ms. McClenaghan: You raised quite a few points. I'll address a few, and please remind me if there are any critical ones I didn't get to.

Senator Black: Maybe we can have a discussion.

Ms. McClenaghan: First of all, the statistics on safety are important, but as you know, 99.98 per cent or 98 per cent of many transactions, while very significant, still leaves the possibility for one accident that has an extremely serious impact.

Senator Black: That is always a risk.

Ms. McClenaghan: I mentioned Walkerton, which I was involved with for several years. You could well say, and we do say, that 99.999 per cent of drinking water samples are safe. But the day that everything goes wrong, everything really goes wrong.

The concern with environmental assessment I mentioned earlier in part is that when you're looking at accidents, if you're looking at low probability accidents, are you assessing the worst case? The Federal Court decisions, which were not the pipeline decisions but the nuclear decisions, basically say you don't have to do that. You can proceed based on the higher probability accidents. The people we work with don't accept that conclusion.

The same goes for the pipelines. Some of those terrible accidents we've had in the Gulf of Mexico and on the West coast have had long-reaching consequences, even though it was only one accident out of many days of activity or transaction.

Senator Black: I know about the Gulf of Mexico, but I don't know what you're talking about on the West coast.

Ms. McClenaghan: The Exxon Valdez accident off the Northwest B.C. coast.

Senator Black: That was 30 years ago. Very well, one was a blowout on a rig and one was an incident over 30 years ago.

Ms. McClenaghan: Kalamazoo was not 30 years ago. The point is, if you have a really bad environmental accident, every decade whether it's nuclear or oil, that's one too many. I was saying that the possibility of those accidents has to be taken very seriously in a way that it's not being done in environmental assessment today in Canada.

Senator Black: Why do you say that? What is your evidence to say that?

Ms. McClenaghan: I just litigated two cases where worst-case scenarios were clearly not assessed. The court said that was fine; and we're saying that's the reason we need law reform — because the public does not accept that conclusion.

The Deputy Chair: I want to make a couple of comments with regard to the testimony. You mentioned alternatives to the project and you mentioned services. Of course, services can always be provided. This is more a question of wealth creation and generating revenue, not services. I would like you to reflect on that when you go back.

You mentioned that renewable investment exceeded the more traditional investment in energy for the first time. Do you have any numbers on the percentage of power that it created as opposed to traditional nominal power and the cost of that in terms of being at a loss or at a profit? These are all things that people will look at when it comes to studying this.

Ms. McClenaghan: On the question of services, I want to be clear. I'm not talking about consulting services; I'm talking about the actual work that the energy does, whether it's heating or lighting or transportation.

The Deputy Chair: Thank you very much for your testimony. We appreciate your being here.

Our next witness is Bruce Campbell, Visiting Fellow, Faculty of Law, University of Ottawa. Mr. Campbell is currently on leave from his role as Executive Director of the Canadian Centre for Policy Alternatives.

Bruce Campbell, Visiting Fellow, Faculty of Law, University of Ottawa, as an individual: Thank you for inviting me to contribute to your important study on the safe transport of oil to market. My remarks are confined to oil by rail, specifically the rail regulatory regime, as this has been the focus of my work basically since the Lac-Mégantic disaster.

A brief bio note: I received the 2015 Law Foundation of Ontario Community Leadership in Justice Fellowship in large part because of my work on Lac-Mégantic. I'm currently at the University of Ottawa faculty of law, as the chair said, and on leave from the Canadian Centre for Policy Alternatives, where I was executive director for 22 years.

As you know, oil by rail will continue to be a significant, if secondary, part of the mix of transporting oil to market. There has been a dip in volume since its peak. I gather the Canadian Association of Petroleum Producers was here the other day. They're still projecting a potential tripling of oil by rail, from 200,000 to between 500,000 and 600,000 barrels a day by 2018.

The Canadian public overwhelmingly believes, and polling data confirms this, that the government's first priority is to protect their health and safety and the environment; and they don't trust corporations to regulate themselves. Only after a major disaster does the public lose confidence in government's ability to protect them. Only after a major disaster do flaws in regulatory regimes come to light.

Despite the uniqueness of major disasters, regulatory failures behind them have common features. These commonalities are evident whether you're looking at the U.S. financial crisis, at the Deepwater Horizon oil rig disaster, at Fukushima and, closer to home, Ocean Ranger and Westray. There were clearly at play in Lac-Mégantic.

They included vague regulations, lack of inspections to verify compliance with the regulations, lack of enforcement tools and penalties to ensure compliance, lack of will to enforce company violations and evidence of regulatory capture.

Capture exists where regulation is routinely directed to the benefit of the private interest of the regulated industry at the expense of public interest, where the industry is routinely able to shape the regulations governing its operations, block or delay new regulations, and remove or dilute existing regulations deemed to adversely affect costs.

Rarely mentioned is regulatory capture in the Lac-Mégantic disaster, but I believe there's prima facie evidence that regulatory capture was a contributing factor to Lac-Mégantic. Until Lac-Mégantic's causes are fully understood and remedied, transportation of oil by rail — notwithstanding improvements in rail safety to date — will continue to pose significant risks and engender public resistance.

Citizens groups have sprung up across the country — Safe Rail in Ontario, Convoi citoyen in Quebec and the Coalition des citoyens in Lac-Mégantic. People are determined to ensure that companies have social licence to proceed.

It was brought to light recently that the government had contributed $75 million to the $460-million fund that settled the class action and wrongful death suits, shielding Transport Canada, one of the defendants, from the threat of further legal liability. The settlement has shut down major avenues of inquiry into what happened and why, eliminating the means to compel witnesses to testify and to compel information to be brought forward that has not been brought forward to date.

The Transportation Safety Board report in 2014 was the most comprehensive investigation into the accident. The government deemed it to be the last word; nevertheless, many loose ends and unanswered questions remain. The people of Lac-Mégantic have called repeatedly for an independent inquiry.

Other major Canadian disasters have prompted judicial inquiries or royal commissions — Hinton Rail, Ocean Ranger, Westray, tainted blood, Walkerton — so why not Lac-Mégantic? It was an accident without parallel in Canadian history, in my view, if you combine the loss of life, destruction of property and environmental damage.

The Minister of Transport has the power, under section 21(1) of the Transportation of Dangerous Goods Act, to call a public inquiry if the release of dangerous goods results in "death or injury to any person or damage to any property or the environment.'' Surely if there ever was a cause for invoking such power, this is it.

I mentioned earlier failures in the rail regulatory regime. It's vital to ask what problems still exist, and I hope you consider this in your study.

I want to focus on regulatory capture. The railway companies have always been powerful players. That, by itself, does not constitute capture, but it's more likely to exist — and this is one of my main points — when a strong regulatory agency to act as a countervailing force to the industry is not in place.

In closing, these are a few ways you might want to consider to strengthen Transport Canada's resistance to regulatory capture. Number one: a well-resourced department with professional expertise capable of assessing the validity of industry regulatory proposals and making its own decisions on the best evidence in accordance with its public mandates.

I've looked at the transportation of dangerous goods budget and the rail safety budget. The rail safety budget was cut by 20 per cent from 2010 to 2014. Looking at the priority and planning projections for the next couple of years, there's no sense that it will be increased. The transportation of dangerous goods budget has basically been constant since I started looking at it in about 2009-10. I'm told that the Canadian Transportation Agency's budget has been pretty frozen for some time now. I think there need to be efforts to improve and strengthen the resources that are going to those agencies.

You're aware of the enormous increase in the transportation of oil by rail, certainly after 2011. As I said, it has dipped recently. In 2009 there was one rail safety inspector for every 14 carloads. In 2013, there was one inspector for every 4,500 carloads. In the transportation of dangerous goods section, only 16 transportation of dangerous goods inspectors were qualified to inspect on rail at the time of the accident.

I know that in 2015, under the former Minister of Transport, there was an increase in rail safety inspectors, but the union that represents the transportation employees is concerned that a lot of that increase is going to the audit function and not the on-site inspection. It's the on-site inspection that is a critically important component of this whole regulatory process, and I think that's one of the areas of weakness.

Other things to consider include in-house expertise and the ability to seek out independent information sources, rather than having to rely on information provided by the industry; measures to address the largely one-way flow of industry personnel to Transport Canada, including effective conflict of interest requirements and other accountability rules; a robust whistle-blower protection program to ensure that employees who come forward with safety concerns will not be harassed or threatened; increased transparency and information disclosure so that citizens groups and municipalities are better able to assess whether the department is fulfilling its mandate.

Finally, policy-makers need to acknowledge the indispensable role of regulation. For too long, regulation has been disparaged by deregulation advocates, labelled as a cost to business, as red tape, as an obstacle to competitiveness, as a silent job killer. Imagine working in a regulatory agency that's considered a silent job killer. It is time to restore the reputation of regulatory practitioners and their essential role as guardians of the public good.

Thank you.

The Deputy Chair: Thank you, Mr. Campbell, for your presentation. We will now have questions from the senators.

Senator Mercer: Mr. Campbell, thank you very much for being here. You started off by saying that you were going to focus on oil being moved by rail, and you made reference to a number of things there. Lac-Mégantic told us that all was not well in rail transportation of petroleum, and you have outlined some problems with the department which we will be talking about as we go through our study.

However, if you will accept the premise that we are going to move product from Alberta and Saskatchewan to market, and hopefully to tidewater so our markets can be more than just our American friends, do you have an opinion as to whether switching from rail to pipeline is a better bet?

Mr. Campbell: I had a look at some of the previous testimony from the Fraser Institute, and certainly when you are looking at loss of life, pipelines are, from the Canadian experience, a lot safer. I'm not qualified to make that comparison. I know what the statistics say. I think I heard them here tonight that they are both extremely safe.

Looking at the Transportation Safety Board statistics on main line train derailments involving dangerous goods, comparing 2013 to 2014, the number of main track derailments increased from 11 to 25, so that's more than a doubling of incidents. In 2012, there were five. That's a worrisome trend.

It only takes one, and the people of Lac-Mégantic paid the price, and the people of Gogama narrowly escaped loss of life. A derailment happened there just about a year ago. In fact, there were two derailments, one very close to the town. There was a lot of environmental damage. It's still in the process of being cleaned up, and there was damage to wildlife and to water.

Another figure that I picked up from the TSB in preparation for today, and this is about as up to date as I could get, in the first six month of 2015, accidents per million train miles involving dangerous goods were a reported 97, which is 33 per cent above the five-year average of 73.

It's not a trend that's comforting, and it's certainly not of comfort to the people of Lac-Mégantic.

Senator Mercer: You're not making us feel good. That's not your job; you are here to give us information.

You acknowledged the value of regulations. I think those were your actual words. We have respect for regulations. One of things we're concerned about with regulations is going too far or regulating too much. Is there an example of anyone who has found a fine balance with regulations in the transportation of dangerous goods?

Mr. Campbell: That's the job of policymakers. First and foremost, the public wants to be protected. That's the public interest. There is also a public interest in the economy. Obviously I would privilege safety over the economy and take a precautionary principle approach. It is better to err on the side of caution. That would be my response to that.

Senator Greene: Senator Mercer actually asked the questions I was going to ask, and I have been trying to think of a new way to ask the same questions, and I really can't. I thank you very much.

Senator Unger: Thank you, Mr. Campbell. Can you tell me again what "regulatory capture'' is?

Mr. Campbell: As I said, it's a common phenomenon that has been determined to be in existence in widely diverse disasters. In the case of Fukushima, it is another way of saying it is an overly cozy relationship.

The rail industry in this case is very powerful and always has been, but it is when there is routine or systematic evidence that regulations are made in the interests of the regulator, sacrificing the public interest. In my experience from looking at the Lac-Mégantic disaster, there is prima facie evidence of regulatory capture. It is one of the factors that needs to be understood and taken into consideration as we go forward and try to develop the safest possible regulatory system.

All the facts have not come out in this, and that's why I really believe there needs to be a public inquiry. The civil cases have been shut down. The Department of Transport isn't in a position to investigate itself, and the Transportation Safety Board was limited in what it could do. Again, it's to make the case for an independent inquiry. Regulatory capture would be one of the contributing factors that I think needs to be investigated.

Senator Unger: Thank you for that clarification. I was thinking something like Stockholm syndrome, but with regard specifically to calamities or disasters like this. Why does regulatory capture happen?

Mr. Campbell: It just does. It happens. It exists, and there is evidence of it. The obligation of companies is first and foremost to their shareholders. Their concern first and foremost is with profits and costs.

The regulators have the broader public interest, and others have made that observation. The recent Auditor General report was completed just before Lac-Mégantic, but it was published at the end of 2013, and one of its critiques was the process of safety management systems, which is integral to the regulatory regime. It noted that in a situation where companies are effectively self-regulating, it's supposed to be an additional layer to regulation, but in the absence of strong oversight, meaning on-site inspections, they are effectively self-regulating, and the Auditor General noted that conflict of interest between the corporate and the public interests. That's where the role of the regulator comes in.

One of the points I'm trying to make is that there's a weakness in the regulator partly due to institutions being not adequately resourced. I've interviewed people, former insiders, who told me that the large majority of senior staff actually come from the industry and are not able to leave their railway hats behind and remember that they are looking out for the public good.

There is a problem. I've suggested a possible way to increase the resistance of the agency to regulatory capture is to ensure that when that transition happens, there are proper conflict of interest guidelines. The Auditor General has also made that point and other forms of accountability to ensure that independence.

Senator Unger: Thank you for that. When I first heard about the Lac-Mégantic disaster, I was travelling with the Energy Committee. We were in Vancouver, and we were just completing a lengthy study on the safe transportation of hydrocarbons. We heard about this disaster. News was coming in very piecemeal and slowly. When I heard that a train had been parked on a hill above a town below and left overnight, I thought to myself, who would make such a decision? Who would do that?

Mr. Campbell: Yes.

Senator Unger: I'm wondering what share of blame would go to human error. Exxon Valdez, for example, happened because of human error, and to my thinking, a certain degree of human error would be contributed to this.

Mr. Campbell: I was at a friend's cottage, and she was reviewing a book for one of her courses. It was actually on the Ocean Ranger. We heard about this, and like millions, we saw the photos and it was just horrific.

I'm not a railway expert. I'm a policy analyst. I've been in that field for 30 years. I felt I had a framework of analysis that would help me analyze this and provide some independence, because as soon as the accident happened it was blame game. Everybody was blaming everybody else. I thought I could provide an independent, outsider perspective on this. Then I learned that my colleague lost three of her family members in that accident, so that injected a personal motivation. It's going on three years since I've been doing this.

You mentioned the train was left unattended on the main track. Something came out in the TSB report, and it was buried. It was only the work of an intrepid Globe and Mail reporter who discovered that the company had given explicit instructions not to set the automatic brake on the cars. There are three brakes; the independent brake on the locomotives, the automatic brake on the cars, and the hand brakes. We know that the hand brake part of it has been quite public, and I could talk about that.

The point is, though, how did Transport Canada let this company instruct its employees not to set the automatic brake? It was in the special instructions. Was it in the safety management system? We don't know that because they're not made public.

Then there is the question of unattended trains. Right after the accident, Transport Canada brought in an emergency directive. One was no more single-person freight train operations. Why single-person train operations were allowed is another story, which I think is incredibly important from a regulatory capture perspective. Another directive prohibited unattended trains on the main track. That regulation was reversed about six months later. Proposals were made from the railway association. There were measures proposed and accepted by Transport Canada to provide an equivalent level of safety.

I can't evaluate whether they provide an equivalent level of safety. Some people I've talked to say it's backsliding or diluting regulations, but there you have it. Freight trains carrying dangerous goods are still allowed, subject to certain conditions, to be parked unattended.

Senator Unger: Last week we had a railway company come in. I believe that industry has learned from huge mistakes like that, and I believe that they are working hard to try to improve their safety records. Indeed, the people that came in, their first thought really was about safety. They have developed a certain type of app which can be used to report. I won't go into all the details, but I was impressed.

I really feel that pipeline and railway are both working hard. The last thing they want is another disaster like that. Would you agree that they are working to improve these records? I'm sure the government transportation system has gone through some soul searching as well.

Mr. Campbell: I think there is that continual tension. There have been improvements in rail safety. There are still problems. I don't understand, for example, why measures still aren't in place that would ensure that volatile components of oil or diluted bitumen are removed before transportation of oil takes place.

I would question why the companies are not more insistent or okay with an increase in on-site inspections by Transport Canada. I understand there's a certain reluctance and a feeling that with the safety management in place, they know best and they're doing it. There's another side to this. If safety management systems are going to operate properly, there needs to be that traditional oversight as well as the company side of it and the safety culture, which is all important. If you're not having those on-site inspections, you're not getting that assurance that you've got the safest possible rail transportation, and that is my preoccupation. That's my assurance.

Senator Unger: Thank you very much.

The Deputy Chair: Mr. Campbell, I know your main presentation is about rail safety. However, I want to speak to you about something that intrigues me that you've written about before: It's comparing the way that the oil industry is managed in Norway to the way it's managed in Canada. I wonder if you could expand on that. I know you wrote an article a few years ago in regards to this — 1913. The oil world has changed — the price of oil. But I would like to hear your views on this and why you think the Norwegian management system is more advantageous in Norway and why we should emulate it.

Mr. Campbell: First of all, that work I did was back in 2012. I was invited by the Norwegian ambassador to spend some time in Norway. I greatly appreciated it; it was a great learning experience for me.

On the transportation side, there's very little transportation of oil by rail; it's mainly pipeline and marine. That's probably the case throughout Europe. I'm not absolutely sure, but I think there's not a basis for comparing, at least to my knowledge at this point, oil or transportation of dangerous goods by rail in Canada and elsewhere in Europe, including in Norway.

My report was mainly concerned with the management of petroleum wealth and comparing Norway and Canada. Of course, they have different political systems. Canada's federal structure with split jurisdictions and so on is much more complex structures than Norway.

Oil was discovered there only in the very late 1960s. Very early on, they looked at a whole range of issues with respect to the management of oil and the appropriation and distribution of oil wealth. They decided to keep it largely in public hands. At the same time that they were developing their state oil company, Canada was developing its state oil company.

They reached a consensus in the early 1970s. They called it the "10 oil commandments'' and they boiled it down into 10 very simple points. There was public management of the development, appropriation and distribution of oil wealth. It's not that there wasn't a role for the multinationals — of course there was a role — but they had a strong public service. They could evaluate and challenge. At the time, when they increased the taxes, the multinationals threatened to pull out. It didn't happen. The multinationals have been in there since that time, and they do quite well. But they have a pretty high tax on the companies: 78 per cent. The general corporate tax is about 50 per cent and another 30 per cent on the oil companies. And you know the comparison with Canada.

Its state oil company, which is a publicly traded company, is active worldwide, including in Canada, the U.S., et cetera.

One of the things they didn't do, which they did in Canada, especially in Alberta, was reduce other taxes as the oil revenue was pouring in. Norway didn't do that.

If you look at the overall personal GST-type taxes, consumption taxes are very high in Norway, as they are throughout Europe; they are among the highest. Someone asked earlier this evening about how they're able to provide this very generous social safety net. I think that's part of the reason.

They were also very conscientious environmentally. Gro Harlem Brundtland was the prime minister in the 1980s — the first UN report on climate change. So they had a carbon tax back in the early 1990s. Now, their carbon tax is the equivalent of $60 a barrel or something like that. It's not a big source of revenue compared to other revenue sources that the government has.

That's an encapsulation of some of the differences between Norway and Canada. Public management and a strong public service sector were certainly ingredients.

Senator Mercer: Thank you for your presentation. I want to touch on a couple of points you made in answering other questions.

You talked about employees of Transport Canada mainly coming from the industry.

Mr. Campbell: Yes.

Senator Mercer: I have managed some good-sized organizations, and I've always thought it was best when you had people who understood what was going on managing the process. I also want to make it clear I don't think we want to be critical of employees of Transport Canada without specific evidence that there's something wrong.

You sort of hinted that the regulations are made in the interests of the regulated as opposed to the general public, and I wrote a note to ask if you are suggesting collusion between the regulator and the regulated.

Mr. Campbell: I'm not assuming that.

Senator Mercer: You almost said "not necessarily.''

Mr. Campbell: I don't have evidence of collusion.

Let me give you an example where I'm concerned about regulatory capture. It concerns single-person train operations and why MMA was allowed to operate its trains with a single operator — a company with a terrible safety record .

What I learned as I started investigating this is that the Railway Association of Canada redrafted the rules back in 2008. It consulted. It did so over the objections of the unions. It redrafted the rules, and there was a provision in there that it instituted called general rule M.

Basically, before general rule M, there was only one railway in Canada that could operate with a single operator, and that was a railway in northern Quebec and Labrador. They got a ministerial exemption to do that. With that ministerial exemption, they had to fulfill 69 conditions, I believe it was, to be able to operate. General rule M put that aside, so it no longer had to have a formal ministerial exemption.

So MMA, which had been in operation for 10 years and had seen this, wanted to have single-person train operations. Once general rule M came into place, it came back to Transport Canada. The Railway Association of Canada was very much an advocate on its behalf to bring in single-person train operations, even though the steel workers union; the company; and the union of transport employees, which organizes inspectors et cetera at Transport Canada, were opposed to single-person train operations. People in Transport Canada, in the regional office in Quebec, were opposed. There was all of this opposition.

Transport Canada itself had commissioned from the National Research Council a study of single-person train operation. It came back and recommended that before this goes ahead, that a pilot study be done, that there be an agreement on the route, and that there be careful evaluation before proceeding. This was maybe three or four months before MMA started operating its oil trains with a single-person operator. That was in July 2012 and it operated until July 2013.

I had seen email correspondence through an Access to Information request. That's one reason I'm suggesting that there be an independent judicial inquiry so that all that information is on the table and people are compelled to testify.

Senator Mercer: I don't disagree with that. We would all like to get to the bottom of this. I'm not against a judicial inquiry or some type of inquiry. I am very cautious, though, that we not point the finger at officials of Transport Canada or at the railway association without having that inquiry to back it up. I appreciate your testimony, but I am also concerned that we don't make decisions or recommendations based only on hearsay and without hard evidence. I have a good deal of faith in the people at Transport Canada, although I am concerned about the budgetary points you made. Governments like to balance budgets, but you don't balance budgets on issues that enforce regulations that have to do with safety. That's all I have to say.

Mr. Campbell: I agree.

Senator Unger: Can you tell me whether rail is facing a lack of social license, which, by the way, some witnesses before us previously described as something amorphous and no one really knows.

Mr. Campbell: The people of Lac-Mégantic had oil trains going through the community. They're not going through now. There's a delay for one year. Whether beginning in 2017 there will be oil trains or trains carrying dangerous goods going through, I don't know. If you've ever been to Lac-Mégantic, it is pretty scary to imagine what happened.

The people of Lac-Mégantic want a bypass. They believe that the government owes it to them. Mayors in other cities, such as Toronto and surrounding municipalities, have called for similar bypasses. I think in the case of Lac- Mégantic, it's particularly the case. They are also calling for a judicial inquiry because they feel that there are lots of unanswered questions. Until those questions are answered, they won't feel that the regulatory system is strong enough to ensure rail safety for their community and so that another Lac-Mégantic doesn't happen elsewhere in Canada.

The Deputy Chair: Thank you, Mr. Campbell. We appreciate your coming to see us this evening, and thank you for your time.

Mr. Campbell: Thank you for inviting me.

The Deputy Chair: Next week we will continue the study and hear from the Commissioner of the Environment and Sustainable Development, Teamsters Canada and Safe Rail Canada.

The meeting is adjourned.

(The committee adjourned.)