Natural Resources Committee on Feb. 9th, 2012
A recording is available from Parliament.
On the agenda
The Chair Leon Benoit
Good morning, everyone. We're here to continue our study on the current and future state of oil and gas pipelines and the refining capacity in Canada. This is the last of our four meetings to take a look at this issue.
We have with us today three groups of witnesses. First, as an individual, we have Vivian Krause. Welcome back. From the Mackenzie Valley Aboriginal Pipeline Group, we have Robert Reid, president. Welcome. From the National Energy Board, we have Gaétan Caron, chair and CEO; Patrick Smyth, business unit leader operations; and Iain Colquhoun, chief engineer.
Thank you all very much for being here today. We do appreciate it, and I'm sure the information you give will add to the good information we have already received from previous witnesses.
We'll have the presentations in the order on the agenda. We'll start with Ms. Krause for up to ten minutes. Go ahead with your presentation, please.
Vivian Krause As an Individual
Thank you very much.
Good morning, everyone.
I will be making my remarks in English, but I would be happy to answer any questions in either French or English.
My name is Vivian Krause. Over the past five years I have followed the science and the money behind environmental campaigns. I've written a series of articles published in the Financial Post and elsewhere. I also write a blog called Fair Questions. I'm not part of an industry, political party, or a campaign.
As I prepared to testify today, I watched a short video at the website of the joint review panel for the Northern Gateway project. In that video, the chairperson of the panel, Sheila Leggett, says the decision that the panel will be making is on whether the Northern Gateway is in the public interest of our country. She emphasizes that public participation is important, and that the panel is focused on making sure it has a process that is open, fair, and transparent. With the backing of government and the oil industry, one of the most powerful industries in the world, it's expected the proponents of the Northern Gateway will have significant resources at their disposal. This is common knowledge. When the public hears from the spokespeople from the ministry and government, we consider the source.
What hasn't been known until recently, however, is that some of the opponents of various pipeline projects and the campaigns against the Canadian energy sector also have some deep-pocketed supporters south of the border. I belive that in order for the joint review panel to conduct its work in a manner that is open, fair, and transparent, funding on all sides should be out in the open. In my review of the American tax returns of the foundations funding the environmental movement both in the U.S. and in Canada, I've traced $300 million that has gone from American charitable foundations to environmental campaigns affecting our country. Most of my analysis is based on American tax returns because the IRS requires greater disclosure than the CRA.
The $300 million is from roughly 850 grants that I've traced from ten foundations. In addition to these foundations, an additional dozen or more American foundations have granted substantial funds to Canadian environmental groups. By my analysis, American funding from the foundations that I've followed has increased tenfold over the past decade, from about $4 million in 2000 to $50 million in 2010. Of the $300 million in American funding that I've traced, at least $30 million is specifically for campaigns targeting the oil and gas industry in Canada.
As I see it, the campaign against Canadian energy is one side of a two-sided coin. The other side of the coin is the creation of the renewable energy industry. In trying to understand the campaign against Canadian oil and the pipeline projects that are the lifeline of the Canadian energy sector, I think this is perhaps the most important insight that I can offer. This thinking is reflected in the strategy paper entitled “Design to Win”, which is prepared by the California Environmental Associates and funded by all of the big American foundations that are funding the campaign against Canadian oil. In that document, there's a diagram that clearly spells out that consumer and voter campaigns are funded in order to influence politicians to create the context for, and I quote, “massive shift in investment capital from dirty to clean energy”.
Of course, the dichotomy between dirty and clean energy is a bit of a false dichotomy in the sense that the so-called clean energy industry also has some negative environmental impacts. Underneath this dichotomy is another dichotomy, which of course is between energy that has historically been largely or partially from foreign oil imports and an industry that has been created that is primarily domestic.
The campaign to shift from dirty to clean energy, as it appears to me, is also about reducing dependence on imported oil, and increasing energy independence. In fact, if you read the fine print, you will find that American foundations say this themselves in their strategy papers, that one of their interests is in increasing American energy security and American energy independence.
In the media coverage in the public debate over the last few weeks, there have been several recurring questions. I'd like to speak briefly to each of these. The first question is, so what? Environmentalists have downplayed the extent of their American funding by saying the oil industry has foreign investors, and the environmental impacts of the oil industry are global, so it's fine for the environmental movement to source its funding globally. These are valid points. I will argue, though, that at the heart of the funding matter is not just the foreign nature of the funding; it's the fact that the money involved is big, and that it's coming from billion-dollar foundations, and in one case a hedge fund billionaire. And the funders that are funding this strategy are funding science as a marketing tactic to sway market share, to manipulate markets, and in some cases to protect trade interests. If thousands of Alaskan families say they are giving $25 or $30 to B.C. environmental groups, that would be foreign funding, but I don't think it would bother us, because in fact if there is a major oil spill, Alaska would be affected.
What we see here is the opposite of that. It's not small amounts of money from a large number of foreign sources; it's very large amounts of money from a very small number of billion-dollar foundations. Actually, my blog and most of my writing has been about the science and the money behind environmental campaigns. Really, it's the use of the flawed science and some of the exaggerated claims that are my biggest concerns. Some of what the environmental organizations are saying is simply untrue. This brings me to ask who is funding these campaigns and why.
Another question that comes up is the question of who is calling the shots. Environmentalists insist that they're in the driver's seat. However, this does not quite ring true for me, because most of the foundations funding these campaigns don't accept unsolicited proposals. In other words, they have their own ideas.
The third issue is what we might call the constituency issue. This is an important question for the joint review panel. When an organization receives a substantial portion of its funding from foreign sources, who does that organization represent? For example, RAVEN, a small first-nations group that campaigns heavily against the proposed Prosperity Mine in B.C., reported in its tax return for 2009-2010 that 83% of its funding is from outside Canada. When an organization is that heavily funded by foreign funding, whose interests is it representing? Are they Canadian interests or the interests of its foreign funders, or perhaps both?
Incidentally, I've also seen grants that mention specific mines and other specific projects. In one case, it was a ski resort, the Jumbo Glacier ski resort, in British Columbia.
When billionaire funders are involved in influencing public opinion and public policy on a major issue of national importance, I think the money should be out in the open, whether the billionaire funders are American or Canadian. I believe that this applies to foreign investment and philanthropy, as well.
Going forward, I hope that the CRA will require the same level of disclosure as the IRS. If that had been the case, this would have been out in the open over the last ten years. I also hope, as I've said before, that government and industry will begin a dialogue directly with the American foundations that are funding the campaign against Canadian energy. These foundations give away $1 billion a year. I don't know that they can be outspent, even by the oil industry. They've already spent hundreds of millions of dollars in our country, so I think it's clear that they're serious about what they're doing.
I think the time has come for dialogue directly between the Canadian energy industry and the American foundations that are funding the campaign against it.
Thank you very much.
The Chair Leon Benoit
Thank you very much for your presentation.
We go now to Robert Reid, president of the Mackenzie Valley Aboriginal Pipeline Group.
Go ahead with your presentation, please.
Robert Reid President, Mackenzie Valley Aboriginal Pipeline LP
Thank you, Mr. Chairman.
Good morning, ladies and gentlemen.
I want to thank you for the opportunity to provide you with an update on the Mackenzie Valley gas pipeline and the important role that the Aboriginal Pipeline Group is playing in the development of this very important piece of northern infrastructure.
Just 40 short years ago, the trapping industry provided northern aboriginal people with their own economic base. They were an industrious, independent, and self-sufficient people. Unfortunately, the trapping economy did not survive. As a result, northern aboriginals were forced to move off the land and depend on a cash economy, and many became dependent on government and the social welfare system.
Today our shareholders and those they represent are looking for a way to become self-sufficient once again. We see the Mackenzie gas pipeline and the associated exploration and development activities as a way to provide that economic base for the people of the Mackenzie Valley.
Back in January of 2000, aboriginal leaders met in Fort Liard in the southern Northwest Territories. At this meeting a decision was made that if there were going to be a pipeline built on their land, they would work to obtain an ownership position in that pipeline in order to maximize the benefits to their people. This led to discussions with Imperial Oil, ConocoPhillips, Shell, and Exxon Mobil, culminating in a memorandum of understanding in June of 2001 that gave us a one-third ownership position in the Mackenzie Valley pipeline.
By June 2004 the Inuvialuit, the Gwich'in, and the Sahtu formally became Aboriginal Pipeline Group shareholders. APG is a business deal negotiated by aboriginal people for aboriginal people, one that will benefit the northern aboriginal people for generations to come. Our mandate is to maximize the long-term financial return to the aboriginal groups of the Northwest Territories through ownership in the pipeline.
Through APG, aboriginal people have had and are having today a direct voice in the decision-making for this significant project. The Mackenzie gas project consists of four main infrastructure components. First, there's a gathering system north of Inuvik that gathers the gas from the three gas fields. There's a facility known as the Inuvik area facility, which will remove the natural gas liquids from the gas streams. Third, there's a 1,200-kilometre, 30-inch-diameter gas pipeline from Inuvik southward to Alberta. And finally, there's a 10-inch liquids line that will carry the natural gas liquids to Norman Wells, where it will interconnect with the existing Enbridge oil line. The project has an initial capacity of 1.2 billion cubic feet a day, which is expandable to 1.8 billion cubic feet a day by adding compressor stations along the route.
Last December the National Energy Board issued its supply-and-demand forecast, which concluded that gas from the Mackenzie Delta will be needed by about the year 2020. That's largely due to a decline in production from conventional resources in North America, combined with the increased demand for this environmentally preferable fuel.
Mackenzie is a non-controversial project that is ready to move forward now. The regulatory process is complete and an NEB certificate has been issued. There's widespread alignment for the pipeline, including strong aboriginal support. As you'll see in a few moments, there are huge economic and environmental benefits, not just for the north but for Canada as a whole.
The Mackenzie gas project is the only answer for a sustainable economic future for the Mackenzie Valley. Without a pipeline to bring their products south to markets, investment by the oil and gas firms in the north will be limited. In the past, this industry has provided contracting and employment for the people throughout the Mackenzie Valley and the Beaufort Sea region. Once the MGP is on a path to being constructed, a new basin will open up for exploration, ensuring employment and work for northerners for many years to come.
The Mackenzie gas project has guaranteed $1 billion in set-aside work for aboriginal contractors along the pipeline. This was negotiated as part of the access and benefits agreements. This is a huge opportunity for northern companies to build capacity and compete on an equal footing with southern companies.
During construction over 7,000 jobs will be available in the Northwest Territories and over 140,000 will be broadly spread across Canada. That's to provide the goods and services needed for the pipeline and associated facilities. This equates to some 30,000 person-years of employment in the Northwest Territories and over 200,000 across Canada.
The project is not only good for the north, it's good for Canada as a whole. We will provide a positive GDP impact of over $100 billion, with royalty and tax revenue of over $10 billion to federal, provincial, and territorial governments, and our project supports Canada's course in the reduction of greenhouse gas emissions by displacing coal and oil in the power generation market. Natural gas produces one-third fewer emissions than oil and fully one-half that of coal. The power generation market is the fastest-growing market segment for natural gas, with a 40% forecast for growth by the year 2020. If used to replace coal and oil for power generation, the Mackenzie project could lead to a 600-megatonne reduction in greenhouse gas emissions.
We need to move forward with this project now. However, for this project to proceed toward construction, we need to finalize a fiscal framework with the federal government that will provide an appropriate balance of benefit and risk for both the project and the federal government. That will allow us to recommence the detailed engineering field activities and site-specific permitting necessary to meet the NEB requirement to commence construction no later than December of 2015. With four winter seasons of construction, gas could start flowing by the year 2019.
Northerners and northern businesses have been waiting too long for this project. Unfortunately, we're now about ten years behind our original in-service date of 2009. We cannot fail them now. This project will give the youth in the Northwest Territories employment and career certainty within their homeland, something that has not been available for generations.
We've endured a very lengthy six-year regulatory process. We simply can't afford more delays. We must conclude the fiscal discussions with the government in the first quarter of this year. That's to begin the developmental work, the engineering work, and so on, to allow construction to commence before that NEB certificate expires. We are optimistic that we will come to an agreement to enable this nation-building project to become a reality.
So there you have it. We have an all-Canadian project, with full regulatory approval ready to proceed, ready to create jobs—7,000 of them during construction and over 140,000 across Canada—ready to reduce the deficit by contributing $10 billion in direct tax and royalty benefits, ready to support Canada's clean energy initiative, a 600-megatonne reduction in greenhouse gases over the life of the project, and ready to address Arctic sovereignty. Nothing says it better than real infrastructure in the north, and of course the project is ready to open a new basin to resource development to meet Canada's future energy needs.
All of this is with not just aboriginal support, but with aboriginal ownership. We see APG as a good model for harmonious aboriginal participation in our major projects. This project demonstrates that it is possible not only to work with industry, but at the same time guarantee protection of aboriginal culture and our environment. The Mackenzie gas project is truly a nation-building project, delivering clean energy we need in an environmentally responsible manner, and creating jobs and economic benefits for all of Canada. APG is proud to be a part of it.
The Chair Leon Benoit
Thank you very much for your presentation, Mr. Reid.
We go now to the National Energy Board and Mr. Caron, if you could go ahead with your presentation, please.
February 9th, 2012 / 9 a.m.
Gaétan Caron Chair and CEO, National Energy Board
Good morning, honourable members. Mesdames et messieurs les députés, bonjour.
Thank you for the opportunity to appear before you today to discuss oil and gas pipelines in Canada.
The National Energy Board, known as the NEB, looks after more than 70,000 kilometres of oil and natural gas pipelines. Pipelines that are built, operated, and maintained in accordance with our regulatory requirements are inherently safe. The majority of pipelines are buried below ground. Canadians live, work, and travel safely over them every day, and may never even realize they are there.
Pipeline materials, construction, and operations are governed by requirements set out by the Canadian Standards Association and the NEB in its regulations and conditions. These requirements place a heavy emphasis on quality throughout the life cycle of the project. From the testing of chemical and mechanical properties when the pipe is made, to the extent of non-destructive examination of welds during construction, and the type and frequency of testing when in operation, all of these are subject to NEB scrutiny.
The NEB holds the companies it regulates accountable for the safety of their facilities and for the protection of the environment in which they operate. Our safety programs are designed to make sure companies are effective in managing safety and environmental protection throughout the entire life cycle of a pipeline—from design to construction, operation and through to abandonment.
As we audit and inspect for compliance, we look for evidence of management systems that provide a strong foundation for a pervasive culture of safety, forcefully affirmed by the organization's leadership, rigorously documented in writing, known to all employees, and consistently implemented in the field.
Every year we publish a report entitled “Focus on Safety and Environment”. In its most recent edition, we report that worker serious injury rates are low and are continuing to drop. No member of the general public was injured by an NEB-regulated pipeline during the nine-year period of the review and for many years before we began to publish the report. Environmental impacts of leaks have been localized and fully remediated in compliance with our requirements, guided by international best practices. This is our record when you look at the concrete outcomes of the work we do implementing the National Energy Board Act as an independent expert regulator reporting to Parliament.
We are committed to continual improvement, and we are taking further action to improve results in the four pillars of safety and environmental protection. There is a diagram in my opening remarks you can refer to that shows those four pillars: worker safety, damage prevention, emergency preparedness and response, and integrity of installations.
Although the number of pipeline failures is very low, we send our inspectors to the site of all pipeline ruptures. We collaborate with other authorities, such as the Transportation Safety Board, known as the TSB. We also work on preventing ruptures through audits, inspections, and board orders. In a few instances, the board has ordered a company to reduce its operating pressure until such time as the company can demonstrate that the integrity and operation of the pipeline system is sound at the full operating pressure.
When the board sees an increase in incidents such as the stress corrosion cracking ruptures in the 1990s, we take a leadership role in identifying the causes and ordering that measures be taken for the continued safe operation of pipelines. As can be seen in the graph included in the opening remarks, our intervention in the mid-nineties in the stress corrosion cracking inquiry caused a significant reduction in the number of ruptures under our jurisdiction. The lessons learned have been used in other jurisdictions. The increase in ruptures in 2009 appears to have been a one-year phenomenon, but we keep a close eye on any emerging trend. Studies continue to confirm that pipelines operate more safely than any other mode of transportation of hydrocarbons.
We utilize a risk-informed approach when assessing projects and setting requirements for pipelines. We methodically assess the risk to public and worker safety and to the environment. This allows us to most effectively manage NEB resources and properly prioritize our activities throughout the life cycle of facilities.
In the application phase of the project, we assess whether the project is in the public interest. If so, we assess whether the project can be built and operated safely and in a manner that protects people and the environment.
In the planning phase, industry must meet our regulatory requirements in order to design and plan a project appropriately. Companies are required to demonstrate meaningful public involvement and consultation.
If we approve a project, we can attach any conditions we see fit in the public interest, and our role doesn't stop there. We monitor and verify compliance with requirements during the construction and operation phases of the project.
Our oversight also includes the abandonment of a pipeline. Companies must prove that the applied-for abandonment plan can be conducted safely while protecting the environment at the time of abandonment and beyond.
Despite our regulatory oversight, incidents, although infrequent, can still happen. This is the case in any jurisdiction for any mode of transportation. The NEB's priorities in any emergency are the safety of people and the protection of property and the environment. The NEB has an emergency management program in place and is ready to respond to an emergency situation at all times. We also have working agreements with other government departments and agencies in order to coordinate responses and communicate effectively in times of crisis.
Any time there is a serious incident, the NEB oversees the regulated company's immediate and ongoing response and cleanup. We require that all reasonable actions be taken to protect employees, the public, and the environment. We verify that the company conducts to our satisfaction a cleanup and remediation of environmental effects caused by the incident.
We maintain an emergency operations centre in Calgary to coordinate our field staff at the incident site, and to provide situation reports to the Government of Canada’s emergency operations centre here in Ottawa.
We hold companies accountable for anticipating, preventing, mitigating, and managing incidents of any size or duration. NEB enforcement activities range from notification and opportunities for voluntary compliance, to reduction of operating pressure of a pipeline, potential suspension of authorizations, or revocation of operating licences. Offences can also be prosecuted.
Where the board finds that safety can be improved, it takes the necessary actions to have the situation rectified. We have the authority to shut down the pipeline company's operation. Failures or serious injuries must be reported to the board by law. The board requires companies to conduct their own investigations and submit their results. In serious cases we will conduct our own investigation.
The TSB may also investigate and make determinations of the causes of the failure. The board reviews the findings of all TSB investigations and takes action to ensure that recommendations are acted upon.
In closing, I believe that Parliament, by passing the National Energy Board Act in 1959, provided Canadians with a national institution well equipped when it comes to pipelines to ensure safety, and to protect the environment and their communities. Our record, in terms of positive trends in our key indicators and the action we take when we see the emergence of an unwanted trend, speaks for itself.
Like any serious safety regulator, we are never totally happy with our results. Every day the 400 people working at the NEB look for ways to continually improve our methods and our results. Canadians expect no less.
I will be pleased to answer your questions with the assistance of my two colleagues, Mr. Patrick Smyth, business leader of operations at the NEB, and Mr. Iain Colquhoun, our chief engineer.
Once again, thank you, honourable members, for the opportunity to speak to you today about the NEB's commitment to continued pipeline safety.
The Chair Leon Benoit
Thank you, Mr. Caron.
Thanks to all of you for very interesting presentations. They were very helpful to our study.
We'll get directly now to comments and questions, starting with Mr. Anderson.
David Anderson Cypress Hills—Grasslands, SK
Thank you, Mr. Chair.
I want to thank our witnesses for being with us today.
Ms. Krause, I'd like to start with you. I wish we had a little more time to explore deeper some of the things you've talked about here.
Most of us assume that the battle we see against pipelines and oil sands is an ideological one. It was very interesting this morning to hear you talk about the economic aspects of that. It's also interesting that we see these socialistic obsessions being funded by billionaires.
Who are the key players in the foreign funding that's coming into Canada? Can we track the money a little bit? How does the money get into Canada? What organizations does it comes through, for the most part?
As an Individual
The main funders are the William and Flora Hewlett Foundation, the David and Lucile Packard Foundation, the Oak Foundation, and the Rockefeller Brothers Fund. The Rockefeller Family Fund funds things south of the border. There's also the Wilburforce Foundation, the Brainerd Foundation, and the Bullitt Foundation. Those are the main ones.
The big five are Hewlett, Packard, Moore, Pew Charitable Trusts, and the Rockefeller Brothers Fund. Those foundations have $20 billion in assets and give away about $1 billion a year.
David Anderson Cypress Hills—Grasslands, SK
Many of them made their money from the oil and gas sector.
As an Individual
For example, the wealth of the Pew Charitable Trust originates from oil, as does Rockefeller's.
David Anderson Cypress Hills—Grasslands, SK
How are they able to get that huge amount of money you're talking about into Canada?
As an Individual
To finish up, I think it's important that there is a plan here. In fact, Tides Canada was funded by the Hewlett Foundation to develop “a strategic plan to address oil and gas development in British Columbia”. That was in 2004 that Tides Canada was paid $70,000 to develop this plan by the Hewlett Foundation. Since then Hewlett has poured in $26 million.
I think it's fair to ask what the plan is. Does it involve funding a large number of environmental groups that campaign in concert against Canadian oil? Does it involve the creation of the Great Bear Rainforest? Does it involve funding the first nations on the strategic north coast of B.C.? Does it involve funding a particular scientist, politician, or political party? Those are fair questions. What's the plan?
Secondly, of the $300 million I've traced, far and away the largest recipient is Tides Canada and its sister organization the U.S. Tides Foundation. I've traced $60 million of American money that has gone through Tides Canada over the last ten years.
David Anderson Cypress Hills—Grasslands, SK
Do you know what percentage of that has gone into this project in Alberta or B.C.? Is that too difficult to find out?
As an Individual
Just to give you one example, the Hewlett Foundation and the Packard Foundation together have granted $90 million towards B.C. environmental groups. Of that $90 million, about $80 million was specifically for projects to create the Great Bear Rainforest, and also to address the energy sector. It's interesting that here we have $55 million that's specifically for the creation of the Great Bear Rainforest, but of course that isn't called the Hewlett Packard Rainforest, it's called the Great Bear Rainforest. Now, in the name of protecting the Kermode bear, environmentalists are arguing that oil tanker traffic needs to be banned on the entire gateway portion of the B.C. coast. The interesting thing about it is that the Great Bear Rainforest goes from the northern tip of Vancouver Island all the way to the southern tip of Alaska, every square inch of the coastline.