Economic Relationship between Canada and the United States Committee on March 4th, 2021

[Sherry Romanado, Liberal, Longueuil—Charles-LeMoyne, QC]

Thank you very much, Mr. Chair.

I want to give an opportunity for the ADM to talk a little bit about the impact of the closure of Line 5 on the United States, because he didn't have a chance to jump in there. I thought maybe it would be helpful if we could highlight some of the impact. As my colleague was mentioning, it sounds very one-sided. This is all Canadian oil going to Canada, but there is a lot riding on this in terms of the United States.

If you would like to elaborate a little bit, I will have another question after that.

[Glenn Hargrove, Assistant Deputy Minister, Strategic Petroleum Policy and Investment Office, Department of Natural Resources]

Thank you. I would be very happy to.

I think it is really important that we use this opportunity to really underline the impacts on the U.S., because it really isn't that all the risk is being taken on by the U.S. and all the benefits will go to Canada. That's not the situation at all. Americans face a lot of risk with the potential shutdown of this pipeline.

Michigan has the highest propane consumption in the U.S. The feedstocks from Line 5 that are refined in Ontario produce 65% of the propane for Michigan's upper peninsula and 55% of Michigan's state-wide propane needs. We have seen recently the potential impacts on those supplies to Michiganders.

Line 5 also supplies essential feedstock for the production of jet fuel for the Detroit airport. It feeds refineries in Michigan, Ohio, and Pennsylvania, which are dependent on the line for their operations. For example, there are two refineries in Toledo, Ohio, that would be at risk in the event of a Line 5 shutdown. We're talking about billions of dollars in annual economic output.

From an environmental perspective—this was raised—it would require approximately 2,100 tanker trucks per day leaving Superior and heading east across Michigan, and roughly 800 railcars travelling on Michigan's rails to support the light oil and natural gas liquids that Line 5 moves each day.

So this is not a Canada-versus-U.S. issue; Americans would really benefit from the line's continued operation.

[Sherry Romanado, Liberal, Longueuil—Charles-LeMoyne, QC]

Thank you very much.

We heard on Tuesday and again today that we have a lot of tools in our tool box in terms of bringing Line 5 and the arguments on both sides to a successful closure. We heard that, obviously, we prefer a diplomatic solution, that we have been engaging with our counterparts, that this is an all-hands-on-deck situation. We heard that there has been a mediator requested for sometime in the next month.

Can we also talk a little bit about whether it would be possible for us to use the 1977 transit pipeline treaty if necessary? Can you explain a little bit to the committee what it would look like if we were to go that route?

[Jean-François Tremblay]

We're looking at all the tools we have in the tool kit. It's true.

I think the best solution remains an agreement between Enbridge and the state. One thing that is interesting is that we never heard the governor saying that she doesn't want the pipeline. She wants a pipeline with a tunnel, and Enbridge wants to build a tunnel. The issue is when the tunnel is going to be in place versus when all this is going to be fixed. I think there's maybe a timing issue or a sequencing issue, but there should be at some point an agreement on this.

On the treaty, I know, as was said, that you met with people from GAC. International treaties are really under the responsibilities of GAC, so I will be very careful. I'm not a lawyer, as opposed to some of you, so I would not go too far in terms of interpreting what the treaty of 1977 said. As you know, the treaty was signed in the context of a potential pipeline from the north. It hasn't been built, but this treaty actually has some measures that are supposed to guarantee the transit of pipelines that are going to Canada from the U.S., as well as from the U.S. to Canada.

We are looking at the treaty, of course, like we're looking at all the other tools we have. To be honest, the question will be, which one do we need to use?

[Sherry Romanado, Liberal, Longueuil—Charles-LeMoyne, QC]

Thank you.

My last question is on whether it's possible to speak a bit about some of the opportunities we have with respect to electric vehicles, le circuit....

I'm sorry. I'm going back and forth in my French and English.

This was something that was discussed in the conversation with the President last week in terms of the importance of a continental grid. Could you talk a bit about that?

[Jean-François Tremblay]

It's important that we have the same standards in the way the car industry is developing the electric vehicles. It's important so that we can charge our vehicles on both sides of the border, that we have the capacity to do that. It is also important, in an economy that is so integrated on the auto sector side, that we also have a supply chain for the critical minerals that are needed in the batteries, one that is safe, secure and actually beneficial for us.

There are a lot of elements that are very important on both sides of the border and that reinforce the need for the U.S. and us to work together to make sure that in North America we develop standards and a way of working on EVs, as well as a supply chain that will of course support our car industry. Mollie Johnson is the ADM on this. If she wants to add anything, I would be more than pleased.

[The Chair, Liberal, Raj Saini]

I'm sorry. We're out of time. We can save that comment for next time.

[Sherry Romanado, Liberal, Longueuil—Charles-LeMoyne, QC]

Thank you.

[The Chair, Liberal, Raj Saini]

Next up is Monsieur Savard-Tremblay.

You have the floor for six minutes.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Mr. Chair.

I'm going to put the same questions to the senior officials that I asked the minister earlier, hoping this time to get an answer.

What is your estimate of the potential job losses in Quebec should Line 5 be shut down, which is highly unlikely, based on a number of indicators?

[Jean-François Tremblay]

I think the threat should nevertheless be taken seriously. When the governor of a U.S. state says she wants to shut down a pipeline, you have to take it seriously. We also find ourselves with three cases before the courts. So it's serious.

It's very difficult to assess job losses because the supply chain has flexibility, as you and others have pointed out. So certainly some people are going to try to catch up, either by train, by ship or by other means. At the same time, the supply chain has its limits and it's not necessarily safer than an oil pipeline, as was mentioned earlier.

The case of Line 5 should not be seen as a simple matter of jobs. It is a question of energy security. These are families and businesses that could be deprived of energy. As was mentioned, propane is used extensively for heating in Michigan. Not having access to heating in the winter is pretty serious.

To get back to a comment that was made, in the United States, this issue is often presented as just an economic argument that benefits Canada and does not really benefit the United States. In fact, it's more a question of energy supply for a North American population.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you. It's already clearer than what we heard earlier.

If I understand correctly, one of the reasons why the pipeline should be favoured over the train or the waterway—we know that Quebec has access to the river, which shows that this possibility exists—is the safety aspect. That's what you're talking about in comparison.

In this case, should the different deregulations of oil transport by train and ship be perceived as errors made along the way?

[Jean-François Tremblay]

As a former deputy minister of transport, I can say that all modes of transportation must be safe, and they are. All measures must be taken to ensure that they are.

That said, let's be honest, a pipeline is much more efficient. It doesn't emit greenhouse gases and it doesn't clog up traffic. And it doesn't cause delays for other consumer goods transported by train. Farmers use the train to transport their exports, and other sectors also use the train.

Automobiles or metal cannot be transported by pipeline, but gas and oil can. This is very efficient. Logic dictates that the oil pipeline is the safest, but above all the most efficient way.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

In Quebec, farmers use propane, but we don't heat with propane.

[Jean-François Tremblay]

It is little used, except in small residences in the forest—I experienced this in my youth. You're right that propane is not widely used in Quebec or Canada, but it is used. It should not be neglected.

In Michigan, it is used much more than in some other states.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

In terms of job losses, both Enbridge's and Valero's estimates were 600 jobs.

Can you confirm these figures?

[Jean-François Tremblay]

It is not up to me to confirm or deny their numbers.

Unless, Glenn, you have some analysis behind this....?

These seem to be quite low numbers.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Yes, they do seem to be low.

Earlier, the minister spoke of thousands of jobs. So I am surprised by the contrast between the two estimates.

[Jean-François Tremblay]

As the minister said, the pipeline generates and feeds an economy with well over 1,000 employees. Tens of thousands of people work at the Detroit and Toronto airports. So this is certainly very important.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Based on your experience as a former deputy minister of transport, you were able to say that the modes of transportation were safe. However, there has been deregulation and an increase in the amount of oil being transported.

Earlier, the minister gave the example of Mégantic to say that the railroad should not be used to transport oil. Do you have the same fear?

[Jean-François Tremblay]

We must ensure that all modes of transportation are safe. The horrible and unfortunate Mégantic tragedy should never have happened. We must ensure that all modes of transportation are safe.

What I can say is that, generally speaking, everyone prefers a pipeline to a train to transport oil.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Savard-Tremblay.

For the next six minutes, we have Mr. Blaikie, please.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

Often in the discussion around America's buy America policy we think of things like buses, for instance, or construction, in terms of bidding on public contracts. I'm wondering if you've done an analysis of the ways in which the new buy America proposals might affect Canada's natural resource industry, and if you could share with the committee what the expected impacts are.

[Jean-François Tremblay]

I don't have such an analysis. I think it's too early for us to have all the details around this.

I will remind people that even in the context of softwood lumber, for example, our exportations are very high these days, despite, as you know, the duties from the U.S.

On our relationship with the U.S., we were talking about energy, and our exportations over there in energy goods are probably above $92 billion per year. We're quite successful at getting our product into the U.S. most of the time, in large part. We have irritants with them on buy America and other issues, but we find solutions, too, when we have a predictable partner. I think that's the way we need to approach that relationship. It's not going to change from administration to administration. The U.S. will always have those views of buy America, and some Canadians also have those views.

I think what we need to demonstrate to our partners is that we both benefit from the integration. It's not that jobs produced in Canada are lost in the U.S. It's that jobs produced on both sides actually create more jobs on both sides. That's the way it has been working with the auto sector, for example, and that's the way it works on energy.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Am I hearing correctly that there's no sense of urgency in the Department of Natural Resources around these buy America policies, or concern that they'll affect the export of any primary-industry products into the United States?