Natural Resources Committee on Feb. 9th, 2012

[Gaétan Caron]

That's right.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

So any change—they're changing three valves—requires a set of hearings in front of you.

[Gaétan Caron]

No, that was the second part of my answer. The choice of there being a hearing or not is a discretion that board members who sit on the case exercise. That is based in part on the degree of public concern about the project and their own expert opinion as to whether there could be environmental, safety, or economic impacts by the proposed project. It's a discretion exercised on a case-by-case basis.

There's no obligation for a section 58 application like this to have a hearing; it is discretionary. If a pipeline has more than 40 kilometres, the act says it must have a hearing under section 52 of the National Energy Board Act. So 40 kilometres is the cut-off point under the existing legislation that you passed back in 1959.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Can you tell me this? We had some discussion about the utilization of refineries and the level of capacity they're running at in Canada right now. We heard it's a percentage in the low 80s or 83% or whatever. I'm just wondering if you have an estimate on the utilization of our oil and gas pipelines in Canada in the present. I guess there's a difference between oil and gas because of the markets right now. But do you know what that utilization rate is for each of them?

[Gaétan Caron]

I'd like to give you a qualitative answer and undertake to give the clerk more specific numbers, if it's acceptable to you.

I'd say some gas pipelines are underutilized right now because of the evolving nature of the western Canada sedimentary basin. Oil pipelines, for the better part, are working at or near capacity, which explains why we have a series of applications coming our way--in the past, in the present, and I think in the future. But if it's acceptable to the chair, we'll provide the clerk with more specific numbers on the degree of utilization of gas and oil pipelines. You mean the major ones, I suppose, not all the small pieces of pipe.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Yes. Do you know what utilization rate the industry likes to see? We were told that for refineries it's approximately 95%, which they see as their prime utilization rate. Do you know what it is for pipelines?

[Gaétan Caron]

I don't think there's a target rate. Depending on the method of tolls and tariffs, I think the market understands a pipeline cannot be always full if the demand side is variable, subject to storage. I don't think there's a fixed number. It's obvious that everybody benefits from a pipeline moving all the capacity it can, because the cost per unit of gas or oil is reduced the more you utilize it. So I'd say 100% is desirable. It's actually happening on some oil pipelines right now, including Kinder Morgan, I believe. Gas pipelines are a different story, where you've got quite a bit of space that could be occupied if there were either more supply or more demand for the gas.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you.

I'll go back to Ms. Krause. The U.S. has an interest.... Mr. Jean made a comment about our oil going into the United States at a discount. The Alberta government has said that if we get access to another market, the difference in that amount for which we'd be able to sell our oil is going to be in the tens of billions of dollars. When you talked this morning about economic interest, you talked more about the renewable energy industry being involved perhaps in some of this discussion, about their concern about U.S. energy security. Have you heard anything, or do you get any impression that some of this lobbying is being done in order to maintain that discounted price they get on their oil?

[Vivian Krause]

Nothing, no.

If I may, I would just like to mention one thing. Looking at my notes in response to Mr. Hawn's question earlier, I think it's an important point for the committee. I mentioned that the Oak Foundation had made several grants to Tides Canada. In fact it was four grants since 2005, for almost $900,000. But here's the thing. The Oak Foundation specifically funded the West Coast Environmental Law Research Foundation, and I quote, “To constrain the development of Alberta's tar sands by establishing a legislative ban on crude oil tankers on British Columbia's north coast”. Then they say: “The desired result would be a permanent legislative tanker ban and cancellation of the Enbridge Northern Gateway Pipeline.”

Also, they funded Greenpeace for something called the “Stop the tar sands campaign”. The Oak Foundation says:

This will result in the withdrawal of two institutional investors from the tar sands by 2012; the disengagement of Norway's Statoil and Britain's BP from the tar sands project; the end of tar sands subsidies from the Government of France....

[The Chair, Conservative, Leon Benoit]

Thank you.

And thank you, Mr. Anderson.

Mr. Trost, you have up to five minutes.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair.

I want to follow up with Mr. Reid on a few questions about the Mackenzie pipeline.

Coming from western Canada—and I know other parts of the country always find this a bit strange—we have a bit of a labour crunch, and even with Canada's rather robust immigration numbers, that's going to be difficult to handle. You were talking earlier about how this could secure long-term employment for aboriginal populations in your area. With that in mind, what is being planned to take advantage of it? Beyond construction jobs, which will not be long-term career jobs, what would be the long-term advantages for the region involved? Because the bulk of the jobs will be construction rather than maintenance.

[Robert Reid]

Thank you for the question.

Let me give you a very specific example. Several years ago, APG was instrumental in developing the aboriginal training program to ensure that aboriginal employees would be trained and ready to operate the pipeline. This was a program that consisted of both an academic stream and a work term, on-the-job training program with two streams, one for technicians and one for journeymen.

We attracted close to 50 aboriginal students from high school. They entered the program, a four-year program, and it was planned that they would be up and ready to go in 2009, when the pipeline was scheduled to go into operation. Unfortunately, they were up and ready to go, but the pipeline wasn't.

Those 50 students who became trained pipeline operators are now dutifully employed in Alberta, so from that point of view, the program was both a success and a failure, because our objective was to try to attract and train local aboriginals to have them employed in their homeland.

We would expect to look at a similar program timed this time for the new in-service date, which is in the order of 2019 to 2020.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

How are you going to be able to make sure you get the skilled labour? I'll go back to my experience when I was looking for diamonds in Paulatuk in the northern tip of the Mackenzie region. We had shortages in even getting people to help us with setting up pickets. I was a junior geophysicist on the project, and I remember the day the senior guy and I were billing $600 or $700 a day just to write “N 25” and “S 20” on some pickets.

So I understand it; the guys who are trained and skilled are already working and hustling businesses like there's no tomorrow. But what are you going to be able to do for...? Is there going to be a large influx of outside labour that may cause social issues in those areas? What is the overall plan for dealing with the boom that may happen?

[Robert Reid]

There's no question that during construction there will be a high degree of imported labour from the south. That is going to happen. There are only 45,000 people in the entire Northwest Territories.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Actually, there are 41,000, according to the lastest census data.

[Robert Reid]

Okay. I stand corrected. In any case, there will be a large quantity of jobs imported, and skilled labour imported, to construct the pipeline.

The problem you're referring to is a very real problem—that is, encouraging aboriginal youth to stay in high school and complete their high school education. It's a huge problem, the dropout rate up there. That comes back to the fundamentals of APG's involvement in the project. APG is not just a flash-in-the-pan, short-term-gain type of operation. We will produce a revenue stream for our aboriginal shareholders for as long as gas flows through the pipe. It's the intention of our shareholders to use that money to create better opportunities and a better way of living for aboriginal youth.

That goes to education. It goes to on-the-job training. It goes to creating employment opportunities, not just on the pipeline but elsewhere, because if they have the education and the training, as you point out, they'll get a job.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

So if environmental groups like the ones Mrs. Krause was talking about started to target your pipeline project there, that would have a negative social impact on the aboriginal communities in the area of the Mackenzie Valley—if, say, they would start to spend money to stop your project the same way they'd be going after the oil sands.

[Robert Reid]

Yes, that would have a very definite negative impact on not just the pipeline but the aboriginal communities along the route. The aboriginal communities have no economic base at the moment. They desperately need this pipeline to create an economic future.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Trost. Your time is up.

We go now to Mr. Stewart for five minutes.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Thank you, Mr. Chair.

Mr. Reid, I found a bit of your testimony earlier quite interesting. You were saying that the key difference between Keystone and Enbridge would be that those are instances of companies going to first nations and saying “We'd like to run a pipeline through your territories”, whereas in the Mackenzie Valley it was the first nations going to the company and saying “We'd like to help build this project”. Is that correct?

[Robert Reid]

Yes. The roles were reversed in our case, very definitely.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

You said that it took six years, from beginning to end, to get this approved. Do you think that helps speed up the process, because there was this amicable relationship?

[Robert Reid]

The regulatory delay, as I mentioned, was due to the joint review panel that was established to review the environmental and socio-economic aspects of the pipeline. That panel ran into a number of issues. It's difficult, because under the land claims settlements, the jurisdiction for environmental review was passed from CEAA on to a number of regional land and water boards and environmental review boards. There would have been a total of about 12 or 14 different agencies, all with equal regulatory authority over the project. So they created a cooperation plan.

The NEB was involved in that, back in 2002, I believe. The idea was good. It was to amalgamate and have NEB and joint review panel hearings proceed over different aspects of the project. Where it ran astray, and I have some personal recommendations here, was that, first, the joint review panel was established as an independent review agency, accountable to no one. It needed to be administratively accountable to someone. The panel members were paid by the day, with no cap. There was no incentive for them to move along quickly.

Second, the panel members needed to be properly qualified, and in this case I think they fell short of the mark.

Third, they needed to be backed up by qualified staff. And again, in this case they fell short of the mark.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Thank you very much for your detail. Can I just move you along?

We've had 130 first nations in British Columbia sign a declaration on the Fraser saying that they are completely opposed to the Enbridge pipeline and they are completely opposed to the twinning of the Kinder Morgan pipeline. It would seem to be almost the reverse situation here. Not only do these first nations who signed the declaration not want the pipeline, they won't even talk to the companies.

I'm just kind of seeing how that plays out. It seems like such a stark contrast. Enbridge kind of barrelled ahead, and the first nations were an afterthought. How do you see that playing out?

I am very concerned. We talk a lot about restricting the consultation process. Coming from British Columbia, we know that there actually can be a number of tensions between first nations and others when they feel that their land is being threatened. Have you put any thought into this or reflected on this at all? I don't think I can read your blog, but I'll take your thoughts here.

[Robert Reid]

Well, one important difference between our pipeline and the Northern Gateway Pipeline is that they're an oil line, and we're a natural gas line. I think that probably has something to do with it.

Other than that, there are differences between aboriginals in the north and their needs and desires and aboriginal communities in the south. In fact, there are differences between each aboriginal community and their needs and desires. So it's not a one-size-fits-all solution.