Economic Relationship between Canada and the United States Committee on March 18th, 2021

[The Chair, Liberal, Raj Saini]

Welcome to all our witnesses. It's great to have you here to offer your guidance and knowledge on this very important subject we're studying.

Today we have with us Pierre-Olivier Pineau, professor in energy sector management with HEC Montréal.

From the Canadian Propane Association, we have Nancy Borden, board chair and owner of Vancouver Island Propane Services; Dan Kelly, past chair and chief financial officer of Dowler-Karn Limited; Mark Mundy, member and vice-president of logistics at NGL Supply Co. Ltd.; and Shawn Vammen, member and senior vice-president of superior gas liquids at Superior Plus.

From the Explorers and Producers Association of Canada, we have Tristan Goodman, president.

We'll go into the opening remarks.

Mr. Pineau, you have five minutes.

[Prof. Pierre-Olivier Pineau, Professor, Chair in Energy Sector Management, HEC Montréal, As an Individual]

Good afternoon, my name is Pierre-Olivier Pineau, a professor at HEC Montréal and holder of the Energy Sector Management Chair, which focuses on energy systems analysis. I'm particularly interested in understanding energy systems, particularly in North America, and I have a personal research interest in the electricity sector.

I know that the focus today is on Enbridge's Line 5. I will focus my remarks on the precedents that this decision could create in connection with the various energy infrastructures in North America.

For the sake of transparency, I would like to disclose that my chair has 10 funding partners, including Enbridge, Hydro-Québec, Boralex, among other Canadian companies. So my chair is financially supported by Enbridge. That said, my comments today are made in my personal capacity, completely independently, and from my perspective as a university professor.

It is extremely important that Canada and the United States have collaborative energy infrastructure and joint planning processes. In this case, it is very important to separate policy issues and decisions from the regulatory planning processes and the common objectives we have for our energy systems.

I find the politicization of this issue very concerning. Michigan had an election campaign in part against this pipeline. Decisions about pipelines and energy infrastructure should be made independently by regulatory agencies, based on long-term planning for energy needs in the United States and Canada, with a view to sustainable development and, of course, climate change.

We know that society must fight climate change and that we will have to electrify our economies much more in the years to come. We are facing challenges with the transmission lines that connect our two countries and even our provinces in Canada. Interprovincial and Canada–U.S. interconnections must result from decisions that follow economic and sustainable development logic, not political logic.

If the issues surrounding Enbridge's Line 5 are politicized, I am very concerned that this political influence will change the normal course of energy studies and infrastructure. That's why I really believe it's very important that Canada clearly articulate the broader interests of both countries in analyzing this infrastructure. Not in a political way, but in a regulatory and planning process that is independent of the political decisions of a governor, a governor, a prime minister, a political party, an election campaign or a promise to voters.

In this regard, it is unfortunately too often possible to polarize public opinion on some very specific issues that focus on only a small portion of global climate concerns, rather than representing them well, while energy systems have huge ramifications that make it very difficult to analyze these issues through a single project.

It's very important to establish processes that will allow us to have robust infrastructure, framed by strong regulatory processes, especially for the future and power lines between Canadian provinces and American states.

I will conclude here because I think my five minutes are up. I will be happy to answer any questions you may have.

[The Chair, Liberal, Raj Saini]

Thank you, Prof. Pineau.

Now we will hear from the Canadian Propane Association. I understand that Ms. Borden will be speaking.

Are you splitting your time with Mr. Kelly?

[Nancy Borden, Owner, Vancouver Island Propane Services, and Board Chair, Canadian Propane Association]

Yes, we'd like to.

[The Chair, Liberal, Raj Saini]

That's fine. You have a total of five minutes.

Go ahead, please.

[Nancy Borden]

Híswke. Thank you.

I acknowledge that I'm speaking to you from the unceded territory of the WSÁNEC first nations. Saanich lies within the territories of the Lekwungen peoples, represented by the Songhees and Esquimalt nations, and the WSÁNEC peoples, represented by Tsartlip, Pauquachin, Tsawout, Tseycum and Malahat first nations.

On behalf of our association members across Canada and my colleagues here today, I want to thank the committee for the invitation to speak to you about the importance of Line 5 to the propane industry and to Canadians.

With over 400 members from coast to coast to coast, the Canadian Propane Association includes producers, wholesale marketers, transporters, retail marketers and manufacturers of propane appliances, cylinders and equipment.

Propane is a multi-billion dollar industry that sustains thousands of jobs right across Canada. Many of our members are community-based businesses that provide good-paying local jobs. You will also know them as members of local chambers of commerce, as volunteers and as sponsors of community groups and local sports teams.

Mr. Chair, propane is a vital part of Canada's energy portfolio for the future. As a source of low-emission energy, propane is a cleaner alternative to carbon-intense fuels such as heating oil, gasoline and diesel, and renewable propane will provide an even lower carbon footprint. Whether it's in its applications for home or commercial heating, agriculture, transportation, construction or mining, propane is a safe, clean and affordable energy choice for Canadians.

When it comes to Line 5, it's important for committee members to know that this is the only supply of propane via pipeline to southern Ontario. Line 5 is an important part of energy security for Canada, as well as cost certainty for Canadians.

Line 5 is the feeder pipe into the Sarnia fractionator, which has over 100,000 barrels of capacity per day. Propane is approximately 70% of that capacity. Any prolonged disruption of Line 5 would have severe and lasting consequences on the supply of propane to Ontario, Quebec and Atlantic Canada.

We have communicated to governments that without proven historical and safe delivery of propane via Line 5 into the Sarnia fractionator, rail and truck modes of transportation will increase dramatically, and with that there would be no expectation that the volumes achieved via pipeline could easily or readily be replaced. Thousands of additional trucks would be required, placing more stress on a rail delivery system that is already near capacity.

In short, the discontinuation of Line 5, in the CPA's opinion, is not an option. The environmental and economic consequences would be devastating for those living on both sides of the border.

Safety is a fundamental priority for the CPA, and we have long supported the safe continuation of Enbridge's Line 5. The plan to replace the existing Line 5 dual pipelines in the Straits of Mackinac with a pipeline secured in a larger underground tunnel deep under the straits meets environmental safety needs while maintaining critical energy infrastructure. Line 5 is vital to meeting our energy needs as Canadians.

I would now, through the chair, like to ask Dan Kelly, past chair of the CPA, to continue these thoughts for you.

[Dan Kelly, Chief Financial Officer, Dowler-Karn Limited, and Past Chair, Canadian Propane Association]

Thank you, Nancy.

I would like to acknowledge that I am speaking from the traditional territory of the Anishinabe, Haudenosaunee, Ojibwa and Chippewa peoples. This territory is covered by the Upper Canada treaties.

Perhaps some members are surprised by how much they're hearing about the importance and reliability of propane throughout the testimony at this committee. The fact is, as Nancy pointed out, propane is a very important source of energy for Canadians. Over 100,000 homes in Ontario, Quebec and Atlantic Canada use propane as their home energy source to heat their homes and to cook their meals, representing approximately half a million Canadians who rely on propane in their daily lives.

However, propane is relied upon far beyond residential use. For example, 25% of propane that is marketed in Ontario is used in hospitals, schools and businesses. In Quebec, that number rises to 45%. Total daily demand for propane in eastern Canada continues to rise. In Ontario, the average daily demand is nine million litres, approaching 16 million litres during times of high demand. In Quebec, daily demand is three million litres, with a peak of almost five million litres, and Atlantic Canada uses one million litres daily.

Propane is clean, affordable and readily available. Propane is harmless to land, to air and to water. It can greatly reduce the use of carbon-intense fuels in indigenous, rural and remote communities. Many of these communities spend hundreds of millions of dollars on remediating diesel spills when those resources could be used to build more housing, community centres and other important infrastructure.

In addition, an off-oil program across Canada could immediately reduce GHGs by 38%, just by switching to propane. The CPA has been calling for changes to the Greenhouse Gas Pollution Pricing Act that would see an exemption for low-emission propane in farming activities. Changes to the GGPPA are also needed for remote power plant generator operators, which would provide indigenous and remote communities a real choice for cleaner energy.

In short, Canada's propane industry has much to offer Canadians as a safer, greener and more accessible energy option. However, without Line 5, providing Canadians with this critical source of energy would be significantly more difficult.

Canada's propane industry joins with the countless Canadian voices who have come together to support the safe, continuous operation of Line 5, the closure of which would have catastrophic economic impacts to Canada.

Thank you, Mr. Chair.

[The Chair, Liberal, Raj Saini]

Thank you, Ms. Borden and Mr. Kelly, for your remarks.

We will go to our final opening statement, from the Explorers and Producers Association of Canada.

Mr. Goodman, you have five minutes, sir.

[Tristan Goodman, President, Explorers and Producers Association of Canada]

Thank you very much.

My name is Tristan Goodman. I am the president of the Explorers and Producers Association of Canada. EPAC represents about 139 Canadian-based oil and natural gas companies, from start-ups and juniors to major oil and gas producers, that operate in various provinces and territories across the country.

We represent about 60% of all natural gas produced in this country and about 30% of oil produced in this country, and probably around $0.25 trillion of market assets within this country, so it is fairly significant.

Let me start by saying that although we believe Canada's oil and gas industry has a constructive and bright future in our country, we also recognize that the nature of energy development is fundamentally changing to drivers like energy transition, global and Canadian climate change expectations, and the importance of genuine indigenous reconciliation.

Decarbonizing the Canadian energy business is well under way. Our industry plays a critical role in meeting Canada's international climate commitments. Not only is the issue of climate important for Canadian governments, voters and the broad Canadian public, but it's also now a key evaluation criterion for most investors.

Although change of this nature is hard for any energy industry, the decarbonization that the Canadian energy industry is now moving through not only presents opportunities for addressing critical issues of anthropogenic climate change, but it can also position our nation to continue economically capitalizing on the very large and positive economic and job contributions from development of oil and gas across this country.

For example, looking forward, we're pleased to see the focus of all governments on the opportunities of Canadian natural gas from large-scale deployment into hydrogen technology, as well as providing tools like carbon capture, utilization and storage to aid our Canadian oil industry.

Many different energy forms are needed around the world going forward, but it's important to take a practical approach to policy development. As recently as two days ago, the highly regarded International Energy Agency released short- and long-term reports that reflect the significant need for oil and gas development going decades into the future.

Turning to the recent changes in the United States with the Biden administration in office, Canada and the U.S. share many energy opportunities and challenges. Ensuring collaboration on the full range of options is imperative. This includes pipeline regulation, market access, energy policy, job creation during a post-pandemic world, and the environment.

One note of obvious immediate concern and of clear discussion today is around Enbridge Line 5, not only on the construction and build-out of that, but also the current situation with the Government of Michigan's concerns with this line. It is critical for Canada to keep moving on some of the positive efforts that have already been undertaken on that, but also to get this line complete and prevent a stoppage. This is not only a concern for Canadian oil and gas producers, Canada and those in refining provinces like Quebec and Ontario, but it could also have significant negative consequences on jobs and large refineries in the United States. It will create other problems across the pipeline network in the U.S.

EPAC and its members are fortunate to have a solid technical and non-partisan understanding of many of the practical changes that face the new emerging relationships between Canada and the United States. Items related to market access, climate policy, prevention of carbon leakage, macroeconomic considerations and national offset/emissions trading policies are just some of the areas of credible expertise that we hope could be valuable.

Personally, I've had the privilege of working in the private sector, non-government agencies, academia and different governments on four different continents, and as an energy executive with a large Canadian energy regulator for over 15 years. I also have solid doctorate-level training in environmental science, policy development, economics and law, so I hope I may be of some use to the committee, my country and to the energy industry that I represent.

Thank you.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Goodman, for your remarks.

Just as a note to the members, in looking at the time, we will have time only for one full round.

We will start off with Ms. Alleslev, for six minutes, please.

[Leona Alleslev, Conservative, Aurora—Oak Ridges—Richmond Hill, ON]

Thank you very much, Mr. Chair.

In the opening remarks from the propane industry, I heard that they are very surprised that suspension of this pipeline is even under consideration. I couldn't agree with you more.

As a Canadian and a member of this committee, I can say that I'm very surprised that this is the only pipeline that provides propane to Eastern Ontario, Quebec and Atlantic Canada. Can you shed some light on whether there have been discussions around an alternate mechanism so that essentially we don't have all of our eggs in one basket?

[Dan Kelly]

I think it may be best to ask Mr. Mundy to respond to that one.

Mark.

[Mark Mundy, Vice-President, Logistics, NGL Supply Co. Ltd., and Member, Canadian Propane Association]

Thank you, Ms. Alleslev.

Again, we're talking about a pipeline that provides 540,000 barrels a day. The replacement of that and the lack of infrastructure that exists today is somewhat, I'm going to say, hard to overcome.

We've tried to understand the overall impact, especially to the Canadian Propane Association. When we're talking about 100,000 barrels a day coming out of the Sarnia plant, and when we talk about the logistics and constraints around getting those barrels from, say, east Edmonton across the country to the marketplace, and you're talking about a railway that's already confined and at capacity, I don't think it is easily achievable.

[Leona Alleslev, Conservative, Aurora—Oak Ridges—Richmond Hill, ON]

There's no question that, as you guys have said, the railways are not an alternative. I mean an actual long-term solution. I come from a defence and security background, and something as critical as this piece of infrastructure.... The fact that, first, it goes through the United States, which is obviously an area we don't have jurisdiction over, and second, there is only one pipeline, is somewhat concerning. If ever anything did happen to that, the results would be devastating.

I understand that you haven't had conversations about redundancy or a backup plan for that.

[Mark Mundy]

That's correct.

[Leona Alleslev, Conservative, Aurora—Oak Ridges—Richmond Hill, ON]

I would like to share my time with MP Hoback, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Ms. Alleslev.

Mr. Pineau, you talked about the regulatory process, how important that is and how we need to depoliticalize pipelines and actually go back to using regulations to approve pipelines.

I agree with you 100%. In fact, in Saskatchewan and Alberta we've been very frustrated in the last four years because that's exactly what has not happened. It has been politicalized and we've seen the regulators being readjusted every time along the process, so we didn't even have a stable environment for the regulators to operate in.

How do you see something like what Ms. Alleslev is talking about in regard to Canadian security and making sure that we could always have our product flowing within Canada, so that we always have the ability to make sure that we're taking care of ourselves and not being reliant on a U.S. court, in this case, for our future. How do you react to that?

[Prof. Pierre-Olivier Pineau]

I think there are two parts to my answer.

In the long run, we should really establish a stronger relationship with our neighbour and make sure that Canada and the U.S. operate as an integrated energy market. We have to establish joint institutions so that we are not going into these dead ends where we have countries going different ways. That is the long-term answer.

In the short term, of course, we need to build in some redundancy in infrastructure. To some extent, the railway is providing some of the redundancy. I'm not knowledgeable enough on the railway capacity versus the pipeline capacity for propane, but when the railways were shut down slightly more than a year ago because of the Wet'suwet'en situation, Ontario and Quebec did suffer from a propane shortage. That wasn't due to the pipeline issue; it was entirely due to railway issues.

We do have some level of redundancy in the system, but definitely not enough. Pipelines should be considered more, I agree, for the short-term answers, but in the longer run we really need to build joint institutions to build some level of trust between the two nations.

[The Chair, Liberal, Raj Saini]

You have 30 seconds, Mr. Hoback.

[Randy Hoback, Conservative, Prince Albert, SK]

How do we [Technical difficulty—Editor] members of the propane and [Technical difficulty—Editor] pipelines? How do we take something that's become unchecked populistic, where politicians use pipelines as a battering ram to basically say, “Hey, I'm an environmentalist; I'm against pipelines,” even though they're actually doing more harm to the environment. You can see the example right now. We're going to throw stuff on rail and trucks instead of sending it through a pipeline.

How do we depoliticalize it? How do we actually get back to science and regulators making decisions on whether pipelines should go forward or not?

[The Chair, Liberal, Raj Saini]

Mr. Pineau, give a very short answer, please.

[Prof. Pierre-Olivier Pineau]

It's a very difficult question. I don't have an answer as to how to depoliticize that.

I think we need to educate the population more across energy issues and climate change, and we need to make sure that data is available so that people can understand. We have energy data issues in Canada. I know it's not the topic of the day, but energy information is not as widely available as it should be. I think we should construct that knowledge base among Canadians so that they better understand the situation.

[The Chair, Liberal, Raj Saini]

Thank you very much, Mr. Hoback.

Now we'll go to Mrs. Romanado for six minutes, please.

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

Thank you very much, Mr. Chair. I'll be sharing my time with MP Bendayan.

Thank you so much to the witnesses for being here today.

Mr. Kelly, you've brought up a subject that I don't think I've heard yet in terms of the impact of Line 5 shutting down, and that was with respect to the supply of propane to hospitals, schools and businesses. I'd just like you to clarify your comments with respect to the supply to Ontario's hospitals, schools and businesses, and Quebec's hospitals, schools and businesses.

Quebec, my home province, has just crossed the 300,000 threshold in cases of COVID, and the idea of hospitals lacking supply is very concerning in the middle of the pandemic. Could you please clarify that for me?

[Dan Kelly]

Certainly. I'd be happy to.

Depending on the region you're in, if the location of the institution, whether it's a school, business or hospital, is in a remote region that is not served by natural gas, or where electricity is not a cost-effective solution, propane is being used in those situations.

We also have propane being used as backup power generation for many institutions as well. There are urban centres in Ontario that my company serves, where we have backup storage on site for propane so that, should there be a power outage, that could be used to power the hospitals.

However, there are many remote regions and rural settings where they're using propane to heat the facilities.