Industry Committee on July 20th, 2010

[The Chair, Conservative, Michael Chong]

Just very briefly, because we're running out of time here.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Okay. The $400 million you've invested over the last five years, how much will that be of value in new terminal business?

[Christian Houle]

If I take quickly the top three, let's say, the gasoline hydrotreater will not be used; it will probably be sold to somebody in the world. That's what we're going to try to do. The distillate hydrotreater is considered almost brand-new and will be sold most likely to somebody in the world. And the CCR might be sold to somebody in the world, but it won't be used in the terminal.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you, Chair.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Allen.

Mr. Coderre.

[Denis Coderre, Liberal, Bourassa, QC]

Mr. Chairman, I am known as someone who says what he thinks. But I really get the impression that someone is pulling the wool over our heads today, because this just makes no sense.

We are being told that there was a desire to sell a refinery which, in reality, was so obsolete that it was worth no more than a scrap yard, and yet you were asking for between $150 million and $200 million for it. Montreal deserves more than to just be a parking lot for gas. Is that clear? That's the major point.

There are no refineries being built elsewhere. Basically you are telling us that you intend to dispose of your current stock and that we will just be at the mercy… Furthermore, now it will be tankers coming in. Shall we talk about the environment? You aren't even capable of complying with Quebec's environmental regulations, given that you have had 25 offences in the last several years. And yet you are here telling us that there is nothing to worry about because tankers will be coming in, what's more, and we will be able to get supplies from the Gulf of Mexico. I guess you intend to work with BP; I can hardly wait to see that. Over there, you don't need to unload anymore; on the contrary, you fill up. All you have to do is scoop up the oil on the beach.

I find that completely unacceptable, Mr. Chairman.

I hope you have an open ticket, because I don't think we'll have finished with Shell today. If another committee meeting is needed, we will call one.

Mr. Oblath, I'm very pleased that you're here today, but I would like you to table your term sheet, because I don't understand. If you have to put forward another $600 million, and that infrastructure is totally wasted and you will let that infrastructure go...and now you're saying, well, we're still willing to sell. Okay. We'll have Delek tell us later on... Would you be ready to table that term sheet so that we can see what happened? That's the bottom line. It's not just an issue about what Delek offered you. It's what did you tell them? In the beginning we were talking about a bracket just to put up some money to buy the refinery, and now it's more and more. At the end of the day, we understand it's a total waste.

It's not very encouraging for the employees, but nor is it very encouraging in terms of our energy security. We will be dependent on the United States and others, in terms of supply, for the purposes of our own energy security. I can't wait to go to the Shell station at the end of my street and see that the cost of gas has gone up by 10¢ a litre because of our dependency on the United States. If something happens—such as a humanitarian mission, a war or whatever it may be—we will be dependent on another country. What does it mean to be a sovereign country, in your opinion?

It's not just a 25% shortfall in Quebec; it will be 13% all across Eastern Canada.

I am outraged by those kinds of comments. But none of this seems to really bother you, Mr. Houle. Not only that, but it's our fault, because we summoned you to appear at a committee meeting today, which meant that you didn't have time to apply for your permits. However, you did have time to file a motion for an injunction, for example, because you wanted to move ahead with the dismantling before obtaining the necessary permits.

Mr. Oblath, do you believe that Delek US has the capacity to run Shell's Montreal East refinery?

[Richard Oblath]

I have no doubt that they're a credible owner of a refinery. They already do run that, and I have no reason to believe that they could not do so here.

[Denis Coderre, Liberal, Bourassa, QC]

So you don't doubt their financial capacity? I don't want to hear about credibility. They are credible. You signed a confidential agreement. If you signed a confidential agreement, that means something. You didn't do that with Blue Wolf, but you did that with Delek US. Do you believe, yes or no, that they have the money to buy you?

[Richard Oblath]

I do not want to judge their balance sheet. That's up to them. They showed us the capability of raising those funds, a vast majority--the amount of funds they were going to put in was tiny. Most of those funds were coming either from loans, from--

[Denis Coderre, Liberal, Bourassa, QC]

That's their issue and we'll talk about that. What you wanted to have was the money, so they filled the bracket that you had focused on, which is $150 million to $200 million. The question I'm asking you--

[Richard Oblath]

Mr. Chair, again--

[Denis Coderre, Liberal, Bourassa, QC]

No. I had an answer. You repeated exactly what you were saying at the beginning.

Are you ready to table your own term sheet so that we can know, so that Canadians can know, because it's a public hearing, what you truly wanted from somebody who would be able to buy that refinery?

[Richard Oblath]

Mr. Chair, the terms sheet for the refinery alone has been publicly discussed here. The special committee knows what it was. It was in the range of $150 million to $200 million. The reason it's not an exact number is it depends on some other factors in the detailed offer that would be made. We have had no expression of interest that has come close to the $200 million mark for the refinery alone.

[Denis Coderre, Liberal, Bourassa, QC]

Okay. So you don't mind if other witnesses who were part of the committee would talk freely about the terms of your terms sheet. You give that. You don't have any problem with that.

[Richard Oblath]

I do not--

[The Chair, Conservative, Michael Chong]

Mr. Coderre, as chair I'm going to interrupt here. We're at the end of the meeting, but I'm going to answer that question.

Witnesses are free to divulge whatever information they wish to divulge, without fear of civil suit in a court of law. Testimony given here or comments and questions provided by members of this committee or questions or comments provided by witnesses are protected, as they are in the House of Commons. So I reiterate that as chair, not just for our present panel of witnesses but for the future panels that will appear today.

We finish up our meeting here at quarter to eleven. I want to thank all of our witnesses for appearing today, and I want to thank our members of the committee for their questions and comments.

This meeting is suspended till eleven o'clock.

[The Chair, Conservative, Michael Chong]

I would like to call this meeting of the Standing Committee on Industry, Science and Technology back to order.

Welcome to our 26th meeting on this 20th day of July, 2010.

We are meeting today pursuant to Standing Order 108 to examine the impending closure of Shell Canada's Montreal refinery.

Welcome to our three witnesses. We have in front of us today Monsieur Fortier, from the follow-up committee of Shell Refinery; Mr. Boles, from Delek US Holdings; and Monsieur Delage, from IBS Capital. Welcome to all three of you.

We will begin with questions and comments from all the witnesses. We will not have opening statements from the witnesses. We will begin with questions and comments from members of the committee so we can get into questions immediately.

We have an hour and a half of questions and comments from members of this committee, beginning with Mr. Coderre.

[Denis Coderre, Liberal, Bourassa, QC]

Thank you, Mr. Chairman.

I am very pleased to see you all here today.

As you know, earlier this morning, officials from Shell said a great many things, in particular with respect to Delek US Holdings.

I would like to put my first question to the Hon. Michael Fortier, who is chair of the Shell Refinery Follow-up Committee. In your opinion, was it truly Shell's desire to sell the refinery, at every stage of the process, or did you have the sense that it was constantly upping the ante?

[Michael M. Fortier, Chairperson, Follow-Up Committee of Shell Refinery]

That is a question that you should put to Shell. I asked Shell that very question, Mr. Coderre, at the very beginning, when the union and the governments involved asked me to lead the process. That was the first question I put to Shell officials and I was told it was very serious about wanting to sell the company.

I asked the question again very often throughout the process, and every time, at different levels, whether it was Houston or London, the company confirmed its desire to sell.

[Denis Coderre, Liberal, Bourassa, QC]

Do you agree with that, Mr. Delage?

[Claude Delage]

Yes.

[Denis Coderre, Liberal, Bourassa, QC]

You're a financial expert. You lobbied a number of potential buyers and you also proposed buyers. Is it your view that a company such as Delek US Holdings has the financial wherewithal to buy the refinery and that Shell should have paid more attention to its request?

[Claude Delage, Managing Partner, IBS Capital]

I very much agree that Shell was a highly qualified company, both in terms of its organization, as a subsidiary of a larger group, and in terms of its expertise in the field. It is important to understand that Shell had concerns—which were appropriate—and did not want to sell to a company unfamiliar with the industry. It had that expertise.

[Denis Coderre, Liberal, Bourassa, QC]

Mr. Boles, welcome to Canada and welcome to our committee.

I'm delighted to see you, because it seems you're part of the solution, and that for the first time we've put a face to a name and people have the opportunity for you to tell us what you had in mind for the future of the Montreal East refinery.

First of all, did you withdraw...? Shell said that you withdrew from your offer or you felt that Shell asked for too much and that it didn't seem they truly wanted to sell.

[Jim Boles, Business Development, Delek US Holdings]

With respect to the question about did we withdraw, negotiations reached an impasse over one very significant issue, in my view: the turnaround. That would have resulted in Delek acquiring a closed refinery. That's not something we get excited about--nor would our potential financing sources.

We attempted to explore a number of options around this matter, and were unable to. So we were looking at buying a closed refinery that we could not reopen until the spring.