Industry Committee on July 20th, 2010

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Okay, so it's just about product. It's not about a company, and you don't deal with the actual corporations then?

[Richard Bilodeau]

I would have to verify that. My quick recollection is that it's product.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Okay, very good.

Maybe I'll go over to Mr. Labonté from the Ministry of Natural Resources. On a larger scale, on a macro scale, at what point do you get involved in competition? Again I'm asking because I don't want to waste your time, but are we barking up the wrong tree? Should we even be bothering you or wasting your time?

[Jeff Labonté]

Well, I don't think serving you here at the committee and providing testimony is wasting anyone's time.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

No, no, but is it something that falls under your purview?

[Jeff Labonté]

From our perspective, the competition in the petroleum sector or the oil and gas sector is not in the purview of the act under which we would act. We monitor markets and we certainly monitor oil and gas prices and crude oil sales and movement of product. To understand what is going on, we use Statistics Canada data and we have agreements with all of the particular producers and companies so that we can understand what is happening in the marketplace. So we don't measure it against a competitive landscape or whether or not it leads to adequate or appropriate competition.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Am I out of time?

I'm going to pass the rest of my time to Mr. Coderre, who only has a short question.

[Denis Coderre, Liberal, Bourassa, QC]

Mr. Labonté, if the Department of Natural Resources has nothing whatsoever to do with Shell, could you please explain why you told my colleague, Mr. Petit, earlier that you were not aware of the fact that there had been discussions between Shell and the Department of Natural Resources—initially, it was at the federal level, and after that, with Quebec?

Did you know that on February 18, 2010, the President of Shell Canada, Lorraine Mitchelmore, met with Minister Paradis and his chief of staff? Are you aware of that?

[Jeff Labonté]

Thank you very much for your question.

I'm aware of the fact that there was a committee and a survival committee established—

[Denis Coderre, Liberal, Bourassa, QC]

That was not my question

[Jeff Labonté]

—and that it has involved a number of levels of government and that Minister Paradis had some interest in that particular activity as a minister from Quebec and for the particular region. I'm not privy to the conversation between Madam Mitchelmore and Minister Paradis.

[Denis Coderre, Liberal, Bourassa, QC]

Let me rephrase that in English. You were saying, if I recall, that you were not aware of or don't think Shell Canada had any discussions with the Department of Natural Resources. Were you aware that the minister met the president of Shell Canada?

[Jeff Labonté]

I was not aware whether Minister Paradis met with the president of Shell Canada.

[Denis Coderre, Liberal, Bourassa, QC]

Okay.

What's the communication link then? I've been a minister, and one thing I know is that everybody knew everything I was doing, and that Christian Paradis is the same kind of person. So I guess if the Minister of Natural Resources signed three letters to make sure that we could save the refinery, you must be aware of some discussions between the minister's office and the department, especially because it's under your jurisdiction.

[Jeff Labonté]

We certainly have provided information to the minister and to officials in government about this particular refinery and the refining industry overall and the oil and gas markets in Canada. That is our responsibility.

As to the specific nature of their discussions, I'm not aware of what they discussed, which is what—

[Denis Coderre, Liberal, Bourassa, QC]

But you were aware they met?

[Jeff Labonté]

I am aware they met. I read it in the media a number of times, sure—and others, I understand. As to the specific date, I don't know what date it was.

[The Chair, Conservative, Michael Chong]

Okay, Mr. Coderre.

We will now move to Mr. Allen.

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

Thank you, Mr. Chair, and thank you to the witnesses for being here.

I guess the first question is to our natural resources folks. We talked a little bit about the government not intervening in the cases. I want to pick up a little bit where Mr. Rota left off.

You are still monitoring the energy markets and you're monitoring the supply. Can you elaborate a little bit on how you do that? Because Mr. Coderre specifically asked a question on a regional basis and you said that under your conditions it would not rate as a national issue. I'm specifically interested in how you review and make a decision on a national scale. Do you review the specifics of a regional issue that comes up to determine if that could in fact have a national impact? And how do you do that?

[Jeff Labonté]

Certainly our analysis is ongoing and regular in terms of petroleum markets and oil and gas markets in Canada, and we do that on a longitudinal basis, looking at trends over time as well as more accurate information.

In terms of our assessment as to what would trigger authorities under the Emergencies Act or the Energy Supplies Emergency Act, that is something that would be at the national scale. Part of that role is actually the department working with its provincial counterparts to establish whether it seemed to be, in a regional sense, an emergency and whether that would then constitute a national emergency from their perspective.

I can certainly speak to perhaps a few examples that are realistic. In the late 1990s there was an ice storm in eastern Ontario, upstate New York, and much of the eastern townships in Quebec, as well as the Island of Montreal. That ice storm crippled transportation of goods and services and activities going on for a number of weeks on end. I think the military was mobilized for a period of weeks, with thousands of Canadian soldiers helping facilitate in terms of what was going on with the landscape. Neither did that particular disaster or emergency trigger the particular acts under our authority.

The Saguenay floods that occurred in early 2000 in the Quebec region, which would also constitute a quite severe economic and environmental situation, did not constitute a national emergency.

What would trigger the department's action under the two acts is a fairly high threshold, I would say, in terms of what would meet the standard. Certainly there are a number of events that occurred in the last couple of decades that have been quite significant on Canadians and the Canadian economy, none of which has triggered the act.

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

Okay. So there have been a number of refinery closures. As you have indicated in your comments, I think, there have been 31 in Canada. So if I'm led to believe this, there has been no assessment and the government has not been involved or played any role in these. In a major issue like this, if you didn't get involved in any of those major ice storms or anything, how do you say that you are ensuring security of supply of energy?

[Jeff Labonté]

Again, we look at the macro situation across the whole country with respect to the capacity that exists within the refining sector, as well as with the oil and gas operators. Of course, they operate on two levels. They operate at the level of the upstream and the downstream, as I mentioned earlier.

From our perspective at this point in time, and certainly over a prolonged period of time, the economic environment has been such that the capacity has been lower than the actual throughput, which means that reserve capacity exists within the refining sector to meet increased demand, and that demand hasn't existed, so there has been underutilization—which I think was part of the opening presentation I made.

In terms of the rationalization, certainly there has been a trend going on for at least 30 years that has seen rationalization in the refinery sector in Canada, and of course around the world, as I pointed out.

The unfortunate side of refineries is that Canada has gone from some 40 refineries to about 16 at this point in time, and that has occurred over the last 30 years. Over that period, while capacity has increased, the actual number has decreased and their economies of scale have substantially increased. A number of those previous refinery closures or conversions have existed and there hasn't been a requirement under any act for the government to act or to intervene into the market-based policy framework that we have for the energy economy in Canada.

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

What is your timeline for monitoring these shortages? As you presented, page ten in your deck talks about what this was like in 2009. There have been significant changes, obviously, so the 2007 report was significantly out of date. How often do you update this chart reflecting numerous conditions and changes in the market?

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Allen.

Go ahead, please, Mr. Rau.

[Michael Rau, Advisor, Petroleum Markets, Oil Sands and Energy Security Division, Petroleum Resources Branch, Department of Natural Resources]

I can respond to that. The answer is that we haven't actually had a full report since 2008, but we monitor this stuff on almost a weekly basis where we can get it. The Statistics Canada data right now comes out about 60 days after the month of record. We have a number of other different sources through the NEB and we monitor the Energy Information Administration in the U.S. quite regularly, but we haven't actually updated our report specifically since 2008.