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