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

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Thank you, Mr. Yu. I really appreciate your stamina in giving us all this information. Thanks for your time.

I want to look at alternatives. One of the concerns I have is that if they win this court case, what does this look like? What precedents have been set in regard to how it will impact other pipelines that go through other states? Do you see that possibly being a problem if they're allowed to do this?

[Vern Yu]

That's a very important issue for the U.S. federal government to look at. It's why we think it's important for the U.S. federal government to weigh in on this particular challenge. The U.S. pipeline safety act definitively says that the safety and operation of pipelines is under U.S. federal oversight. It should not be that each and every state along a pipeline right-of-way should have the ability to regulate interstate commerce and interstate transportation.

That's why we've taken our case to the U.S. federal court. We believe the law says that pipelines in the U.S. are federally regulated entities, both for their safety and their means of being able to provide commerce for multiple states along the way.

[Randy Hoback, Conservative, Prince Albert, SK]

It's fair to say that the future of Canada and of Sarnia and that area is dependent on a U.S. court. Is that fair to say?

[Vern Yu]

That is a distinct possibility.

[Randy Hoback, Conservative, Prince Albert, SK]

If they come back.... You talked briefly about trucks, trains and tankers and all the challenges that come with that. If we were to start putting oil inside the trains, where would they go? Would they go from Superior to Sarnia? Would they go from Chicago to Sarnia? Is there more capacity in the line from Chicago to Superior? Can we put more oil, and avoid Line 5, through Chicago and back up to Sarnia?

Is that even feasible, or are we at full capacity on the existing lines right now?

[Vern Yu]

We are at close to full capacity on the existing lines now. We can move a little more crude oil from Chicago to Sarnia, but it's not really meaningful. The replacement of Line 5 would effectively be moving oil from Edmonton to Sarnia on a train, or trucking that oil from the U.S., with U.S. production, up into Sarnia. There is no ability for us to materially off-load crude that's in Superior, Wisconsin, and move it by train to Sarnia. The infrastructure is limited.

[Randy Hoback, Conservative, Prince Albert, SK]

If that's the case, then—if we get a negative result on May 12, and let's say we get an injunction against us, “us” meaning Enbridge—what does that really mean for Sarnia and that whole area? It's not only Sarnia. What about Wisconsin, Illinois and Ohio? What does that mean for that—

[Vern Yu]

To be perfectly frank, we don't expect any court to shut the pipeline down in May. We don't see any avenue for how that can happen. We need to work through this U.S. federal court hearing and process, in the medium term, to make sure that doesn't actually happen.

In the future, should some court actually shut us down, we would be short crude oil and natural gas liquids for refineries in Indiana, Ohio, Michigan and Pennsylvania, along with refineries in Ontario and Quebec. They would be immediately 50% short of the crude they need. We would see shortages of gasoline, diesel, jet fuel, propane and butane, such that those regions just wouldn't have enough.

In the longer term, people would have to figure out ways to move that replacement fuel by rail or truck. You would need to see thousands of trucks to replace the pipeline. We estimate that you would need to see 15,000 dedicated trucks per day to make that happen. You would need to see 800 extra railcars a day to see that happen. That is a very large logistical challenge.

The Detroit airport would not have enough jet fuel. Pearson International Airport would not have enough jet fuel. We would see some very significant challenges for people to live the life they're accustomed to today.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Hoback. I'm sorry, but your time is up.

We go to Mr. McKay for five minutes.

Go ahead, please.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair.

Thank you, Mr. Yu. You've been very helpful in terms of this study. As you can see, there's not a lot of daylight among and between the members or the parties. It feels a little like an echo chamber.

What's puzzling me is Governor Whitmer's position, which seems to be legally dubious at best. Even environmentally I can't quite understand the position that transfers crude from a pipeline to trucks. It's politically very difficult, because she must be making some enemies among her fellow governors. The legislature is controlled by the Republican Party. I'm a little puzzled by Governor Whitmer's position, given the difficulties that any potential shutdown, or even the threat of a shutdown, would create.

Can you make, for the committee, the governor's argument as to why this is a good idea?

[Vern Yu]

That's something we've been trying to figure out for quite some time.

When she first came into power, we sat down with the governor and tried to brief her on what we were doing with the tunnel, on the operational reliability of the existing pipeline and on the incremental safety measures that we put in place to make sure the pipeline could remain safe while we went ahead and built the tunnel. We talked to her about how we have radar to track all the vessels that go over the pipeline and the straits, and how we hail every vessel that travels through the straits to make sure their anchors are pulled up so there is no inadvertent damage to the pipeline.

We've now put our own vessels on the water to make sure the incoming vessels abide by our safety protocols. We have cameras and other sophisticated equipment looking at the pipeline 24-7 to ensure we are absolutely safe. The pipeline can run at 600 pounds of pressure, but we run it at 150 pounds of pressure. The pipeline's walls are almost an inch thick, which is three or four times the regular wall thickness of pipelines that we run.

This is the most scrutinized piece of pipe in North America. It has the highest safety standards of any pipe in North America. It's the pipeline most reviewed by federal safety regulators in North America. We are abjectly confident that the pipeline is safe.

We're as perplexed as anyone with regard to the governor's motivations. Michiganders themselves support the tunnel. I think our latest polling shows that two-thirds of Michiganders support the Great Lakes tunnel.

[John McKay, Liberal, Scarborough—Guildwood, ON]

You've said that you wanted to arrive at a reasonable outcome, and it sounds very reasonable that you want to arrive at a reasonable outcome, but from your vantage point, what's a reasonable outcome for the governor in a situation such as this?

[Vern Yu]

From day one, the governor has wanted an immediate shutdown of the pipeline and for it not to restart until the tunnel is completed. We have said that is not a reasonable outcome because it would put the energy security of the entire Great Lakes region at risk, so we're not prepared to do that.

We have offered numerous incremental safety measures. We've offered more information to the state. We've offered many things, but right now it's a one-way conversation.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. McKay.

Mr. Savard-Tremblay, you have the floor for two and a half minutes.

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

Mr. Yu, earlier you spoke of alternative replacement strategies. You said that there would be many trucks per day.

I want to make sure I understand. When you were talking about the number of trucks per day it would take to replace the pipeline, you were referring to the United States, right?

[Vern Yu]

Yes. The numbers I've talked about are to meet Michigan's needs for replacing the crude oil and refined product. I think it's a similar answer for Canada. It would be—immediately—railcars, trucks or more marine vessels coming in on the St. Lawrence.

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

Have you done any assessments or actual studies on it, should an alternative be required?

[Vern Yu]

Those alternatives, as I mentioned at the outset, would take time.

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

Yes.

[Vern Yu]

Those alternatives would require siting permits and construction. Those alternatives are less safe than a pipeline and much more costly than a pipeline.

Over time, you can replace Line 5 and Line 9 into the province of Quebec, but it will be much more costly for consumers, and an immediate shutdown would obviously cause energy scarcity, as I mentioned in my prior remarks. Ontario is in a tougher position, because it doesn't have water access to crude oil like Quebec does. Ontario would be like Michigan, effectively, where rail and truck would have to take up the slack for the pipeline.

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

So no specific studies or assessments have been done regarding a possible replacement.

[Vern Yu]

We haven't done specific studies for Ontario and Quebec. We've been doing the studies for Michigan, just because this issue obviously has been an item for us for many years in that state.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Savard-Tremblay.

We'll go to Mr. Blaikie for two and a half minutes, please.

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

Thank you very much.

Obviously, there was just a change in administration in the United States. It's not that long ago that this occurred. I'm wondering if there has been any change in tone or tenor around this issue by the federal government since the election, and how you think the change in administration might impact this case.

[Vern Yu]

The prior administration was very supportive of the pipeline. The Biden administration, I believe, is still studying the situation and hasn't made any public announcements on where it is on this right now.