Transport Committee on Nov. 4th, 2014

[David McGuinty, Liberal, Ottawa South, ON]

Thank you, Mr. Chair.

Good morning, gentlemen.

Mr. Mitchell, can you tell us more about your rail-to-truck transload facilities? When were these built?

[Grant Mitchell, President and Chief Executive Officer, RTL-Westcan Group of Companies]

We have two of those facilities, the newest one being in Calgary, Alberta, which was built about three years ago and became fully operational two years ago. It's state of the art. It has all the Scully protections for loading into trucks, so it's a rail-to-truck transload. We primarily transload petroleum products there, the largest one being diesel.

[David McGuinty, Liberal, Ottawa South, ON]

Are they being expanded in size, scope, or volume, for example?

[Grant Mitchell]

They are not today. Today we have excess capacity in our Calgary facility.

The one in Trail, B.C., primarily transloads both acid and then dry fertilized products. It is a truck-to-rail transload, and it's the same thing, with all the required safety precautions, monitoring, and a very good plan in both facilities, a plan registered both with the municipality as well as the local fire departments.

[David McGuinty, Liberal, Ottawa South, ON]

Are the projected decreases in fuel prices on the global markets going to have an impact on your business?

[Grant Mitchell]

The biggest impact we see is that growth may be slowed slightly, based on the current fuel prices. What we expect to see is slower growth on the upstream side of the market. We expect to see a slight increase on our retail markets as people potentially start to drive further distances or drive more.

[David McGuinty, Liberal, Ottawa South, ON]

The conventional wisdom is that even if every pipeline that's under consideration in Canada is built, including a pipeline to the east, a pipeline through the west, and a pipeline to the south, on top of existing pipeline capacity, by 2024 we're going to see a surplus of a million barrels a day in production from the oil sands. That's the conventional wisdom. Those are the conventional numbers that have been put out by CAPP, the NEB, and others in terms of projections.

You're on the front lines of this business, and from a safety and security perspective, based on what we heard from one of our witnesses Mr. Warnock, he said that transporting oil by truck would be a burden, it wouldn't be possible because of the shortage of drivers and that they couldn't handle the volume that trains could because they didn't have the cars and the length of trains, and so on and so forth. Can you help us understand what the thinking is in the patch? What's the thinking at RTL-Westcan? What's going to happen here if we can't take this oil by truck?

[Grant Mitchell]

Our thinking is we certainly concur with Mr. Warnock. We're certainly active members in the AMTA and the CTA as well. So, we certainly concur with a lot of their thoughts.

We have taken a little bit more of a proactive approach in regard to recruiting professional drivers into our business, because we do believe the threat is very real, that there will be a potential shortage of drivers as these markets continue to grow. So, as Mike mentioned—

[David McGuinty, Liberal, Ottawa South, ON]

I have no doubt that you're investing in safety and training, and so on, but my question is more about what's the conventional wisdom in the private sector in the oil business? You're in the transport business, of course, but you deal with an awful lot of oil and petroleum products. What's going to happen with all this excess capacity? What's the expectation? Is this a problem that in the oil patch people think is going to solve itself?

[Grant Mitchell]

I'll speak specifically for the work that we do in the regions we operate in, the oil patch, and the customers we serve. A three- to five-year view is what we often talk about with them. They expect that even as there are more pipelines and they do their full lines, which reduce the amount of trucking required to rail transloads or to a specific pipeline, based on their drilling plans they expect to see an average growth of 3% to 5% in their trucking requirements over the next three to five years, on an annual basis.

So we're working with them very closely to make sure the capacity is there. We don't see a big risk.

[David McGuinty, Liberal, Ottawa South, ON]

Can I turn to liability for a second? What's the liability insurance coverage for trucking companies if there's a spill?

I had a meeting on the weekend with a senior adviser to the mayor of Lac-Mégantic, who told me that the costs in Mégantic are $600 million and climbing fast. There's been a serious discussion of razing, literally tearing down huge tracts of the town, to clean up the oil, which is underground and is surfacing and moving. The oil is migrating, so they don't know what the final costs will be.

I know you're in the trucking business, but what's the liability situation for trucks now if there's a spill or an accident? How does it work in practical terms? Who can help us understand that?

[Grant Mitchell]

How does it work? I think that's key. Comparing ourselves to rail is really not an accurate comparison, based on a 100-car train versus one trailer. Primarily we're hauling 35,000 litres of product, give or take, in our oil patch operations.

[David McGuinty, Liberal, Ottawa South, ON]

What happens if there's a spill?

[Grant Mitchell]

Sometimes it's a little more; sometimes it's a little less.

[David McGuinty, Liberal, Ottawa South, ON]

Yes, I understand that.

[Grant Mitchell]

If there's a spill, the first key is first response. Get there and get it contained to limit your liability. Then working with local authorities, devise a plan to remediate the area very quickly. Fortunately, we've been successful in doing that, and we've have had very few issues. We've had no issues of any great magnitude. Based on the regulations today, we see the liability as being well contained.

Obviously we carry appropriate insurance policies to be able to deal with anything that may happen.

[David McGuinty, Liberal, Ottawa South, ON]

I'm out of time, unfortunately. The chairman's giving me the signal.

That's exactly what we want to hear about: what is your liability coverage? Let's say there's $1 million of cleanup costs. How's that dealt with? How's the municipality indemnified or paid back for cleaning up? How does that work?

[The Chair, Conservative, Larry Miller]

Answer very quickly.

[Grant Mitchell]

We follow a very standard process. For liability coverage, insurance, depending on specific contracts, we'll have anywhere from $5 million to a much larger number in underwriting protection, and I would say that for all carriers our size.

[The Chair, Conservative, Larry Miller]

Thank you.

Ms. Young, you have seven minutes.

[Wai Young, Conservative, Vancouver South, BC]

Thank you for your presentations.

Since Mr. McGuinty has raised it, what is your view of safety in moving oil by pipeline or train or truck? Which is the safer transportation mechanism?

[Grant Mitchell]

From our perspective, we feel it's very well controlled by moving product by truck. As mentioned, specific to our oil patch operations, we operate in a radius of 75 miles. It's from the wellhead to rail yard or wellhead to pipeline, so it's very well controlled.

I couldn't speak to the safety of pipelines. Certainly it's not my area of expertise.

[Wai Young, Conservative, Vancouver South, BC]

We have heard in the committee that moving oil by pipeline is the safest mechanism as opposed to what we've seen in Lac-Mégantic.

Would you say that the trucking industry will ever be able to move the volumes that are currently here and projected, as Mr. McGuinty was asking?

[Grant Mitchell]

We will not be able to move the volumes long distances and be able to provide as efficient a service as rail or pipeline. Our place in the oil patch is definitely shorter haul.

[Wai Young, Conservative, Vancouver South, BC]

So the opposition's opposition to the pipelines is not helping the industry at all or moving the product we need, because you're never going to be able to match the levels of movement this industry requires in that sector.