Standing Senate Committee on Transport and Communications

Proceedings of the Standing Senate Committee on
Transport and Communications

Issue No. 5 - Evidence, September 19, 2016 - Afternoon

EDMONTON, Monday, September 19, 2016

The Standing Senate Committee on Transport and Communications met this day at 1:31 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, this afternoon the committee is continuing a study of the development of a strategy to facilitate the transport of crude oil to Eastern Canadian refineries and to ports on the East and West Coasts of Canada.

I would like to introduce our first panel from the Capital Region Board, Malcolm Bruce, the Chief Executive Officer, and Neal Sarnecki, the Regional Project Manager.

I would ask you both to begin your presentations, and then afterwards, the senators will have questions.

Malcolm Bruce, Chief Executive Officer, Capital Regional Board: Good afternoon. I am Malcolm Bruce, as mentioned, the Chief Executive Officer for the Capital Region Board.

On behalf of the Capital Region Board I would like to thank you for the opportunity to speak with you today on this very important matter.

Before I begin perhaps some background would be helpful. The Capital Region Board is defined as a growth management board responsible for regional level planning and collaboration within the Edmonton Metropolitan Region. The region consists of 24 municipalities that include the City of Edmonton; five counties, one of which is a specialized municipality; and 18 cities, towns and villages that are within the confines of those counties. We are now 1.2 million strong with 725,000 jobs in the region. That represents approximately 30 per cent of the provincial GDP.

The board itself consists of 24 members represented mostly by the mayors of each municipality within the region. The board's mandate is to prepare the region for responsible growth and continuing prosperity.

Current projections indicate that in 30 years' time by 2044 the population will nearly double to 2.2 million people with 1.2 million jobs, essentially becoming the same size as metro Vancouver today. Decisions, as you know, that we make today will determine our outcomes of tomorrow.

This region is the hub for the largest petrochemical cluster in Canada. This is a key economic and growth driver, not just for the region and the province but for the country.

I am here today to share the relevant conclusions of a report recently released by the board entitled the Energy Corridors Master Plan. It is a unique and foundational document for the Edmonton Metropolitan Region.

At its core the report recognizes the significant downstream activities that our region provides. More importantly it says coordinated planning of pipelines, particularly in the Edmonton metropolitan region, is the key to value-added opportunities and coordinated planning of pipelines means opportunities for more clustering and local upgrading that would benefit both regional and national economies.

Clustering means efficiencies. Local upgrading and refining mean local job creation, wealth generation, industry diversification and contribution to the national economy. Pipelines are key enablers in this aspect.

I would also like to answer three questions about why this plan was commissioned, how it is relevant to this committee's study of a national crude oil transportation strategy and the role of leadership in creating a national strategy.

Question 1, why the Capital Region Board commissioned the Energy Corridors Master Plan. In its land use planning capacity the board has been increasingly interested in pipelines as a critical component of the energy supply chain. There is a map in your package and I will speak just briefly to it as a point of reference.

We have learned that Alberta alone has about half of the country's pipeline network and we have learned that the highest concentration of those pipelines is in the metropolitan region, as you can see from your map when you focus on where Edmonton is.

Of particular interest we learned about the increasing constraints in the region that are jeopardizing important growth in the critical northeast industrial heartlands. As mentioned, the largest petrochemical cluster activity in Canada is found in Alberta's Industrial Heartland, including the newest refinery in North America, the North West Refinery Project.

We have learned that without a pipeline strategy and policy framework the northeast of the region would be completely clogged in just a few more years and essentially without an efficient means to grow and place more pipelines. In a very short period of time our resources would then bypass that heartland area and flow out of this country for market upgrading elsewhere.

The strategy within the Energy Corridors Master Plan emphasizes the coordination of energy corridors being the best way to ensure efficiency and sustainability, to keep business here and to also keep more of the valuable downstream enhancements in this region.

In short, by establishing and protecting regional energy corridors future prosperity and sustainability can go hand in hand, contributing to both local and national economies.

We are promoting this at a difficult time when the politics of energy and pipelines in particular is under attack. A case in point is the Capital Region Board recently voted to support both the Energy East and Northern Gateway pipelines that are under review.

Additionally Transportation Minister Garneau is currently in the process of contemplating a marine tanker ban on British Columbia's North Coast, which would have significant consequences for the projects like Northern Gateway. This ban would severely impede Alberta's ability to diversify our economy or our markets for our product. My colleague here coined a phrase which we have recently sent to the minister, "It is our coastline too."

Question 2, how does the plan support a national strategy to facilitate transport of crude? Pipelines are another form of nation-building like the rails, the roads and information networks. It is noteworthy that both rail and roads were not without their controversy as well when they were being built.

Consider these facts. More than two-thirds of Canada's energy demand is met by natural gas or products made from crude oil. Currently 3 million barrels of crude oil is being transported by transmission pipelines in Canada every single day. That is equivalent to 4,200 rail cars, which would create a single train that is 75 kilometres in length.

The current difficulty in moving crude oil is jeopardizing important growth through market expansion. In the big picture the ultimate risk of indecision and/or inaction on the development of a strategy to facilitate transport of crude oil is to accept a lesser position on the economic world stage, and that risk is much greater than the perceived risks of pipeline development to our quality of life and the prosperity that we enjoy in Canada.

Question 3, this is the opportunity for national leadership. The loss of public confidence in pipelines cannot be overstated. This is a result of a lack of leadership and a coherent narrative in communicating the risks against the overwhelming benefits.

The fact is that despite popular wisdom the safety of pipelines is equal to or better than rails and roads. Pipeline transmissions account for 97 per cent of all natural gas and crude oil moved in Canada, with a 99.9995 per cent safety record.

It is also important to recognize the leadership evidenced in the cooperation of pipeline developers to comply with the ever growing conditions imposed on their projects. A good example is the modifications made to the Northern Gateway project.

There is now broad public and industry acceptance of the need for sound environmental practices and consultation. Successful energy extraction and market diversification could play a major role in Canada's global environmental leadership aspirations but a broad strategy is needed, a broad strategy that addresses both new growth and value-add for Canada like what is happening in the Edmonton Metropolitan Region, and that meets the demands for shipping of raw products to new markets. A broad strategy will deepen and strengthen our resiliency, our ability to withstand the economic shocks that may occur in one part or another of the industry sector.

In conclusion, our region's rationale in developing the Energy Corridors Masters Plan was a response to a clear need. The board demonstrated leadership in addressing it. There is a clear need for further collaboration on pipeline development and a general discussion across the country about energy extraction, that is, to save us from those consequences of current misinformation that is being perpetuated and/or a lack of information and a lack of good planning. Our research and experience support the development of a national strategy. To quote, "A rising tide lifts all boats."

We know Canadians want to share in the economic benefits of the energy industry but only if they know that extraction, distribution and the use of the resources is sound and principled. Canadians need reassurance that that is being done.

Strong leadership to send those messages will ensure a successful national strategy for the transport of crude oil to Eastern Canada refineries and to the ports both east and west.

As we have learned from the Energy Corridors Masters Plan, the strategy must first be based on facts, on broad collaboration and on a shared vision for future prosperity. These are key elements of a national strategy. The strategy must be championed and seen to be championed by our national, provincial and municipal leaders and energy stakeholders.

As a personal aside, I spent 30 years in the army and it has given me a perspective that I think is relevant here. In 2006 I was deployed to Iraq where I was a lead planner for the multi-division in the south that was responsible for the four southern provinces in Iraq.

The critical economic function outcome that I had to come to terms with was the establishment and the security of a pipeline to the Port of Umm Qasr from the oilfields to ensure that the Iraqi government received fair market value for its 1.2 million barrels a day that flowed from the oilfields. My point is that they got it. They understood the importance of getting fair market value for their oil to ensure their prosperity.

Thank you. I am happy to take any questions.

Senator Black: Thank you both very much for being here and for that very strong presentation.

As you know the purpose of this study is to endeavour to develop exactly the type of strategy you are talking about but as you also know, because you are very informed on these matters, time is not our friend here any longer. We do not have a great deal of time. The time for talk is close to over. The window for Canada is closing would be my view. You could disagree and if you do disagree, please let me know.

We also want to exhibit strong leadership. That is why we are here. Give us the two or three things this committee should be focused on in your view to achieve the result that you want to achieve.

Mr. Bruce: Thank you, senator, for your question. The first one I think is important is that we need to be able to provide the facts to Canadians. I think the narrative is lost a little bit in the conversation that currently is occurring. I think changing the narrative around what pipelines are, what they do and how they are being used today is important.

I recently read an article in one of the newspapers — I think it was maybe The Globe — a few days ago that said Canadian pipeline companies are doing exceptionally well in the U.S. because there is an environment where it seems to be more permissive and the narrative around pipelines in the U.S., other than say Keystone, by and large is very important. I would say narrative is the first one.

The second one is that I have to go back into the leadership point. This is a national issue and it has got to be dealt with from a national perspective. The time, as you said, is short and I agree with you. I think there are a number of projects that need to have some decisions and kicking those decisions down the way is not helpful.

We have a regulator that we are supposed to have faith in, the National Energy Board, and they have made some pretty solid recommendations based on a significant amount of input from stakeholders. Yet it seems to be being discarded and not acted upon. I would say to you that number 2 has to be good leadership and decisions on the information provided.

Then the third is I think we need to enhance the credibility of the National Energy Board. I think the National Energy Board is suffering a little bit from a lack of confidence in the general public. I think somehow we need to look at how we can enhance that to regain the trust and confidence of Canadians in that organization.

Senator Black: What are the consequences of us not achieving those goals?

Mr. Bruce: A failure to deliver the kind of prosperity I think this country can deliver on.

I would say to you that we all are looking south of the border. As you know, the Americans up until last month were the number 1 crude oil producing country. They have slipped a little bit because of some of their explorations. They are number 2 behind the Saudis but not by very much. They are producing about 12.2 million barrels a day, and they have a potentially very protectionist president coming in. Right now our only option to ship our crude is to the south to the Americans, except for 300,000 barrels into Vancouver and the like.

I would say to you that we are sitting on a bit of knife's edge right now. If the new president decides that he wants to become self-sufficient—

Senator Black: He or she.

Mr. Bruce: He or she wants to be self-sufficient then I think we would be in severe jeopardy of losing some of our prosperity.

Senator Unger: Thank you very much for your presentation. Your closing statement is nothing short of jaw-dropping. If they get it in Iraq what is wrong with Canada?

Would you agree that our pipeline agenda has been hijacked by special interest groups in the name of the environment? You know that they are paid. They are funded by the foundations from the States although now that the U.S. is energy self-sufficient they may stop funding these activist groups, but we always seem to be stuck with the problem of how to convince the opponents of the pipelines that this is a net benefit to Canada and indeed each of the provinces individually. We had a presenter this morning who offered very good statistics about how each and every province going east especially or west would benefit. How do we change this narrative?

Mr. Bruce: That is a very good question, senator. Jeffrey Simpson, a few months ago, wrote a number of very poignant articles in The Globe and Mail that related directly to national level projects. Is it still possible to do national projects in this country? Every time you want to do something of a national nature yellow flags run up the pole. It does not matter who it is from, whether it is provincial, municipal, First Nations, environmental, or a number of other reasons. I am not saying any are good or bad. I am just saying that there seems to be a consistent approach of saying not in my backyard or that is not what we want or these kinds of things.

It takes national leadership to overcome those concerns. If you look at our history of the building of the rail it was not pretty. I would say to you that it still probably is not done the way we wanted but it accomplished one thing, which was the delivery of a rail system we continue to use to this day that connects East and West.

I have to say to you that leadership goes back to the heart of this issue. If we want to solve national issues we need national leaders to solve national issues in whatever context that means.

Senator Unger: You mentioned Minister Garneau, "It is our coastline too." Was he here in Edmonton?

Mr. Bruce: No. We found out on August 26 that the moratorium is having public consultations specifically focused in B.C. that will determine whether or not there will be a moratorium on tanker shipment on the inner coastal lines, which was kind of surprising. That consultation is due to terminate on the 30th of this month without any consultation in places like here.

Just so everybody is aware the Northern Gateway pipeline actually initiates itself here. It starts in Bruderheim, which is part of the Edmonton Capital Region and will run for 70 kilometres west within the capital region boundary.

We are very keen and we think we have a say. That is why our board took a position to write a letter to Minister Garneau saying, "At least extend the engagement, please" and "Oh, by the way, please come and speak to us because we would really like to have a conversation with you."

Senator Unger: That is great.

Mr. Bruce: That was Neal's point, "It is our coastline too." I loved it so it is now on their letterhead. It is in their hashtag.

Senator Unger: Alberta has been the economic engine of Canada for many years, and now we need help. I know that our provincial partners way in the East want the pipeline as well but it is getting it from A to B.

Senator Mercer: It is an interesting organization, the Capital Region Board. I listened to your description of the makeup of the board and I listened to your presentation. It was very good.

Where do you go from here though? We talked about leadership and we know it is all about leadership, but leadership sometimes needs a push. Leadership sometimes needs to be led or directed. Where do you go from here? You made a very good presentation to this committee. It will have an effect on what we recommend, it seems to me. Since you are made up largely of municipal representatives have you then taken this argument to the national municipal organizations? Have you presented to them?

I understand the frustration of understanding the problem and not having everybody else understand it but you have to educate the rest of us, not necessarily us at this table but Canadians in general. You have to get across the country and tell the story. What are you plans? Where do you go from here?

Mr. Bruce: Excellent question. Thank you, senator. Yes, we recognize that sometimes fate is in your own hands and I think a key driver to that is what you do yourself.

With regard to the Energy Corridors Master Plan we are dealing with the provincial authorities because most of the remit in there is provincially led. However in conversation with the CEO of the Alberta Energy Regulator, whom I meet with regularly about this particular question, he is all in as well. As you know he looks at it not just inter-regionally but also interprovincially. He is aware of our concerns and about our need to move this project along and he deals a lot with the NEB.

You will see very shortly the letter on the Energy East pipeline. The board will be publishing that both provincially and federally for the various elected officials but more importantly also for the national media.

We are not going to send it to Denis Coderre or any of those folks. What we want to do is send it to Canada. We want to send it to the people of Canada because we just think that we need to create that change in narrative. That is what we really want to talk about.

I have travelled this country. I have lived in seven different provinces. I can tell you that when I drive by Lévis where the refinery is there or down in Saint John, New Brunswick, they are not using Canadian oil. They are using oil that is shipped in through the Gulf of St. Lawrence all the way down the seaway until you hit Quebec City, and you cannot tell me that is any more safe than pipelines.

The value-add is not occurring from our own products. I think this country has so much potential and we just do not fully realize it. It is a change in narrative is what I am really trying to get and we are starting it with communication to the public, direct communication to the public.

Senator Mercer: Continued reference to railways and highways, the Trans-Canada Highway system and the railway in our early part of our country's history, is a good one when we talk about this. I think what you need to do — and I know you already know this — is that you do not need to talk about the economic benefits to Edmonton and area. You can stop talking about the economic benefits to Alberta, but what you have to talk about is the economic benefits to Quebec, to New Brunswick, to Nova Scotia, to Ontario and everybody else. As we have heard there are huge economic benefits, if for nothing else, from a tax point of view.

Alberta has been driving the economy of this country for a number of years. I as a Nova Scotian recognize that and I appreciate it. Back when this country was founded my province was the economic generator driving the country. Times have changed. We need to put it in a context that Mr. Coderre's constituents understand that a pipeline is beneficial to Montrealers, that people in Quebec City understand that a pipeline is beneficial to Quebecers, and that the people in Ontario understand, et cetera.

I really think that is a challenge for you because you have to really work it, plus the fact that we heard earlier today from other people talking about the number of jobs that would be created to build a pipeline. I am particularly focused on the pipeline east. The pipeline west has the same effect going west. I think that is a really a strong benefit.

Senator Black has brought this up several times. We are talking about a stimulus package without any government money. This is the largest stimulus package that any industry in this country could come up with and they are ready to go. I mean they are ready to do this fairly quickly. Obviously there are a whole bunch of T's that need to be crossed and a whole bunch of I's that need to be dotted.

I did want to ask another question. You talked to municipal people at the national level and you have given me a bit of an answer. What about the other major player that we need to talk to in this process, the Aboriginal people, group by group by group, by group because it is going to be a long process?

With the proper leadership saying that we are going to do it and then sitting down and talking to people, I think that is the kind of leadership we need. I have not seen leadership from the companies involved saying here is a plan to involve Aboriginal people, particularly young Aboriginal men and women in helping build the pipeline, and then here is a plan for Aboriginal people to help manage the pipeline because it is going to be going across their land in many cases. Is there a way that they get a piece of the pie in a percentage term that makes great sense to them? Do you have a plan for that?

Mr. Bruce: I will address the Aboriginal question second. I just want to address your point about some of the economics. It is all anecdotal, but I was up in High River last year and I was talking to a trucking firm owner. He just had to let 20 people go. Not a single one of them were from Alberta. There were 15 from the Maritimes, 3 from Quebec and 2 from Ontario.

My EA just came back from Cape Breton. She is from Cape Breton. She was down there at a house party with 15 people and 10 had lost their jobs in the oil sands, 10 out of 15.

When you talk about a pan-national problem in terms of energy I think it is important to recognize just how influential the energy sector is across the nation. Those are just anecdotal examples.

Senator Mercer: That is why Senator MacDonald and I in particular completely understand the economic effect the downturn in Alberta has had. We have seen it. Senator MacDonald and I both have friends or neighbours who are home now. They were travelling back and forth to Alberta or were living in Alberta and they are back home.

I was driving to the airport yesterday and my wife mentioned that a car driving by was from Alberta. I said, "He has got a long drive home." Then we had a second thought and said, "He is not in for a long drive home; he probably is home now," because he had come home in his car with Alberta plates on.

We understand that this is a sales job. We need people on our side to get this job done and we need leadership. There is no question that leadership is key. Go back to the Aboriginal question.

Mr. Bruce: On the Aboriginal front I have been fortunate in my life to have spent a lot of time with First Nations people in this country in all contexts, north, south, west and east. I will say first and foremost they are very engaging and to be honest with you as long as you reach out to them they are very accommodating.

My most recent experience was when I was responsible for a portion of the security for the Winter Olympics in Vancouver. Starting in September, the year before the Olympics, I was out there engaging with a number of First Nations because we were going to be operating, providing security and footprint on their traditional lands.

One of the chiefs from the Squamish Band said it would be really nice is to have a little show and tell about what kind of security apparatus we are going to have. We put together a little plan. It involved all elements, not just the forces but other things, and in the end 35,000 people came out for that little dog and pony, and that was all based on an idea of the Squamish chief. These are the kinds of initiatives you can get out of them when you are willing to engage them.

I will say, though, I think there is a bit of uncertainty with the recent Supreme Court decision from last year where the understanding we had on consultation is now changing or is migrating. We are in the process of finishing our growth plan, which is a plan that is going to generate how we are going to grow for the next 30 years in the capital region. I too am now reaching out to the six bands that call this their tribal land, the Treaty 6 folks for the confederacy, as well as the Metis Nation of Alberta.

I do not have a duty to consult because I am not the provincial government, but I also know that I have an obligation to consult. I will not use the term to consult but at least engage with the Aboriginals to make sure because there are a lot of common themes. You are right. Housing and employment, all these things are important aspects. I think there is a way. You just have to sit down and chat with them. I think there is a mechanism for doing it.

Senator Mercer: In my meeting with the Aboriginal leader yesterday I walked away with the attitude that there is a win-win here for everybody if done properly, openly and honestly in dealing fairly with the Aboriginal communities.

I see an absence of anybody doing it from the corporate side. We have talked about the government side as well, but I do not see corporate leadership happening here. Am I wrong?

Mr. Bruce: I cannot really comment on specific companies and how they are doing but I do know that Northern Gateway's current engagement strategy with First Nations along the route has been fairly successful. I mean if you look at the engagement process that they are running now it has been fairly successful.

I would say to you I am not sure about Energy East. I do not know enough details on it, but I would say that any strategy in any delivery of some kind of national infrastructure needs to have some kind of very distinct, explicit, upfront-loaded engagement process with our First Nations. Anything that does not have that will not be very successful.

Senator Black: The Trans Mountain folks have done a tremendous job of consulting Aboriginal groups along the line. I do not know whether you can confirm or deny that, just for the record. It is difficult for me to put something on the record, but the reality is that they have done a tremendous job in their consultations.

Mr. Bruce: Again I am very challenged with specifics but I do follow it because it relates to what I do and I think it is an important aspect of engagement.

Senator Mitchell: I have a couple of questions. On page 6 of your presentation, Mr. Bruce, you mentioned that the Capital Region Board has voted to support both the Energy East and the Northern Gateway. You are not mentioning Kinder Morgan. Is that simply a geographical impact, coinciding with impact, or is there something else?

Mr. Bruce: No, those other two were just examples. We are big supporters of pipelines. Kinder Morgan is another one that we are very keen on. As we know, Kinder Morgan has been 60 to 70 years in the making, 300,000 barrels a day, and there has been no issue with them.

I would say to you tripling the capacity of that line, we are all in favour of that. We just have not explicitly stated that because so far that project is not at a point where we think that our input is going to be critical yet, but we may look at that depending on some of the further consultation going on.

Senator Mitchell: I am very interested also in page 5, where you say:

We learned that without a pipeline strategy and policy framework, the northeast of the region would be completely clogged in just a few years . . . and essentially without an efficient means to grow, it effectively means that, in a very short time, our resources will bypass this region and flow out of this country for market upgrading elsewhere.

I have a couple of questions on that. That seems to imply that we could have more upgrading here, but that begs the question that seems to be asked so often of how that can be economic. Are you suggesting that there is a relationship between your concentrated energy corridor plan and enhanced economics for upgrading here?

Mr. Bruce: Currently the pipelines are regulated through the Alberta Energy Regulator but it is more on the technical side and they will give final approval for where they are.

There is no planning body, so in Alberta for the large transmission lines there is an organization that plans, does all the stakeholder engagement and then decides where those lines are going to go. It is not the same for energy pipelines.

What has happened is essentially when it comes time to put a pipeline in the ground there is consultation among the local landowners, the local municipalities and the company. They figure out the best way through and then they build the pipeline accordingly. As you can imagine, up in the northeast where there is significant clustering of the petrochemical industry it looks like shattered glass under the ground.

If we want to grow the industry there, and we currently think we have a capacity to put seven to ten more refineries up in the northeast, we need to be able to put large pipelines, 10-inch and above pipelines in there. From our reports we will be out of room for those kinds of pipelines in the next four to five years.

Senator Mitchell: What is your group's relationship with Alberta's Industrial Heartland Association? I know there is a geographic difference but it seems to me that you are talking about the same things. You are actually referring frequently to the heartland.

Mr. Bruce: Alberta's Industrial Heartland Association is made up of five municipalities, industry and three associate municipalities. I think they are on the docket to speak this afternoon.

Those five municipalities are also members of the Capital Region Board so there is a lot of synergy in terms of understanding the issues. I am trying to remember which pipeline it was, but they brought forth the issue to see if they could get board endorsement to make a more public 24-mayor kind of representation on it. We do work very closely with Alberta's Industrial Heartland because they are a key economic driver for our region.

Senator Mitchell: Just to further Senator Mercer's point about Aboriginal consultation, which I think you addressed very effectively, I did have a quick look at your Capital Region Energy Corridors Master Plan and you do point out further action. You invite participation from key stakeholders, including but not limited to, so it is open. Everything is listed here but it does not include Aboriginal groups. It might be that what you are talking about has come after that. Are you formalizing that stakeholder consultation? Would it be that it is a smart thing to put in as part of the formalized corridor plan?

Mr. Bruce: Yes, and some of it is because the change in dynamics of our understanding of where we had duty to consult and where the provincial jurisdiction led.

That said, just so you are aware, we have met with a number of First Nations and we have reached out on the larger plan which drives some of this, which is the growth plan. The growth plan is our sort of strategic document that shows how we are going to grow, where the corridors are going to go, where we are going to look after agricultural lands and all the rest of that kind of thing, it talks about density.

In there I have personalized a letter to each one of the six bands that have tribal lands here as well as Treaty 6 and the Metis Nation of Alberta, so I am hopeful when I get an opportunity to engage with them at that level that I will bring them up to speed on all the other activities that we are doing.

Senator Mitchell: Clearly the focus of this study is pipelines and clearly you are here to talk about that. Maybe that is why other initiatives or possibilities are not being raised in your presentation or maybe it is that your mandate is strictly pipelines.

There is also a tremendous pressure now to begin looking to a different kind of energy future. There will be fossil fuels but also the world is looking at alternatives and that is going to be a significant portion of a modern 21st century economy.

Does your board see that as a place where the capital region should be focusing and in some ways it is? I mean there are initiatives. Is it something that you are taking an active involvement in or are you strictly focused on energy corridors in the traditional sense?

Mr. Bruce: No. We are a regional planning body so we look at all aspects of regional planning and how we are going to grow to one million people and another 470,000 jobs, creating 1.2 million. It is going to have significant impact on natural living systems, as we call it, so we have a policy area to deal with that. We have built climate change throughout our growth plan and that includes renewable energy and alternate sources.

I think we are all aware that we are going to be moving more and more into green tech. In fact one community in our region, Devon, is now currently looking at whether they can go net zero by 2050 and I think they will.

We have the most northern net zero building ever built is here in Edmonton. There is a lot of drive and a lot of innovation and what we are looking at provincially is what kinds of regulations need to be tweaked or changes that will enhance the attractiveness of doing that, particularly among private industry.

The long answer to the question is yes, we are looking at it and yes, we are very keen on it.

The Deputy Chair: Before we go to the second round, Mr. Bruce, I want to bring up a couple of points with you and get some feedback from you.

You mentioned, I think rightfully so, the importance of national leadership when it comes to driving these projects of great national interest. I wonder what it would be like to try to build the St. Lawrence Seaway today or if W.A.C. Bennett was trying to dam the Columbia River or we were trying to build James Bay or Upper Churchill. What we would be going through?

It seems to me this should be a much more manageable issue. I look at the Edmonton situation. After reading the Capital Region Energy Corridors Master Plan this is the energy pipeline hub of Canada. You have more pipelines running through here, I suppose. I don't think anybody even comes close to in the rest of the country.

I am going to go through this. I have not gone through it yet, of course, but I am just curious if you could take this plan and extrapolate it, apply it in such a way, let's say to the West Coast here.

My colleagues have heard me say this privately. I have always been sort of flummoxed when it comes to moving petroleum to the West Coast why we are not choosing the lowest hanging fruit. What I mean is we have a port like Prince Rupert. We have railway corridors going there. We have power corridors. We have highways. Why are not we heading there? Why isn't that the first choice?

I understand when people get concerned about going through pristine land and certain areas like Kitimat. I understand the concern and I share that concern. I think we all share concern when it comes to environmental issues, but there are practical ways to do things.

You see areas that are already — I don't want to say compromised — used where corridors already exist. Why isn't the industry keen on those areas when it comes to moving the petroleum?

Mr. Bruce: To answer the specific question I am not sure why Kitimat and not Rupert. I think part of it is the shelteredness of bringing the larger 2-million-barrel tankers into Kitimat. Though it is narrow, it is deep and it provides a bit more safety.

If you know those inner straits currently there are American tankers running up and down that. Whenever the weather is bad on the West Coast or west of the islands, Queen Charlottes and the like, they move into the eastern.

Most recently many of you would have known about the Russian tanker full of a very, very toxic chemical that had lost steerage. Haida Gwaii officials were trying to figure out where they were going to let it run aground, where it would do the least damage.

We have no capacity up there except for Vancouver, which is a 12- or 14-hour tugboat drive away, or up in the Alaska Peninsula, which is another 12-hour tugboat drive away, to come down and service that area.

Any addition, whether it be at Rupert or Kitimat, will provide some kind of tugboat and Coast Guard capability in a place where currently it is unserviced. There are lots of tankers moving through there now.

I do not know about the specific decision but my concern again goes back to the narrative. I do not think people are dealing with facts when they are talking about the pristine areas out there because we are running lots of tankers up there now full of sulfuric acid, oil and all the rest of that.

The Deputy Chair: When I say pristine areas I am referring more to the land base. I mean oil in the water in a ship's bottom is oil in a ship's bottom. It is going to be there depending on the environment of the ocean or the water. It is easier and there is less grief when you follow already existing land corridors than to cut through land that has not been disturbed in any way.

I am just curious why this does not seem to be part of the narrative when it comes to the large companies that want to move the petroleum. They do not seem to factor this into their deliberations.

Mr. Bruce: I think that is a very good question, senator. One of the things we are looking at is multi-use corridors. Why build a corridor just for a pipeline? Why build a corridor just for a road? Why build a corridor just for a bridge? I mean this country has two big ribbons called railways that cross this country. Could we not enhance that and move the pipelines through there? I think that is a very valid question.

Senator Unger: With regard to alternative energy and renewables how many years is it going to take for us to be there?

You mentioned Devon by 2050, so in my estimation we have roughly 30 years until it would be totally renewable alternative energy. Would you agree with that or would you comment?

Mr. Bruce: As all things, it is about the question of how much pressure is put on. Do you allow things to develop naturally so the market bears the development with some social pressure on things and how it goes? Or, do you incentivize the creation of a move toward more renewal energies, how much incentive you use and how many changes to regulation you make to make it more affordable?

The final point is mandate. You mandate a move to that. You can do that through a number of other mechanisms, regulation being one of them. It is either do you allow it to proceed as it is proceeding, do you incentivize it, or do you mandate it? That will really drive some of your timeline issues.

When we look at Europe, for example, digesters are turning green waste into biofuel. There are 9,500 in Germany but their kilowatt costs are like 31 cents and ours are 3 or 4 cents. The incentives for the market to start looking at some of that are not necessarily there.

I am not saying increase the cost of electricity, but what I am saying is that if you look at what you are trying to achieve you need to look at a broad spectrum of tools to enhance the move toward that particular initiative, including making regulation changes to ensure that it occurs.

Senator Unger: You used the word "incentivize." That is your word. I think subsidize. For example, Ontario has a lot of turbines with which a lot of people are very unhappy. Their electricity costs keep going up and they are being subsidized to a large degree. I do not see that as being the way into this new world.

I guess my point would be: Would you agree that we still need the hydrocarbon industry for the foreseeable future until these green energy technologies prove themselves sustainable? Right now they are not.

Mr. Bruce: I would agree with the presumption that the petrochemical industry is here to stay and it is going to be here for a very long time to come. We enjoy a certain quality of life that is driven by our oil both in terms of direct and indirect benefits in plastics and all the rest of it. When I talk about value-add industries the point is that we upgrade from bitumen to diesel to get by-products. Those by-products are then turned into propane, methane, polyester, and on and on and on it goes.

Unless we find something completely different that would be a pretty radical change, I would say, in at least our lifetimes. What green technology will enable us to do is to leverage some of these things that can then enhance and replace some of the products that we use oil for now or natural gas or anything else of that nature.

Incentives do not necessarily mean money. Although it largely does in a larger context it does not necessarily mean money. I go back to the regulations. Governments control regulations. Regulations can be an incentive unto themselves. If you deregulate or change a regulation on a certain aspect then private industry may look and see that this will work for them.

It is a conversation that needs to happen between those that are doing clean tech or green and then those that produce the regulations to see where you can come up with a balance.

The Deputy Chair: I would like to thank Mr. Bruce and Mr. Sarnecki for their participation.

I wish to welcome the next group of witnesses. From the City of Red Deer, Her Worship Tara Veer, Mayor; from Alberta's Industrial Heartland Association, Her Worship Gayle Katchur, Vice-Chair and Mayor, City of Fort Saskatchewan; Pam Cholak, Director of Stakeholder Relations; and Lori Mills, Energy Liaison, Strathcona County.

I would ask you, beginning with Mayor Veer, if you would make your presentations and the senators will afterward have questions.

Her Worship Tara Veer, Mayor, City of Red Deer: Mr. Chairman, honourable senators, thank you for the opportunity to present to you from a mayor's perspective and on behalf of Alberta's third largest city.

My intent is to submit testimony to hopefully reframe what has become a nationally divisive debate about if energy products should be transported to how best to safely transport Canadian product to both domestic and international markets. I will speak to the responsibility of the federation to do so on grounds of economic diversification, Canadian sovereignty, environmental responsibility, and the ethical imperative of good government. Under federalism we are all aware that Transport Canada is mandated with responsibility to make provision for the safe transport of domestic product to fulfill Canada's national objectives.

The question before our country should be less a judgment of pipelines per se but how do we mitigate any risks associated with how we choose to transport the energy that all Canadians rely upon.

Our country requires energy for innovations in medicine, environmental protection, goods and services production, transport and retailing, research and development, as well as manufacturing. The economics of energy transport is therefore beyond the employment, commodity and value-added contributions to GDP that we traditionally tend to associate with the energy sector. All regions and all Canadians rely on energy not just as a sector in and of itself but as a diversification driver.

Long-term sustainability is the ultimate objective of energy transport. Energy is foundational to all existing and emerging regional and national economies. Shipping industries off the St. Lawrence Seaway and off eastern and western coastlines rely on energy. B.C.'s forestry industries, Ontario's manufacturing industry, intellectual industries, tourism industries and one of Quebec's largest employers rely on energy.

Some jurisdictions will suggest that domestic energy transport has no direct or indirect economic benefit for their constituencies. However sustainable provincial and federal coffers through energy royalties, income tax and federal equalization payments translate into essential public infrastructure and government services that have both direct and indirect economic benefit for all Canadians.

Our country is forfeiting opportunity. This is not an opportunity cost in a financial sense for Alberta alone but one borne by all Canadians as long as we remain bound by systemic, competitive disadvantage. It is an opportunity cost in both community and country building. Some are saying no to pipelines when what we actually need to say no to is the forfeiture of our environmental, economic and social sovereignty to other energy source countries and our sole customers to the south.

There are many who challenge energy transportation on environmental grounds but it is arguable that if Canadians are not masters of our environmental fate we are simply shifting the environmental burden of transport.

Energy is already being transported through every jurisdiction in our country. It is only a question of how. A comprehensive environmental perspective, however, would consider the cumulative effects of sourcing energy for Canadians from other parts of the world, source countries with environmental negligence, violations and unsustainable practices. Opposing environmentally ethical energy arguably contributes to the aggregate of detrimental environmental impact by sourcing energy for domestic purpose from countries without environmental conscience.

Canada is respected internationally for our human rights record and all that is synonymous with being Canadian. Those who oppose domestic energy transport must acknowledge the consequences of continuing with the status quo, rather than opting to source from Canadian producers who not only abide by the most stringent environmental regulations and labour standards in energy producing countries but who are also producers of environmental innovations and technologies in all aspects of resource extraction, production, as well as refinement.

Good government engages in democratic process that is uncompromising in integrity, transparency, accountability and fairness in its due process. The credibility of recommendations regarding how our country will choose to safely transport all domestic products will be directly correlated to the credibility of the process that those recommendations will be built upon.

Consultation with indigenous persons must be early, ongoing and through mechanisms that recognize rights of self-determination. Consultation with environmental stakeholders, energy stakeholders and the general public must also be early, ongoing and comprehensive.

Honourable senators, in terms of how Canada chooses to transport domestic product I submit to you that the Canadian way is to choose environmentally and socially ethical energy, to choose sovereignty and sustainability for our national economy, and to find a way how with all Canadians and in the interest of all Canadians.

I will leave you today with submission packages on behalf of Red Deer city council and the citizens of our community, including the resolution that we unanimously adopted in support of safe domestic energy transport.

As one of Canada's fastest growing and most dynamic cities we are relying heavily on your recommendations and report. Our local unemployment is at an historic high of 10 per cent and for the first time in 40 years we have lost population.

Your decision matters to your fellow Canadians in central Alberta. We appeal to you to find a way how that respects the economic, social and environmental interests, not just of central Albertans but of all Canadians. Thank you.

Pam Cholak, Director of Stakeholder Relations, Alberta's Industrial Heartland Association: Good afternoon, Mr. Chairman and honourable Senate committee members. My name is Pam Cholak and I am Director of Stakeholder Relations for Alberta's Industrial Heartland Association, also known in short form as the AIHA which I will reference frequently through my presentation today.

I am very pleased to have joining me this afternoon representatives of two of our member municipalities, Her Worship Gayle Katchur, Mayor of Fort Saskatchewan and Vice-Chair of Alberta's Industrial Heartland Association, as well as Lori Mills, Energy Liaison for Strathcona County.

I am also very pleased to be sitting here among such an esteemed panel of women talking about energy and how that impacts our Canadian nation today, and I would daresay that this is a very esteemed panel that I am part of.

On behalf of AIHA, thank you for the opportunity to meet with you today to provide some overview remarks on behalf of Alberta's Industrial Heartland and to answer any questions that you may have. We are very pleased to have our Alberta senators here and we welcome those from other places in Canada. Welcome to Alberta.

We understand the mandate of this committee is to focus 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. As Canada's largest hydrocarbon processing region and Western Canada's energy hub, energy infrastructure including pipeline, rail and roadway access is critical to Alberta's Industrial Heartland. To be clear, pipeline access to tidewater is critical for our region, our province and our nation to reach export markets where better value for our natural resources is achieved.

Pipelines are much more than just the means to moving product. Pipelines are a part of a large, complex energy industry that employs thousands of Canadians and has the capacity to positively impact lives beyond our Canadian borders.

This discussion on pipelines while sometimes frustrating to us in Alberta is in some ways positive because it allows us to talk about consequences and the impact coordinated energy infrastructure or lack thereof in our country has on market access, jobs, investment potential and our overall competitiveness.

Let me tell you a little bit more about who we are and why energy transportation is so critical to Alberta's Industrial Heartland. Alberta's Industrial Heartland Association is a municipal not-for-profit organization focused on attracting and retaining sustainable industry development in a specialized industrial region encompassing eight municipalities and covering over 582 square kilometres of land now known as Alberta's Industrial Heartland.

Our membership is comprised solely of five regional municipalities: the City of Edmonton, the City of Fort Saskatchewan, Strathcona County, Sturgeon County and Lamont County. In addition to the full membership AIHA has three associate members that include the Town of Redwater, the Town of Bruderheim and the Town of Gibbons. Collectively our membership represents 1.2 million residents in the capital region.

For the past 18 years industrial heartland municipalities have taken a proactive and co-operative approach to planning for industrial developments in the region. A leading principle of AIHA is to promote responsible, sustainable development within the region. This requires collaborative planning for infrastructure, services, emergency preparedness and land use that are guided by the principles of environmental stewardship, sustainable community growth and economic prosperity across all areas.

AIHA is the model of collaboration, partnership and synergistic operations. Alberta's Industrial Heartland, AIH, is Canada's largest hydrocarbon processing region, home to a synergistic industrial cluster encompassing over 40 companies and more than $30 billion worth of capital investments in energy and petrochemical processing facilities. Global companies such as Shell and Dow as well as integrated companies such as Pembina Pipelines operate within our heartland region.

Companies operating in the industrial heartland representing mid and downstream sectors, value-added as they are known, provide 6,500 full-time jobs to the region with an additional 23,000 indirect jobs and account for $1.5 billion annually in local spending with additional moneys in charitable giving directly benefiting communities like Mayor Katchur's.

Alberta's Industrial Heartland is also home to Canada's newest refinery, North West Redwater Partnership Sturgeon Refinery. This newest refinery is employing 6,000 people directly during its construction phase and will supply Western Canada with its diesel needs while utilizing innovative technology for carbon capture. Innovation and diversification requires sustainable energy infrastructure.

Alberta's Industrial Heartland is also considered Western Canada's energy hub. Strategically located at the hub of major oil and natural gas pipeline systems for Western Canada's resource base, infrastructure required to transport both raw feedstock and refined or upgraded products is critical to operations.

From a pipeline perspective every major pipeline in Canada runs through the industrial heartland and major export pipelines such as the proposed Northern Gateway project originate in the heartland. The industrial heartland has the highest density of pipelines of any region in Canada. Five major oil terminal companies including TransCanada, MEG Energy and Access Pipeline with multimillions of barrels of storage capacity are also located in the region. We value safety of energy products and the transportation thereof.

With recent delays to expansion of export market pipelines, companies are looking for a plan B to get our products to global markets. This requires the transfer of oil from pipelines to facilities that load the bitumen and oil to railcars. Three oil-to-rail facilities operate in our region with a capacity of 320,000 barrels per day, with three additional facilities being considered.

Today we also want to highlight the importance of gaining access to global markets. Canada does not have the population to consume all the natural resources available to us. In addition, the United States is increasing its own production capacity, decreasing U.S. demand for our oil and value-added products, as well as becoming a competitor to Canadian product in global markets.

A recent report completed for AIHA indicates that Canada has a competitive advantage over the United States in shipping time to the Asian region from the West Coast. This market opportunity not only allows us to sell our resources at a higher value but we also have an opportunity to export our cleaner resources into a region that uses more coal than any other commodity.

We have an opportunity to improve the environmental conditions and social aspects of our global community with increased access to markets, but clearly a pipeline to tidewater is not sufficient. We also need to ensure port capacity is appropriate to handle the product. Pipeline is one part of the market access story. It is not the only part.

Another key factor to consider in the energy strategy debate is the unintended consequence of decisions. Without adequate pipeline infrastructure rail capacity is strained as more oil is being moved by rail. With rail access critical to the movement of value-added product in the industrial heartland a clogging of the rail system results in increasing concern for timely delivery for our midstream and downstream products, higher expenses for our companies and greater safety risk for communities as more rail cars move across our country.

Further, the lack of timely decisions on pipelines and changing regulatory framework results in an investment community that is tentative to engage in our Alberta and Canadian markets. While it might seem that an oil pipeline decision should not impact a polypropylene investment decision, the fact is that investors are looking at how we make decisions in our province and country including the speed and reliability of those decisions.

No one is advocating for a reduction in the proper safety regulations and standards, but in the absence of clarity on those standards and a consistent approach by government reduced investor confidence can impede future jobs and is an unintended consequence in our industrial cluster.

The discussion on market access is much broader than whether or not pipelines should be built for the benefit of the oil and gas sector. The national discussion and strategy we encourage needs to be comprehensive and timely with attention given to rail, port and roadway infrastructure in addition to extension of pipeline capacity.

Collaboration is of critical importance but we do need timely decisions that result in streamlined regulatory processes that support predictable, reliable, safe transportation options for our value-added products key to our industrial heartlands. We must remember that these decisions impact not only our region and our province but they impact all Canadians.

Mr. Chair and members of the committee, in summary Alberta's Industrial Heartland proves that through proper interjurisdictional planning, oil and energy logistics can be implemented in harmony with local municipalities and citizens. We believe that an effective pipeline system is part of a comprehensive energy infrastructure needed to maintain our national competitiveness. A national approach is needed to ensure rail and port capacity exists so that value-added production can grow in Canada and be utilized at home and in new markets, which will in turn provide new opportunities for jobs and economic growth.

Thank you, honourable senators, for your attention. My fellow panel members and I are very pleased to address any questions that you may have and the discussion that will occur. Thank you for having us.

Senator Mercer: Thank you, ladies, for the very informative presentations.

Mayor Veer, you may not have noticed as you were delivering your presentation, but when you reached your final paragraph Senator MacDonald and I exchanged a glance or two when you said your unemployment rate was at an historic high of 10 per cent. Senator MacDonald and I are from Nova Scotia and we will take your 10 per cent any time. However that indicates how serious the issue is and I do not want to make light of it. It was kind of interesting that Senator MacDonald and I both looked at each other and said, "Oh my, 10 per cent."

Both presentations are terrific and are very important for the deliberations of this committee and will have an effect upon what our report eventually says. One of the issues I see is that we need to take this message to a lot of other people. We need to take this message to people in Ontario. We need to take this message to people in Quebec and to a certain extent less so to people in New Brunswick and Nova Scotia. I think you will find that we Nova Scotians and New Brunswickers are probably a little more friendly to this.

You mentioned port capacity at least four times in your presentation. I want to tell you about port capacity, something that we have talked about here today and to others that people have not been paying attention to.

The focus on the Energy East pipeline has always been to end it in Saint John, New Brunswick. I would contend that is the wrong place. I would contend that yes, we need to have the pipeline go somewhere close to Saint John so that the Irving refinery, which is the largest refinery in Canada, will be able to have access to the product. Where you want to end up is at Strait of Canso in Nova Scotia where we currently have the capacity.

Currently, as you know better than the rest of us, we import oil from countries like Saudi Arabia, Venezuela, et cetera. We are importing oil all the time. The capacity to do that is at the Strait of Canso. To give you an idea where the Strait of Canso is, that is the strait that divides mainland Nova Scotia from Cape Breton, so right in there is where the oil comes in. There are huge storage tanks already there to receive the oil as it comes in as we move it west.

It would seem logical to me and to us that we need to start talking about moving past Saint John, New Brunswick, to the Strait of Canso for the very reason to avoid building a terminal. It is not a land-based terminal that they would build in Saint John. It would be a water-based terminal because of the geography of the harbour there.

We could avoid the criticism and I would suggest the protest from the environmentalists over having tankers coming in and out of the environmentally sensitive Bay of Fundy. The Bay of Fundy has the largest tides in the world. When the tides go out in the Bay of Fundy it is just a mass of mud in many places, if you have ever been there. It is a fabulous place to see. However it is also environmentally sensitive for a number of species, in particular certain types of whales that summer in the Bay of Fundy.

I am thinking that we have this terminal at the Strait of Canso where we are already storing all kinds of oil that is coming into the country. It would make sense. Why wouldn't we use that same terminal to send oil out of the country?

Also, as someone mentioned earlier today, from a shipping point of view it is two days closer to the market, whatever market you might choose, whether it be India or certain parts of China. The Strait of Canso is a couple of days closer to India and certain parts of China than is the Port of Vancouver, believe it or not, if you go down through the Suez Canal, et cetera.

After my speech I will get to my question. Do you have a plan to take your very good message to another level, for example to the national municipal organizations? When the Federation of Municipalities meets are you there presenting this? Are you there selling this?

All of us who support the pipelines have a job to do as salespeople. We need to be talking to our friends and our neighbours, and particularly to those people who might be opposed to pipeline development, about this and to really demonstrate that this is a benefit to them. Obviously I want you to promote the fact that we should be going to the Strait of Canso, but that is Senator MacDonald's and my politics. We will continue to push that. Do you have a plan to bring this to another level?

Her Worship Gale Katchur, Vice-Chair and Mayor, City of Fort Saskatchewan, Alberta's Industrial Heartland Association: Thank you very much. I wear the Capital Region Board hat as well, so I wear multiple hats and I know they presented prior to our coming in. I am a mayor, a member of the land use committee for the Capital Region Board, and a vice-chair of the pipeline committee corridors that we were talking about.

We ran one campaign at the FCM, I believe two years ago. We took a booth and brought our representatives and a small information package so that we could talk to everybody and let them know that pipelines are a benefit not just to those in the Alberta's Industrial Heartland or those in Alberta but to all Canadians. We have had a campaign to deal with this.

At that point in time two mayors alongside of me on the committee went out to B.C. and to one of the communities down east to talk about these benefits. They talked about the number of barrels we would be shipping. They talked about the environmental benefits and the saving of carbon capture and they ensured that when we are doing it through pipelines our railcars were not consumed solely by energy products but were there for agriculture and other manufacturing. We went out and we did a full campaign to talk about that.

That committee is now rolled into the land use bylaw. It is something that I will take back to see if we are interested, but it is very difficult for us to get into the FCM. We had to do it under special regulations to be there.

We have been out lobbying and advocating for these pipelines. We understand the benefits to all of Canada. There is one environmental benefit that we really like to promote. If you look around as you are coming into Edmonton or this region what do you see? You see beautiful parks. You see agriculture. You see trees and you see a wonderful environment. What you do not see is the pipelines because they are buried underground. We have been used to living with them for many years. We are used to them. What it does for us is it takes off the truck traffic. It has helped us with the rail traffic but we are now seeing an increased requirement for rail.

In answer to your question, absolutely we have been out there advocating and talking to other Canadians. We meet with Sarnia Lambton. They have an association similar to ours. We say that we need to talk together to the federal government to let them know that it is about all of Canada. We understand that yes, this is a benefit to all Canadians.

Senator Mercer: I applaud you for that and I think that is great. I guess I am still naive at the ripe old age of 69. I still do not understand the world. I am amazed that we are having such a protracted debate about pipelines after Lac-Mégantic.

Have you not been paying attention, Canadians? We had a train accident where dozens and dozens of people died and the town was almost destroyed and you need to have a better reason to have pipelines.

However I would suggest that maybe you do not need a small booth at the federation. You may need a larger booth now because you are going to have to continue. It is a continuous sales job for those of us who are supportive.

Ms. Katchur: Strathcona County and the Town of Whitecourt are bringing a resolution forward at the FCM this year for support. We have been bringing it to our council so this will be another avenue where we will be speaking up to let people know what the benefits are. I know Lori can speak more to that resolution but as an association we have passed resolutions in support of sending letters to our governments, our capital region and even at our local municipality. We have done that as well.

If I can just say, in 1985 our mayor was smart enough to recognize we could not have rail cars bringing toxic products through our communities. There is a safer way to transport them. In 1985 we took the rail out of downtown Fort Saskatchewan and it is now a safe distance away.

Yes, we need to continue to lobby and to do a better presentation. A resolution will be coming forward at the AUMA convention and I think it will have a considerable amount of debate.

Ms. Veer: Senator MacDonald, just to touch base on a couple of the points that you had made, I agree with your point around being proactive and intentional in the approach. Red Deer city council sponsored a motion before the Alberta Urban Municipalities Association that was unanimously adopted by us and was brought forward to our mayor's caucus in Alberta.

FCM currently does have a committee that is studying this. You are correct, though, that the issue has ultimately become a debate on regional interest. The reframing absolutely needs to put it in terms of the Canadian interest.

On the point you raised around unemployment in Eastern Canada, our average of unemployment rate is usually around 2.5 to 3 per cent so for us 10 per cent is substantial. It is an exacerbation of unemployment in Eastern Canada as well because we lost population for the first time. The number of Eastern Canadians who exercise their charter mobility rights work in Alberta and then move back to Eastern Canada accounts for the population loss we have had.

I agree with your point but ultimately our governing purpose needs to be domestic and international market access and then debate how. Currently in terms of governance discussions there are roles for local governments, provincial governments and the national government around the outcomes and the vision regionally and nationally on how we are to facilitate that market access.

The NEB has become a bit of a catch-all for both outcomes instead of just the execution of how we safely transport that product. I agree with being proactive and intentional because not to decide is to decide and that is the frustration that all Canadians are feeling right now because we are in a status quo by de facto.

Obviously there is a changing climate around us in terms of risk on social, environment and economic fronts as well.

Senator Black: If I can just build for a moment or two on Senator Mercer's thoughts on communication, I look at this panel in front of me today and I recognize as an Albertan that you represent basically from Red Deer north one-half of the population of this province, which would be roughly 2 million people.

I have urged Mayor Veer in a private meeting and I would urge you as mayors that you should be speaking in the key markets of Toronto and Montreal. Perhaps the two of you together should launch a little tour. You should be using media availability because your faces are faces which people do not align with when they think of the energy industry. I think this is a very important optic.

I would also suggest to you that a meeting, if you have not done it, with Minister Sohi who is based here in Edmonton would be key so that he clearly understands the interests of 2 million Albertans. It is 4 million Albertans but you can speak for 2 million of them because decisions are coming up at the cabinet of Canada within months and he needs support.

I will leave it at that but I really would urge you two mayors. It is fine to communicate with your organizations but that is not resonating with Canadians and we are losing the PR battle.

Let us talk if we can about a couple of questions I have arising from your excellent testimony. Could you please tell us about the effects of the current downturn in central Alberta? You have reflected on that but, more importantly, if we do not approve pipelines what do you see the situation in central Alberta looking like?

Ms. Veer: Senator Black, I will speak about our theme again. Our traditional discussion around energy has been predominantly in terms of the energy sector and the optic you talk about in the remainder of Canada that the energy sector just benefits Alberta as a commodity and as the value-added contributions that are made to GDP.

Ultimately, though, when you look at the impacts the theme of my message today has been around not just economic impact but around social and environmental impact as well. I mentioned for example our unemployment. When you think about how quickly Alberta has shifted not just into a recession much like we experienced in 2008 but into a deeper and more protracted recession. Our local unemployment is about 10 per cent.

Since 2008 we have been very intentional in terms of diversifying our local economy. For example, we have a strong investment in the education, health and small business sectors, but it is still very clear that there is a strong commodity and value-added component of the oil and gas sector in the full spectrum of the energy sector in Red Deer.

Where I think we sometimes fall short is that we will just talk about royalties and the cost per barrel of oil and what they mean. It also plays itself out in terms of there are now fewer Red Deerians and other Albertans contributing to income tax. There are fewer business start-ups in our community.

Normally we have weekly meetings where we approve new development in the community. In the last six weeks those meetings were cancelled, where normally we will have substantial applications.

We are just starting to feel in 2016 the lag effects of what transpired in 2015 and throughout 2016. These are the numbers we are reporting right now. Our property tax base is a deep concern. We know in many respects it is a regressive tax to begin with. It is slowing in its growth or is shrinking in its growth all across the province. In the major centres along the QEII corridor, one of the strongest economic corridors in the world, income tax is not being contributed to by that 10 per cent unemployed in Alberta or the 9 per cent that Edmonton and Calgary are posting.

Ultimately that is exacerbating the infrastructure deficit that Alberta and Canadians experience and translating into less in government coffers for infrastructure, programs and services. That type of public sector investment in turn has a spin-off effect on the private sector. When we speak of our local lag factor the great concern for Canadians is the impact of the lag factor on equalization payments when Alberta is no longer in a position to be paying into federal transfer payments and on both the infrastructure deficit and the social program deficit across the board at the provincial and federal levels.

When we speak of the effects of the numbers we are reporting now Alberta has not seen this. This is a different recession than what we had in 2008 and the consequences are beginning to bear themselves out. If we do not see change soon our concern is that we will shift deeper into that and the lag factor will translate even more so not only for the people that I serve but for Canadians as a whole.

Senator Black: My question is for Alberta's Heartland Association. Can you tell this committee what you are seeing in terms of investment? Is it up? We wish. Is it down? Is it stopped? Where are we with investment in the region?

Ms. Katchur: The Alberta's Industrial Heartland has been very fortunate. We have $30 billion worth of investment on the ground right now and over 40 companies. We have been planning for that for over 18 years and with good planning we do not have industry and residential conflicting with one another.

We go on business attraction missions. We want to attract them to the Alberta's Industrial Heartland. We want to say this is the place to do your business. Probably one of our biggest challenges is that they ask, "If we were to build this development here how do we get our product to market?"

We are competing with the Gulf Coast and with international markets. It is very difficult for us. We want to ensure that Canada is prosperous. As the largest hydrocarbons production development the focus really needs to be on how we get the product to market.

If we cannot get new business attraction to the heartland area they will go to the Gulf Coast and they will go to Saudi. They may even go to Australia where they have good tidewater access. I know Ms. Mills can speak to that.

Lori Mills, Energy Liaison, Strathcona County, Alberta's Industrial Heartland Association: One of the things that I wanted to raise was referenced by Pam. We have seen investment sort of continue on in the value-add area. We still see pipeline development and industrial development on the value-add side and product is moved by pipeline between industrial sites.

In the last while we have created a pipeline methodology with stakeholders in not the entire heartland but in portions of it that allow feedstock to get from the corridors that come up to the border of the heartland to costly industrial sites.

Before, that would have taken months and sometimes years to get that pipeline routing in place. This methodology was finalized with 100 per cent consensus from all our stakeholders, 14 pipeline companies and over 22 industrial landowners. We have used a number of tools. We really had to move outside the box but that shows it is possible to create some movement and to create pipelines with minimal conflict and while still holding environmental standards and safety high.

Ms. Cholak: If I may just supplement that, investment in the heartland continues. People expect that low oil will actually negatively impact what we are doing in the heartlands. It certainly does have some impact. We are also very conscious of the price of feedstock. We have some of the lowest feedstock prices in the world with propane and off-gases. I know that you heard from previous presenters at the end who were referencing some of that.

The difficulty for an association like ours is we are actually mandated to go out and find those big investment dollars. We are talking about millions and billions of investment dollars at play. It is not just about how many projects we can get but also the sustainability of the kind of business we have and the companies that are operating within the heartlands.

The infrastructure that we talk about being pipeline, rail and port access becomes very important to having that initial conversation about the next kind of investment that will occur from a new development perspective, maintenance, retention and growth of the 40-odd companies that currently operate there. It is about attraction as well as the retention and the ability of those companies to continue to expand and employ Albertans, which has a downstream effect, if you will, on locations like Red Deer and Calgary.

We have been doing an awful lot of discussion provincially and I am going to address some communication issues. It is not just about a national conversation. We also need conversation within our provinces to become advocates for the pipeline, infrastructure, investment, and the competitiveness factor across our provinces as well.

Alberta is well positioned where people have a great understanding of what the energy sector means. There is probably less of an understanding of what value-added is and what it means for us to be competing on that global scale. We are actually competing against those jurisdictions from which we are currently perhaps importing. We are competing against Saudi Arabia. We are competing against the United States. We are competing against other jurisdictions that offer different kinds of incentives and different forms of making decisions.

With all of those things combined, we are certainly a little bit of a bright light, I would say to you, in the Alberta economy at the moment. The industrial heartland does have projects. We do have rail terminals being built, but we want to make sure we identify the sustainability of those kinds of projects. It is not today's projects. It is how we are attracting continued proper kinds of development.

When that infrastructure piece is not secure it makes it difficult for our conversation to happen with potential investors on what the process will look like. We are having conversations with potential investors about the many hoops. For lack of better terminology but to keep it simple, if we have lots and lots of hoops for them to jump through and they may be changing very regularly, we cannot with confidence be able to say to potential investors that this is the length of time and these are the kinds of processes they need to get through to have their projects come to fruition. It makes it very difficult to continue that conversation because they will take their capital somewhere else even though we have the lowest feedstock, even though we have some of the best and most skilled labour force right here.

The industrial heartland is an area that does not require the kinds of work camps that other jurisdictions would require. We have the benefit of these municipalities that allow people to work in the industrial heartlands, building and then working full time afterward in these facilities. We also have cities like Calgary that are housing the corporate services side of it.

We have a full meal package to offer that benefits Canadians because there is also a downstream outside of our borders as well but for the investment potential we need to have the confidence to say to them that this is how things work and this is how things will continue to work for some duration.

Senator Mitchell: Thanks to each of you. I need a circle squared here. Let me put it that way. I have some understanding of the heartland organization. It is excellent. You have companies that require feedstock, hydrocarbon products. At the same time you are supporting the development of a west to east pipeline, I assume, and a Kinder Morgan and perhaps a Gateway.

How do those two things relate? Those pipelines are going to take feedstock away. Are you saying they are also going to give you more feedstock or are these two separate issues? The issue of developing your industrial base is already kind of taken care of from a feedstock point of view but you need a more regularized regulatory environment.

Do you see what I am saying? I am not arguing with you. I am just trying to clarify. I can see how building pipelines is going to stimulate the economy generally but it will not necessarily enhance feedstock, or does it somehow?

Ms. Katchur: What you have to remember is you can ship many things through the pipeline. We can ship bitumen or we can ship refined oil. That is what you have to think about. We have the potential that we do not have to just ship bitumen to the ports and then have it go overseas. We have the ability to refine it here in Canada and that is something that we promote as well.

We have lots of feedstock here. We would prefer to refine it here so that we would get the higher dollar value that comes out of it, but even if we refine it here we need to have the ability to ship it safely to a port and send it overseas.

Senator Mitchell: That is moving me along. When I think of petrochemicals I think of plastics that you are not going to necessarily put it into a pipeline. You are also talking about refining bitumen or refining crude oil of some kind but we keep hearing that the economics of that does not work.

Are you talking about sort of boutiques or very refined refineries or very specific kinds of products? How is it that we hear that we can barely build a plant refinery because of the economics of it and yet that is what you are talking about?

Ms. Mills: One example of that would be the North West Redwater Refinery. They are bringing in crude and diluent but they are actually creating a diesel product which will be used locally but they will also be shipping it by pipe.

Senator Mitchell: That is a very specific case, because they are using royalty oil from the provincial government.

Ms. Mills: Correct.

Ms. Cholak: If I may, through the Chair to Senator Mitchell, I appreciate the question because some of it hinges on the fact that we have too much product that we can actually refine right here. We do not have the kind of population that is going to be able to create the kind of demand for the supply that we have.

Are pipelines going to make or break it for the industrial heartland, if I am hearing you correctly?

Senator Mitchell: I do not want to infer that they are not.

Ms. Cholak: I do not want you to think we are saying that they are not important because they are important for two specific reasons really. They serve a purpose for many industries located in the heartland. We recognize they are an important piece of the energy infrastructure we are talking about and that it builds capacity for us across other pieces of the nation.

I also go back to the reference that without the right kind of pipeline capacity we are actually disadvantaging the kind of development we can have for value-added industry in the industrial heartland in particular. If we do not have the capacity to run our bitumen and upgraded value-added diesel we are using other kinds of energy infrastructure that includes trucks and rail. Then we get ourselves into a bottleneck situation where we do need the kind of railcars and rail capacity for the plastics you are referring to, the polypropylene pellets or other kinds of product.

We only have two real rail carriers in the country. There is only so much track and only so much capacity to handle all of that. In the heartland we have an excess of propane right now. It is at a negative value because it is an off-gas that we are not using properly. We need to ship it out of there. It is by rail. A lot of these facilities are being built because it cannot stay on site. We are shipping it out by rail.

If we start to have pipeline to compensate for other kinds of refining we reduce the capacity on our rail system. We also have the opportunity to use that propane then in other kinds of petrochemical development. That is all about value-added.

It is a little bit of we absolutely need a pipeline because we are part of processing or refining in the heartlands. We also need to pay attention that we are creating this great bottleneck of infrastructure and it is a plan B for oil and gas.

It has that unintended consequence for what we can do. It affects our investment question. It affects the jobs because then without investment we do not have the kind of jobs that Her Worship Veer is talking about as well in other places in the province and the country.

Ms. Veer: Senator MacDonald, there are two parts to it in terms of the economics of it. Oftentimes there is reference to infrastructure investment in a pipeline. Obviously from a job creation perspective there are many who would look to that in terms of that type of public or private investment stabilizing during what we hope proves to be a short recession. Your question is astute in the sense that it is not just about the infrastructure investment to see us through this short window. This is about long-term investment in provincial, regional and national economies.

The whole point is that when we have excess supply we cannot get to market it is driving down the market price. That is a loss in not just pure dollars and cents but that is an opportunity cost on all the environmental innovations and all the social infrastructure investments that we otherwise would be making.

If rail is at capacity in getting to market at some point then there is a glut that is sitting sterilized back home, but the main point is that we are not living in a world that is in a post-oil and gas economy. The fact of the matter is that people are purchasing energy. If we are not competitive and we are in this systemic competitive disadvantage for what is an absolute advantage for Canadians, once we lose that market share that is an opportunity cost across the spectrum to all of us.

Once we lose that market share we have lost that market share for a generation because it is the macroeconomics of investment attracts investment. It is not just about a pipeline to see us through a recession. It is about that stimulus in terms of the ongoing investment of new money attracting new money.

Senator Unger: Thank you for your excellent information. I do agree with Senator Black that as much as possible you should be going to Toronto and Montreal and talking about what Alberta has to offer.

While our colleagues along the East Coast would love to see Energy East successful because there is a great benefit with refineries and a port with good shipping, if we in Alberta are not able to get our product to market and the crude is not coming, then sadly they will access it from the United States, Saudi Arabia and many other countries that were referenced already. We are at a serious economic disadvantage.

I would like to bring up another facet of all of this with regard to why pipelines are not being approved or built. Many have been approved recently but they are not being built because of the fact that there is an anti-fossil fuel sentiment out there. Protesters have been paid for by U.S. foundations because they like a captured market, which they have. Don't hold me to this absolutely but I know the economic disadvantage to Canada yearly is in the billions of dollars.

The question is: How can this anti-oil sands, this anybody but Alberta oil sentiment, be curbed or stopped? What would you do?

Ms. Katchur: For myself I believe we need to have a stronger voice to educate these individuals. It is as much as going out when they are protesting and reminding them as they are standing there with their cellphones what that cellphone is made of, what their clothing is made of, and how did they get to this location. All of that comes from oil.

It truly is about educating people. You will always have a certain degree of people who will want to protest regardless, but until you can have them understand and be educated they will continue to be ignorant.

In Fort Saskatchewan I had one gentleman who comes to my office regularly and I remind him: How did you get here? Did you drive here? What about the wheels on your car and your cellphone that you phoned me with? We have finally come to this impasse that he agrees with me that yes, there is a need for this product. He no longer bothers me anymore, but we have to understand there is a certain segment of the population that is ignorant and it is our job to continue to educate them.

We do it very well at the heartland. When our federal or provincial ministers are in our centrepieces are not flowers. Our centrepieces are all the products that are made with this product. As they sit there and wonder where their makeup came from, their lipstick, what their toothpaste is held in, and the umbrella that they walked in with, it is quite thought provoking. All of a sudden it is a change of sentiment.

It is really trying to bring it down to the lowest common denominator to say it is not just about putting this oil in your fuel tank. These are all the products that come from it when we change how the molecules are. It is really about bringing some science into it and letting them know what the product is.

Ms. Veer: Just to add to that, certainly as Albertans we hear that anti-fossil fuel sentiment often. I completely agree with my colleague in the fact that the conversation needs to change and it needs to be based on a couple points of fact.

The first point is to protest on environmental grounds alone we need to recognize that there are cumulative effects, to look at the big picture in terms of environmental perspective, and to look at what the actual net effect is from a more aggregate perspective.

The second point is that we are transitioning to a green economy but a green economy can also include energy. They are not mutually exclusive. The energy sector is often driving the change for environmental and economic reasons in terms of environmental technologies. It is changing that conversation.

The third point, to add to that as well, is this is not just about fossil fuels in the traditional sense when the energy industry is vilified. It is very much about innovation in medicine, innovation in environmental protection, innovation in goods and services production, innovation in research and development, and innovation in manufacturing. All of those innovations are very much energy dependent.

I completely agree that the national conversation needs to change and I think that that is where Senator Black's point comes in, in terms of having that conversation nationally and being able to take a credible standpoint and offer an opposing point of view in a way that brings facts to the table and not just sentiment.

Senator Unger: Are you specifically able to target organizations with a positive message against an anti-oil message? Do you actually put out press releases or whatever you can do to try to change the conversation?

Ms. Veer: Traditionally under federalism obviously in terms of resources extraction there are some areas that are the responsibility of the federal government particularly in its residual powers and the role of the Senate in terms of protecting regional interests. Then there is the whole resource question that comes under the provincial order of government.

We are in a new landscape where all politics is felt locally. There is starting to be an emergence municipally of the fact that there are real impacts on the communities we serve. This is a bit of a new landscape for us in terms of local government shifting into a more provincial and national agenda because all politics is really local. That is why we have a responsibility on our part to be more intentional with that.

Having said that, though, there are substantial jurisdictional points. That is where the point on working across jurisdictions is absolutely imperative. Otherwise if we remain in this cycle of all of us looking to each other for leadership on it, we remain in this vacuum of having not just the opportunity cost of now but of actually having inherited 20 years of opportunity costs because of our inability to get traction on what is proving to be a critical issue for all Canadians.

Ms. Cholak: I just want to address your question, Senator Unger, around how we combat and what kinds of tools can we use. Very quickly I would say to you that we need to continue presenting the facts about what it is we do specifically in the industrial heartland. We continue to want to delve into the facts of the kinds of products, the kinds of synergies and the important kinds of environmental work that we are doing with the companies and with our municipalities.

Environment is not a bad word for industry and it is not new. It is not new for our municipalities either. I would also say to you wide advocacy. As the esteemed mayors have referenced already today we need to be working together across jurisdictions, within jurisdictions, and across many different kinds of organizations.

To your point, senator, we need to continually communicate, to continue to talk to the typical industry players, to look to alliances and ways to work together with our building trades and our unions, and to talk about the jobs and the important pieces that energy, value-added and diversification play for us in the industrial heartland, for us in the province, and for all of us as Canadians.

The Deputy Chair: Thank you. I would like to thank you for a very comprehensive and fulsome discussion of this issue.

I would like to introduce our next panel, starting with John Falcetta, President and CEO of the Alberta Alaska Rail Development Corporation. The corporation aims to partner with First Nations and American tribal communities in order to design, build, finance, operate and maintain a railway between Fort McMurray, Alberta, and the interchange to the Alaska Railway and Trans-Alaska pipeline system in Delta Junction, Alaska. Mr. Falcetta is joined by Carol Anne Hilton and Ainjil Hunt, both with Aboriginal Engagement. Also with us is Blaine Knott, Regional Representative of the Usand Group.

Mr. Falcetta, please begin your presentation.

John Falcetta, President, Alberta Alaska Rail Development Corporation: I am very pleased to be here with my team. Thank you for the opportunity to speak to you on this very important topic.

I want to jump right into the presentation, if you do not mind. Our mission, our purpose, is to design, permit, build and operate a multipurpose railway from Alberta to tidewater. We intend on producing the capacity to move commodities, goods, people and data. We also intend to connect the Lower 48 to Alaska and, most importantly, have Canadian and Alaskan indigenous people, First Nations, engage with the project as full partners. I will get into a little bit more of that soon.

It is interesting listening to the discussion. Generally it always goes into implementation and I want to talk about that immediately. This topic has been studied and developed for probably the last 30 or 40 years. Some excellent work has been done by the State of Alaska, the Alberta government and Yukon government. It has been built into the latest study, the Van Horne Institute study commissioned by Peter Wallis, which brought it to a pre-feasibility study level. What that means basically is a concept of getting some numbers to plus or minus 30 to 50 per cent or in that area and getting to a point where you can determine technical feasibility.

We are building on that work and some great work has been done through government. As it happens I authored the study that Van Horne produced.

On the long-term structures, absolutely First Nations are not just being consulted on this project. They will be our partners and we are currently looking at some fairly innovative ownership structures. We have not definitively settled on models. We are sort of beta testing them right now, but we think we will have something fairly soon, within the next few weeks actually. Again, we will connect Alberta to tidewater and connect nations to economic activity around them.

The team that we have is extremely talented. I like to think that I might not be the smartest person in the world, but I am smart enough to find the best people in the world and I have some of them with me right now.

As I mentioned, Peter Wallis commissioned the last study and this area of discussion has been taking place for a very long time. What did we find? We found a favourable alignment and discovered it between Fort McMurray, Alberta, and the Delta Junction location at the beginning of the TAPS pipeline and very close to the Alaska railway system for interchange.

If we were going to move bitumen or petrochemical products from the Alberta heartland, ultimately it would be our intention to move them through the TAPS, which is an underutilized asset designed for 2.2 million barrels per day. It is running about 300,000 now. There is not enough North Slope oil to continue on with that level of production.

Also the Port of Valdez itself is running far under capacity. It was designed for the movement of somewhere between 2 and 2.2 million barrels per day. The Port of Valdez is absolutely one of the safest ports if not the safest port in the world.

We have all been to visit our friends at the TAPS and the Port of Valdez. It is very impressive. It is a model for all of us in the world to understand how to move petrochemicals safely through a port.

On the reverse flow of goods I am sure you have heard of other instances where the movement of commodities, particularly marine containers, can sometimes be a bit of an issue in Canada. There could be another outlet and that outlet could be through the Port of Anchorage and at Port Mackenzie. It affords various opportunities. Probably the greatest one is that it will take the pressure off of L.A. Long Beach, Seattle, Vancouver and Ridley Island when they become capacity constrained. It has not happened in a few years but it will happen. It also affords a better transit time in and out of the Asia Pacific by about two to four days. That is a fairly significant point.

We examined the financial components of the project. Frankly it was a bit of a surprise to me that we found a net present value per barrel for moving oil over 20-25 years. Under conditions where we were anticipating 1.5 million barrels per day the rate or the tariff per barrel was somewhere between $8 and $10 Canadian from origin to destination. As I said that came as a bit of a surprise to me initially. We further tested it. We stress-tested it under high hurdles, different conditions, extended construction periods, and various other scenarios where materials might not come in as anticipated, and the results were still pretty promising.

We believe that the capital cost for the railway from Fort McMurray to the Delta Junction, including all ancillary yards and facilities, is somewhere between $14 billion and $20 billion. I guess that sounds like a lot of money but if you have financing and money likes to find good projects then it is probably not that much.

I want to talk a little bit about the team. I get told to talk about myself, which I am a little uncomfortable with, but unfortunately or fortunately I have been doing this for a very long time. I have been in the railway industry for over 30 years. I hate to sound like Hunter Harrison but I started working basically pounding spike and successively moved through various positions. I essentially became responsible for operations in the eastern network with Canadian Pacific and then later on moving into consulting engineering with AECOM where I was responsible for Canadian operations.

I am also probably one of the few people who can say that I have actually built a railway. I was responsible as project director for the Loon Lake Railway in Canada. That was a great project and I am very proud of the team and what we achieved there.

I am also a director of CentrePort Canada, which I am sure some of you are familiar with.

I want to talk about our investors, Sean McCoshen and David Sharpe. I believe Sean has testified in front of this group. Sean is an accomplished American investment banker who has provided hundreds of millions of dollars in financing to First Nations projects in Canada. He successfully designed and financed large infrastructure projects around the world, particularly in the Middle East, with capital costs exceeding $1 billion. He also led the Home Depot recapitalization for somewhere between $6 billion and $7 billion.

David Sharpe is the president and chief operating officer of Bridging Finance, one of Canada's largest private debt providers and heavily involved with First Nations financing. He is the chair of the board of governors for First Nations University of Canada and a member of the Mohawks at the Bay of Quinte.

I will let Carol Anne talk about herself for a second.

Carol Anne Hilton, Aboriginal Engagement, Alberta Alaska Rail Development Corporation: I am the CEO of Transformation International and here with me is Ainjil Hunt from social economic development. We focus largely on the prosperity and social and economic well-being of First Nations. We have been brought on to the project to be able to create excellence in Aboriginal engagement.

I also advise the federal government's Advisory Council on Economic Growth Council and have been doing work on the Aboriginal relationship and space for innovation in the Canadian economy. Within this project I see a lot of room for innovation in the Aboriginal relationship.

Mr. Falcetta: Rounding out our team, we have Mead Treadwell in Alaska, a former Lieutenant Governor. He provides guidance that we need in the U.S. and I am thrilled to have him on our team.

I know we will have a lot of conversation about safety later, but just at a high level I heard comments earlier about safety. Safety is a culture. Safety is something you build into everything you do in railway operations and maintenance. The railways that are successful at producing very strong safety records take that position. Generally speaking, there is zero tolerance for not adhering to that policy. That seems to produce the right results.

In the weekly calls with our entire team almost immediately I involve safety in every conversation. There is a safety message in every conversation. It begins now while you are in design, while you are in the engineering phase, and while you are discussing what if we go here rather than go there. This is where it starts and I have every intention of ensuring that the safety culture is built into this operation right from the start.

Carol Anne, do you want to talk a little bit about indigenous engagement and how we are approaching it?

Ms. Hilton: On the Aboriginal engagement within this project what we see is an understanding of the context because we come from British Columbia. We understand what is happening there with the intersection of the discussion on pipelines, the moving of product and the connectivity to the Canadian economy.

The essential aspect of what we see is the requirements of 2016 for a new relationship with Aboriginal people. At the foundation of that is not only permission but also what we see emerging as a new business partnership.

The historical development of Canada has shifted significantly to how we get to 2016 and what we see as some of the key features of this rail and the connectivity to not only the potential of where we go as a country but also that connectivity to global markets. The features of this include the earliest possible engagement with First Nations people.

What we have heard in our work is that nobody has ever talked to us this early. Within that is the key feature of seeking permission, seeking collaboration and within that collaboration seeking solutions within community knowledge early on.

That is the approach in the work we have done to date. We are hearing: "Nobody has ever asked us what we think, what we know best about our territories or how we experience what makes sense here." Seeking that collaboration, seeking that permission, seeking that community knowledge and the earliest engagement, this is what permission looks like and how we approach consultation. It is a more collaborative design within the process required to move toward permitting the rail.

The complexities of the numbers of Aboriginal entities that we are currently identifying require ongoing relationships and ongoing conversations.

Mr. Falcetta: Just to close out, we have really begun the project in earnest, kicking off with the VHI study in 2015. We are now at a point where we are having active engagement and active conversations with the CTA and with the Surface Transportation Board in the U.S. We will continue doing that until we are at a point where we have designed enough to become invaluable and instructive to both of those agencies. At some point we will apply for a CTA certificate of fitness and permission for construction, and conversely in the U.S. as well under its legislation.

In 2018-19 we intend on being permitted and in the ground with financing. We believe that we can be operating by 2022. This is a very achievable plan. My experience over the last 30 years has taught me that there are no shortcuts. Any time I hear the words "fast track," I hear four times as much money and four times as long.

That is not our intention. Our intention is to work with all stakeholders to the best of our ability. The regulators both in Canada and the United States have a lot to offer us in the way of making the process work for everybody. Having said that, I will open the floor to questions.

Senator Black: I want to congratulate each of you. This is an absolutely tremendous initiative. From Canada's point of view, certainly from Alberta's point of view, any opportunity to get product to tidewater is a good initiative. I really think this is a great and really quite brave undertaking, so congratulations to you and to your team.

I only have one question. There is a myriad of questions but you know them as well as I do. I mean you are a start-up and you are moving forward to try and develop your product. I am sure all my colleagues wish you the best of luck.

There must be a gating issue, an initial issue around shipper and/or government support. The $14 billion to $20 billion just does not happen. Somebody has to support your baseload or some government has to get behind you. Are you at a position to talk about that?

Mr. Falcetta: Absolutely. That is a great question by the way.

I like to always distill things into buckets so that I can understand it myself and then communicate it well. I see three buckets. One is the consolidation of the corridor. The consolidation of the corridor really means ensuring that landowners and stakeholders along that strip of property are engaged and involved in getting what they need.

We will go through the consultation process. The Canadian government will ensure that gets done the way that it needs that to be done. Our First Nations team will ensure that we probably kick it up a level because we intend on doing a little more than just meeting the minimum standard of the law.

The permitting process cannot take place until we have sufficiently done our due diligence in consultation. In fact it will probably be the same in the U.S. through their process with the STB and environmental impact statements that have to be done there. They are a bit different but they essentially come to the same end. That would be bucket 1.

Bucket 2 really is permitting in earnest and then of course that is where you can attract equity and you can attract senior debt. I do not believe that any project in Canada today or in the near future will attract investment dollars until there is social licence. That is bucket 2. That is stage gate 2.

Stage gate 3 might be concurrent with 2. It is really the take or pay agreements with the producers and the off-takers. Obviously that is a negotiation. We like to think if we have a mousetrap that works. That should not be a terribly difficult discussion to have but obviously it is a negotiation. Those are the three buckets.

Senator Mercer: Thank you. That was a very interesting presentation. In your success factors for this you said under long-term structures that First Nations are not just being consulted on our project. This will be their project too through an innovative ownership structure. Can you describe the ownership structure? Is it percentage based? How will the money flow?

Mr. Falcetta: That is an excellent question. We are not absolutely certain about what the equity split would be in terms of gearing for the corporation at this moment. We have run some financial models. It is being talked about and tested with various groups. We are at the beginning of those stages now.

In terms of how money will flow to them it is just as any other corporation will. There is free cash that gets generated by corporations. There are dividends that get paid out by corporations. That will be one of the means of doing so. If I understand your question correctly, I think the key here is really to provide meaningful participation in ownership at a significant equity level.

I feel like I probably should turn a little bit of this over to Carol Anne. She has been having more discreet discussions. I do not know if she wants to talk about that a little bit more.

Ms. Hilton: The ownership structure is looking at the situation. For the level of initial engagement that we have done there is a huge scale of capacity or spectrum of where the entry points of nations are within their own capacity and within their own economic development structures both here in Canada and in the United States.

In the United States we have multinational corporations working in 48 states, billion-dollar companies and then working with little tiny even non-treaty nations through Yukon that are struggling to identify a local economy. We recognize that entire scale and what are fair and meaningful entry points within the business model. We recognize as well that within the equity structure we have seen across the pipeline development is a polarization of the nature of the relationship between the requirements of the pipeline, the development of the business relationship and the facilitation of that with First Nations. That polarization is also something that we see as essential to remove that aspect so that people actually are talking to each other.

That is something that we have not seen and that is something that we see as significant to the equity partnership development as a key feature.

Mr. Falcetta: Senator Mercer, as we develop that I would be happy to send that information to you when it becomes more concrete.

Senator Mercer: Please do. I guess the fundamental question is what we are talking about here is developing a U.S. route and a U.S. exit for the Canadian product as opposed to talking about an all-Canadian routes which we have talked about earlier.

I am very curious about your safety. We talk about it being the safest port in the world. I come from a port city. I am from Halifax. I am always interested in port safety of course. How do you define it as being the safest port in the world?

Mr. Falcetta: That is a very good question. In speaking to the people at Valdez they obviously went through a crisis. They took those lessons and they developed best practices.

In terms of moving oil and petrochemical products their approach is: We will do everything that we can do in terms of contingency planning to ensure that never happens again. Never is a long time. I am not sure that is necessarily possible, but I have been impressed by their diligence in contingency planning and emergency response.

Senator Mitchell: Having been to Valdez I understand what you are talking about. It is also a question of tremendous capacity for emergency response. It really is quite impressive.

I guess one of the questions that your presentation raises for me is: Why would the choice be your railroad rather than a pipeline, or are you saying it is in addition to pipelines or are you saying it is somehow more feasible because pipelines may not be accepted?

Mr. Falcetta: I think there is room for everybody. I am not suggesting that pipelines should not be considered.

I believe we have more demand than we have capacity probably for the foreseeable future. It is not just for bitumen. We are talking about bitumen today. We have also identified $638 billion of minerals that are along the corridor. At some point they are going to be extracted and they are going to be of great benefit to people all over that portion of North America.

It is not simply just a matter of the oil. It is a matter of all other economic activity. I am a great believer in the idea and the philosophy. It was waxed philosophical at length in the last conversation, but to me this is a very pedestrian statement but it is very true. Goods have no value until they reach the point of consumption, and we forget that. We need to develop the capacity to move that. Is there room for everybody? Absolutely there is room for everybody and there will be for the foreseeable future.

Railways, pipelines, trucking companies, all modes of transport, have made our country great. We are better at it than probably anywhere else in the world that I have seen. I do not believe that we exclude one mode of transport to enhance another necessarily. I just believe that our project has economic feasibility. It can include a group that needs to be included and has not been for the last couple hundred years. It also gives our children, our great grandchildren and our great-great grandchildren the opportunity to enjoy the same quality of life that we have because of what was done to our benefit a century ago. It is really quite fundamental.

Senator Mitchell: What are the engineering challenges of building a railway over the kind of terrain that you are talking about?

Mr. Falcetta: I would like to think that good engineering is not really that difficult but that is not true, of course.

The major challenges really are probably in the last segment into Alaska. There is some fairly significant blasting and cut and fill that would have to be done in that area. Also there are a couple of tunnels that potentially would need to be bored. They would be fairly significant. There are 70 major bridge crossings. Of course there are all kinds of challenges with ensuring that DFO is satisfied and with water. There are some challenges with that. However, good engineering work and thoughtful engagement with stakeholders typically will mitigate those issues fairly quickly.

Senator Unger: I am looking at the map. Is the proposed railway the red line on the map?

Mr. Falcetta: I just want to make sure I have the map. Yes, it is actually. The blue line is the connection from the Alaska border to the connection to the TAPS pipeline and to the Alaska railway.

Senator Unger: How many nations would be involved in building this railway? I assume that you would need consent as you show the route. How many different nations?

Mr. Falcetta: How many Air Miles have you collected this year?

Ms. Hilton: Right now we are looking at between 30 and 35. It also depends on the complexities and the nature of how some of the Aboriginal entities are structured and whether we need to engage both the villages and the corporations. We still have to cover some of the Metis locals and those aspects to begin to understand what the exact number is, but we are expecting 30 to 35.

Senator Unger: Do you anticipate any resistance such as the pipelines hear experience from time to time?

Mr. Falcetta: The approach that we are taking so far, Senator Unger, looks something like this. We could absolutely design and engineer with 75 to 80 per cent of accuracy almost within a year. However that is a mistake.

We have benefited so far from our conversations with First Nations. There is the science of engineering and there is the benefit that you get from speaking to people who live in that geographic area. They can actually be pretty helpful with ensuring that you find the right route. We have experienced that on a few occasions already in the last couple of months.

That is a very good question. Do I expect opposition? I do not look at it like opposition. I look at it more like great suggestions that we need to pay very close attention to. That is perhaps why some of the other modes that have been trying to develop their projects have had the opposition that they have had.

Senator Unger: I probably used the wrong word. I know that from municipality to municipality in Alberta the mayors do not always agree and they have their voices, so I am wondering what your conversations would be like as you cross what is primarily First Nations land, right?

Mr. Falcetta: Primarily.

Senator Unger: What would the conversations be like? Have you started that process and are they receptive? That is really what I want to know.

Ms. Hilton: What we have been able to facilitate is early relationships that identify inclusion in actual specifics of route selection. A lot of the kind of energy corridor development has been top down. It happened to us as First Nations and then this approach is designed by us. Let us put that local knowledge into use.

What are the solutions? We have heard some examples. In this area we have looked at protection. Can you look at a suggestion from this area? There is lots of room for solutions and we want to promote is a solution-driven environment that is based on collaboration and co-design. That in itself removes a lot of the potential for conflict.

Mr. Falcetta: To answer your question specifically we reached out to each of the nations. I couldn't give you a percentage but we have received responses at various levels from a significant amount.

Senator Unger: I wish you luck and I wish you great success because you know that Alberta needs every availability to get our products to tidewater. Thank you.

Mr. Falcetta: Thank you for the encouragement.

The Deputy Chair: First, Mr. Falcetta, I want to thank you for being a bit of a visionary. We need some visionaries out there, taking the time to pull people together on the front end of this thing. I think it is important but I am a realistic person. I am a businessman myself. What sort of volumes are you looking at here in order to make this a viable economic concern?

Mr. Falcetta: Without giving away the secret sauce, depending on how we view the asset lifecycle and depending on where we think we can charge a tariff that would be returning to capital we are probably at probably about 300,000 to 400,000 barrels of bitumen per day.

Please keep in mind that we do not intend on being a one-trick pony. Under Canadian law and North American law we could not do that anyway. We would have to be a common carrier under North American law so we would have to accept commodities and moving people where necessary.

The Deputy Chair: You are looking at about 400,000 barrels a day, correct?

Mr. Falcetta: Yes. Just to answer your question very precisely, if it were just bitumen.

The Deputy Chair: Just oil. I find the routing interesting. With 70 bridges and tunnels it is very expensive work. I am just curious why you chose the particular route that is being proposed. I am curious why you would not go through Whitehorse.

I am just thinking of the spin-off for Yukon and engaging Yukon so it can maximize the economic spin-off. I would assume that you would prefer to go through the largest community in Yukon.

Mr. Falcetta: It is not to say that we cannot change our mind but one thing that I will tell you is that in the design criteria that we initially decided on a couple of things that were really important to the team and myself was to find an alignment that met a criteria, to be as flat and straight as possible. In the criteria we decided at that point that we would have no greater than 1 per cent grades and no greater than 9 degree curves. Essentially that is flat and straight. That is where that line came from. It is the most favourable route. That is a significant improvement actually over what we have today in railway alignment in Canada and probably in North America.

That affords us the opportunity that no matter what fuel source is burned in the future or used in the future, less energy will be necessary to pull commodities up and down those hills because they are not as restrictive as others and, importantly, the flatter and straighter that you can make a railway the safer it is.

The Deputy Chair: One more question, and then I will send you over to Senator Mercer. What has the response been from the oil patch on this?

Mr. Falcetta: We have not had a lot of conversation with the oil patch directly, but we have had some conversations with a few of the producers.

At this moment it is a bit premature for us to talk about the project until we have better clarity around First Nations engagement. That is our priority. Social licence is the number 1 priority.

Senator Mercer: You raised the issues of mapping and Whitehorse and it dawned on me that I had not looked at this before. In the environmental assessment of this how close are you coming to the icefields? You are far enough north of Haines Junction, which is right on the edge of the glacier both on the Canadian side and on the American side. Are there any major ice issues on the route that you are proposing?

Mr. Falcetta: We believe that we have avoided them as much as possible at this point. That is not to say that it cannot be refined further. Again, the design work that has been done to this date or to this point has been done only to the extent to show a reasonable alignment.

We have every intention on having much deeper conversations with our First Nations partners who are probably going to be bringing up other issues that will necessitate a different alignment. To what degree? Is it going to be another 500 miles south or north? I do not think so.

Senator Mercer: I have been to Haines Junction and I have been to Whitehorse, et cetera, but I am not familiar with the makeup of the terrain. I am familiar with another railway that does go north and that is the railway that goes to Churchill, Manitoba. I am Deputy Chair of the Agriculture Committee so have had long discussions about the use of that for moving grain and the cost of that particular railroad because it is moving over tundra. Do we have tundra issues on this route? Tundra is not that stable.

Mr. Falcetta: No, it is not. There are permafrost issues in some of the alignment and it sounds like you are familiar with the Bay line up to Churchill. When the Bay line was built it was built on something a little more solid than what it is today. Obviously the climate has changed a little bit in that area and in some places it has actually become almost like liquefaction.

The previous owner of the property attempted to mitigate with some thermal piping. That was somewhat effective. I do not remember exactly the date of building there but I think it was 1905. At that time they did not have technologies like geotech style or geogrid which unfortunately would have helped the cause tremendously.

I have built a railway through that area in your old neck of the woods in Newfoundland and Labrador. We built through soup and there has not been an issue to this day.

The Deputy Chair: Mr. Falcetta, I would like to thank you and your associates for being here today.

That completes our hearings for today. I would like to thank the witnesses for their participation here today and for the input in our study. We have had a productive day here today and we have a few more ahead of us. We will take all the information back to Ottawa for the production of our recommendations to the Government of Canada.

(The committee adjourned.)