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

[The Chair, Liberal, Raj Saini]

You have 30 seconds.

[Rachel Bendayan, Liberal, Outremont, QC]

Ms. Greenwood, you mentioned the importance of the CUSMA, and of course I couldn't agree with you more. This new, modernized NAFTA was really the result of a huge effort right across the country that very much involved you and your association.

Are there any lessons learned from that experience that you feel we can use effectively in this scenario, other than the ones we've already discussed?

[Maryscott Greenwood]

In the time we have I would say we should keep it up. Don't assume that the crisis is over and we can now just kind of move forward. We need to have that kind of an effort applied to the Canada-U.S. relationship to maximize the opportunity for collaboration and minimize the disagreements.

[The Chair, Liberal, Raj Saini]

Thank you, Madam Bendayan.

Mr. Savard-Tremblay, you have the floor for six minutes.

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

Welcome and thanks to the witnesses for being with us today.

As you represent certain companies and groups of companies, I'd like to know what they are preparing for. What are the companies thinking right now? Are they focusing more on the line being kept, or are they considering a Plan B?

[Aaron Henry]

For the most part, this is definitely a plan B. This is not a situation in which there's a whole lot of optimism. In fact, as has been clear from some of the other statements, we're not really even sure if we have the capacity to absorb this displacement in terms of either available trucks or trained truck drivers. It certainly is the case that in some way this flow would be absorbed, but it is not an outcome that we will be pushing towards. The high-level statement is that Line 5 is critical to not only Canada's but also the U.S.'s energy security, and at this point in time, there is no alternative or at least no viable one.

[Maryscott Greenwood]

I have faith in our democratic system, actually, so unlike the case of a presidential permit, in which the authority really does lie with one person, in this scenario the actions taken by one particular political office holder are before a court and also the subject of a great deal of diplomatic negotiation. I don't want to say I'm optimistic or pessimistic, but I have faith in the system and we are in the middle of the process, so I don't want to prejudge it.

It is important, though, to help Americans in particular understand what's at stake.

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

If I understand the first statement correctly, it's not even clear that an alternative exists.

If the pipeline were to shut down, which seems fairly unlikely given the legal precedents and the current dialogue, what would happen? Would it simply end in failure, bankruptcy or shutdown? What would you do?

I'm a little surprised to hear that you have not considered it and you just see it as a disaster, with no thought on how to deal with it.

[Maryscott Greenwood]

I think you're right. If the pipeline were shut down, in Michigan alone they would have a 756,000 gallon per day propane shortage, so there is a massive immediate impact.

I'm hopeful that we don't get to that point, but you're right that we have to look at all the different scenarios, given where we are in this process.

[Aaron Henry]

To maybe dovetail with those comments, I would say I agree that if the pipeline were to be shut down, the consequences would be pretty significant. However, I would also agree with Ms. Greenwood's comment that when we look at this situation overall, at where the conversation is and at the actions that have been taken by Canada so far, we're still in a good place to continue to up that pressure.

I would also, as was mentioned towards the tail end of the last conversation, reiterate that in the event that this cannot be resolved amicably and through diplomatic channels outside of court, there is the 1977 pipeline transit treaty on Canada's side. That is not the measure to start with, but it could certainly be the measure to finish with if it came to that.

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

Not only has it not been studied, but we hear in your testimony a call for us as politicians to keep an eye on this Plan B, if ever there is one.

[Maryscott Greenwood]

That's exactly right. It's important that you're talking about it now. It's important that you engage your counterparts in the United States, outside Washington and inside Washington, in the way you did when you faced the existential threat of tearing up NAFTA.

You're right to be involved in it.

[Mark Agnew]

We would support that as well.

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

Now we have a situation where the governor, the authority in Michigan, feels that the evidence, the studies, that Enbridge submitted are not convincing and do nothing to allay or calm her fears.

It's very surprising to me, because this is backed by scientific facts. Someone clearly is not being truthful, either in the questions asked or the answers from Enbridge.

In your opinion, were the answers satisfactory or not? According to Michigan officials, they were not.

[Mark Agnew]

I won't profess to have read every single last bit of documentation that's been submitted, but certainly what we've been hearing from our companies is that a fairly voluminous amount of material has gone in, the way you would expect any company to do when engaging with governments and regulators. The unfortunate reality is that politics get in the way.

[Aaron Henry]

I would quickly follow that up and say that for the most part, from what we've seen, Enbridge has gone above and beyond to ensure that it can meet the governor's concerns. That includes going beyond simply the proposed tunnel project to encase the pipe. It's also the state-of-the-art Guardian asset protection system they've utilized. It is designed specifically to defend against the number one risk for the Mackinac straits, which is an anchor drop, through basically a communications system with all commercial vessels that maps out the pipeline beneath the straits.

I would agree with my colleague. Ultimately, we're at the point of politics on this, rather than the materiality.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Savard-Tremblay.

Mr. Blaikie, you have six minutes, please.

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

Thank you very much, Mr. Chair.

I'd like to pivot away from the particular Line 5 issue and ask a bit about what your organizations see as the opportunities. With the new administration, there's the opportunity for a far more united front against climate change. A lot of economic opportunity can come from that, both to help our two respective countries lower our carbon footprint and to generate a lot of employment and new business in doing that.

I'm wondering if you might like to take it in turns to speak a little about some of the opportunities your membership is contemplating, and about what kinds of public policy might encourage better collaboration and better results in respect of reducing our carbon footprint.

[Maryscott Greenwood]

I can start. One example of where Canada and the United States can really advance the conversation on climate is through innovation. Just to give you one example, it's not just about carbon capture and storage anymore. It's about carbon capture and utilization, where you can actually capture carbon at the point of emission and turn it into something that you then utilize.

The example I have is a Canadian company called Capital Power. They have assets in the United States and have invested in a technology that creates carbon nanotubes. You take captured carbon and you mix it into cement, for example. When you're looking at building infrastructure, you can actually have a greener form of infrastructure that has the effect of reducing carbon.

There are some very exciting opportunities like that. Public policies that incentivize cross-border collaboration, such as regulatory cohesion, and that have a structure to incentivize innovation are the way to go. There are a lot of Canada-U.S. opportunities. A lot of that will be discussed at the April 22 climate leader summit that I mentioned in my testimony.

[Mark Agnew]

There are a couple of different items that come to mind. For example, we have the COP26 coming up later this year. Given the integration of the North American economies, it would make sense for Canada and the U.S. to go into the COP meetings with an idea of what would benefit North America as an economic block, for instance.

There has also been a lot of discussion going on around critical and rare earth minerals, and if we're going to be deploying a lot of new technologies that will deliver energy efficiency, we need those critical mineral products as inputs to be able to build them. We have some of those mineral products here. How can we work better at getting them out of the ground and into a North American supply chain?

That's just to name two examples.

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

One of the concerns that some people have if we look at our traditional energy economy, and particularly at oil and gas over the last 30 years or so, is that a lot of the value-added work has left Canada. We've ended up with a model whereby we're extracting raw natural resources, sending them to the United States for the value-added work, and then buying back a finished product.

What kind of framework do you think might help prevent that kind of model recurring when it comes to something like rare earth minerals? How can we ensure that while we want to have a North American strategy, a fair share of value-added work is being done in Canada as opposed to our just becoming the source material provider for the value-added work that's happening elsewhere?

[Maryscott Greenwood]

It's a perfect question. We know critical minerals and rare earth elements are found almost everywhere in the world, but 80% are processed in China, so it's the processing—the actual value added that you're talking about—and Canada could own the market on that.

It would take a huge amount of investment. It would take collaboration with the U.S. to make sure you had an end-user for it, and it would take private capital coming in, so you'd need some certainty around your regulatory structure in order to attract the capital.

The huge opportunity in Canada is in terms of processing as opposed to mining. Canada is a resource economy, and obviously it knows how to mine. It has the infrastructure and all of that, but I completely agree that the value-add could occur in Canada—and more so in Canada, really, than in the United States. You have such a huge amount of space and you have plentiful, clean, green, renewable hydro power that makes the carbon impact of a relatively intensive process way less. There are all kinds of natural advantages Canada has, such as engineering, deep-water ports, railroads and an environmental commitment from a regulatory process, that make it the obvious choice.

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

Mr. Agnew, would you like to speak to that question as well?

[Mark Agnew]

Briefly, although we have to remember there are three levels of government and that each level of government has multiple departments, at the end of the day there's one business that bears the cumulative burden of that, so it's really about the cumulative set of measures. What are the tax incentives? What are the investment incentives? What's the regulatory burden, access to labour and infrastructure?

Scotty talked about the growing market and demand for rare earth elements and knowing there will be a buyer on the other end. There are a lot of different ways you could slice that pie, but there does have to be that person at the other end to make it financially viable for the companies.

[The Chair, Liberal, Raj Saini]

Thank you very much.

That has completed our first round. We will now start the second round, beginning with Ms. Alleslev for five minutes.

Go ahead, please.