Economic Relationship between Canada and the United States Committee on March 16th, 2021

[The Chair, Liberal, Raj Saini]

Welcome, members, to the fourth meeting of the Special Committee on the Economic Relationship between Canada and the United States. Pursuant to the motion adopted by the House on February 16, 2021, the special committee is meeting to discuss the economic relationship between Canada and the United States. Given the timelines adopted in the House motion, the focus today will be on Line 5.

I would like to now welcome our first witness for our first panel, Mr. Vern Yu, executive vice-president and president of liquids pipelines.

Mr. Yu, thank you so much for joining us here today. We look forward to a very informative discussion. The floor is yours now for five minutes, and then we will proceed to questions.

[Vern Yu, Executive Vice-President and President, Liquids Pipelines, Enbridge Inc.]

Thank you, Mr. Chair.

Mr. Chair and members of the committee, I want to thank all of you and your respective caucuses for your leadership and support of Line 5. It has truly been a team Canada approach, and we are very appreciative of the support we have received.

I'm Vern Yu. I run our liquids pipelines business here at Enbridge, and I'm responsible for Line 5.

Enbridge is North America's largest energy delivery company. We deliver crude oil, natural gas and renewable power. Last year, we announced a series of ESG performance goals, including a detailed plan to achieve net-zero emissions by 2050, but I'm here today to talk about Line 5.

Let me be very clear. Our goal has always been to resolve the current dispute on Line 5 through negotiation or mediation. We believe it's in the best interests of both Canada and the United States to keep the pipeline running while we build the Great Lakes tunnel as fast as we can.

The stakes could not be higher. Line 5 is not just a pipeline. It's an economic lifeline for both Canada and the U.S. A disruption would impede access to the energy that's needed to run our economies. It would cause energy shortages and significantly impact the price of gasoline, diesel, propane, jet fuel, plastics and chemicals. Closure threatens thousands of good-paying jobs across both countries. Our roads, our railways and our seaways would see much greater environmental risks, with more trucks, more trains and more tankers attempting to replace Line 5.

Line 5 provides over 50% of the crude oil that's used in Ontario and Quebec. Line 5 feeds the Sarnia petrochemical complex, which plays a key role in providing propane and butane. The line also provides the feedstock for a very significant petrochemical industry in Montreal.

In the U.S., the products moved on Line 5 heat homes and businesses, fuel vehicles and planes, and power industry. In fact, Line 5 supplies 55% of Michigan's propane needs. It also fuels the economies of Ohio, Wisconsin, Indiana and Pennsylvania, so a disruption to the operation of Line 5 would hurt economies on both sides of the border.

Terminating our 1953 easement, which allows the pipeline to cross the Straits of Mackinac is a clear violation of the Canada-U.S. transit pipeline treaty, which was signed in 1977. Enbridge and the State of Michigan are already working on a mutually agreed-upon solution.

The Great Lakes tunnel is a $500-million U.S. private investment to be made by Enbridge. The tunnel would bury the pipeline deep beneath the straits. While the current pipeline is safe and has operated incident-free for more than 65 years, the tunnel will make a safe pipeline even safer.

However, until we build the tunnel, the pipeline must stay open. Safety is not only a core value at Enbridge; it's the foundation to our business. We monitor the straits 24-7 using very specially trained staff and very sophisticated monitoring systems. The people who live, work and enjoy the waterways near our pipelines expect us to operate safely. This is our highest priority.

The tunnel represents an opportunity to modernize a critical energy asset with the latest technology while not only protecting good-paying union jobs and preserving North America's energy security, but also protecting the environment and enhancing safety. We believe a binational diplomatic solution can resolve this in a timely manner, allowing everyone to get back to building the tunnel.

On the Canadian side of the border, we believe that continuing to advance a team Canada approach is the best way to go forward, raising the importance of Line 5 at every available opportunity with the officials in the U.S. and underscoring the application of the transit pipeline treaty. We also request that the Government of Canada use every pathway to assert that Line 5 is an important binational pipeline protected by the treaty, whose shutdown would have grave impacts for both the United States and Canada.

Time is of the essence. We need to work together to ensure that both sides of the border continue to have a safe, affordable and reliable supply of energy.

Thank you again for your leadership on and continued support for Line 5.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Yu.

We'll now start the first round of questions, with Ms. Gladu for six minutes.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Thank you, Chair.

Thank you, Mr. Yu, for appearing today.

As the member for Sarnia—Lambton, I know clearly that my riding will be impacted if Line 5 is shut down. We'll lose more than 20,000 jobs. That's in my community alone.

I heard you talk about the binational solution that you believe will help us come to an answer here. With all the different states involved, are you convinced that it's President Biden who will have the power to bring the governor into line, and that it's up to our Prime Minister to call for that?

[Vern Yu]

We are proceeding along multiple avenues to keep the pipeline operating until we see the tunnel completed.

The first thing we're working on is to have, within the United States, the safety and reliability of the pipeline regulated by the U.S. federal government, which we believe is the proper form of regulation. The U.S. regulator, who is responsible for pipelines, has indicated numerous times that the pipeline is safe and fit for service, so I think it's very important for us to convince the U.S. federal government that is the proper way.

One of the things we're requesting of the Government of Canada is to provide support in our Federal Court filings, to ensure it's understood that this should be under federal jurisdiction. We will also ask the provinces to support the federal government in these assertions.

All that being said, obviously we would like to continue to work with the state, because we believe the pipeline is critical for the entire Great Lakes region—Ohio, Indiana, Pennsylvania and other states—as well as for Ontario and Quebec. It's a matter of reinforcing the critical nature of this asset and of the energy security for the entire Great Lakes region.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

To be clear, it's a federal treaty that permitted its existence, so it's really up to the federal government in the U.S. to rule, if it comes to that.

[Vern Yu]

We believe so.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Could you give me a brief history of the legal interaction between Governor Whitmer and Enbridge?

[Vern Yu]

I think this latest controversy started in November. I believe it was on November 13 that the governor filed, in Michigan state court, that the State of Michigan believed we were in violation of the safety aspects covered by the 1953 easement, whereby we have a duty of care to ensure the pipeline is operating reasonably.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

You said that in over 65 years there's been no environmental impact. I believe the EPA and the State of Michigan verify that as well every year. Is that true?

[Vern Yu]

The state is claiming that we're in non-compliance with the easement. We have vigorously filed in U.S. federal court that we are in full compliance with the easement and in full compliance with the U.S. federal regulator, which is the Pipeline and Hazardous Materials Safety Administration, PHMSA, in terms of operating the pipeline safely and reliably.

The pipeline has been in service for over 65 years with no incidents on the straits, so—

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

I read one thing from Ambassador Hillman, who has been trying to negotiate. She was in discussions with Michigan and the governor, and she said the discussions have broken down. Can you shed any light on that?

[Vern Yu]

I believe Ambassador Hillman tried to open a channel for dialogue with the governor, and my understanding is that the governor was not open to having any dialogue.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

I know Minister O'Regan has also been trying, unsuccessfully, to get a meeting with Governor Whitmer, but I think Catherine McKenna was able to get a meeting. Did you have any interactions to find out what the result of that meeting was?

[Vern Yu]

I have not heard about that particular meeting.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

All right.

Could you describe the impact to your customers and what they are telling you will happen if Line 5 goes down?

[Vern Yu]

If Line 5 is shut down, our customers will lose about 50% of the crude oil they need to run at their refineries. Those would be refineries in Michigan, in Ohio, in Ontario, in Quebec, in Pennsylvania and in Indiana.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

What are the alternatives for them?

[Vern Yu]

In the near term, there are no immediate alternatives to replace 540,000 barrels a day of crude oil and natural gas liquids. In the longer term, you would have to build rail off-loading facilities and truck off-loading facilities in those states and provinces to replace the pipeline. Obviously, that takes time. You need to find a site. You need permits. You have to build that infrastructure.

Along with that, you would have to build new railcars that are specially designed for crude oil or NGL. Those railcars aren't available right now. You would also have to build new trucks to carry all that crude and natural gas liquids to market.

A shutdown of Line 5 would cause an immediate shortage of energy in the region. It would drive up prices very significantly. The replacement of that would be years away.

[The Chair, Liberal, Raj Saini]

Thank you, Ms. Gladu.

We will go now to Mr. Housefather for six minutes, please.

[Anthony Housefather, Liberal, Mount Royal, QC]

Thank you very much.

Mr. Yu, thank you for being before the committee today. I want to say how strongly I feel that the Government of Canada and members of this committee have to do everything in our power, with a team Canada approach, to keep Line 5 operational. We are with you in this.

I'd like to get some things onto the record of the committee. I'll ask for some brief answers, because there are some facts that I want to make sure we have when we question future witnesses.

Line 5 is 645 miles, running from Wisconsin to Michigan's upper peninsula to the lower peninsula to Ontario, but the only area that is covered by the disputed easement is the four-mile dual-pipeline stretch running under the Straits of Mackinac. Is that correct?

[Vern Yu]

Yes.

[Anthony Housefather, Liberal, Mount Royal, QC]

The easement, as Ms. Gladu has said, has been in place since 1953. There has never been any product released into the Straits of Mackinac. Is that correct?

[Vern Yu]

Yes.

[Anthony Housefather, Liberal, Mount Royal, QC]

Would it be correct to say that the action taken by Michigan to terminate the easement was based purely on speculative fears, with no concrete evidence of any product that ever was released?