Economic Relationship between Canada and the United States Committee on March 30th, 2021

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

Thank you, Mr. Chair.

I'd like to greet my colleagues and thank the witnesses for their time today.

My question is for the Hon. Bill Walker from the Government of Ontario.

In September 2020, your government announced investments to improve the health of the Great Lakes. At that time, your colleague the Minister of the Environment, Conservation and Parks highlighted the Great Lakes as an important component of the province's economic prosperity and community well-being. He also said that the government is committed to working with its partners and investing in projects on the ground to protect and restore water resources.

We know that the Great Lakes contain 20% of the world's fresh water and that 80% of Ontario's farmland is in the Great Lakes basin.

Based on the statement by the Minister of the Environment, Conservation and Parks, the Great Lakes are of major importance to your government. What do you think of the concerns raised by the Governor of Michigan and, for that matter, by several other groups about the impact of this Line 5 on the health of the Great Lakes? Do you think they are legitimate?

[Bill Walker]

Thank you, Mr. Savard-Tremblay.

Absolutely, I think these are legitimate concerns. We absolutely, though, have to look at this in a pragmatic, rational way. We have to have energy stability. We have to move forward, and as I've shared with you, we have to have the enhancement of hydrogen, the enhancement of more nuclear. We're refurbishing a big fleet of our energy sector right now to ensure that it's clean, affordable, reliable energy. But as I go back to this again.... This pipeline has been in existence for many years with no concern with regard to release or spills. We believe that it can continue to do that while we work on emerging into new forms of technology, new ways to be able to power our economies on both sides of the border, and frankly, we all have to do that for the next generation.

My riding is on the Great Lakes. I'm surrounded, if you look on the map. Bruce Peninsula.... We're surrounded by the Great Lakes, and absolutely, that's a concern, but so are the livelihoods of our people on both sides of the border and so is the ability to ensure that we have sustainable, reliable power for our hospitals, for our long-term care facilities and for our constituents, the people we're given the privilege to serve.

I think that we can do both of these in tandem. I think that we can protect the water. I think that we can protect the environment and protect jobs and do it all simultaneously and have a plan going forward to ensure that we have new forms of energy in the future. However, it just cannot happen overnight, quickly, as Governor Whitmer thinks it should happen today.

Thank you.

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

Thank you.

The closure of Line 5 is far from assured, as there are several steps to take before it can be done. You [Technical difficulties] the Ontario Legislature that the closure of Line 5 would have an impact on everyone and that it would increase gas costs, in particular.

Has your government conducted an impact study on the increased gas costs that would result from shutting down Line 5?

[Bill Walker]

Again, it will have an impact on prices with regard to fuel—our jet fuel, as I mentioned in my preliminary remarks. Pearson, our biggest international hub, is going to be impacted. The cost of all goods, of transport—if you go back to shipping via truck or rail or other ways—not to mention the environmental impact—

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

Mr. Walker, excuse me.

I know you feel there would be an impact, but I was wondering if your government had done an impact study on this particular issue.

[Bill Walker]

I believe that studies are ongoing with a number of different agencies, both through the government and some of the other trade unions and a number of other organizations.

The Ontario Chamber of Commerce has met with the Michigan Chamber of Commerce to take a look at those types of impacts and the exact forms of impact that they're going to have. I don't have that data off the top of my head, but I believe that there are a number of different studies being compiled as we speak. I trust that our federal colleagues are doing the same because, as I said earlier, this is going to impact Alberta, Ontario, Saskatchewan and Quebec. All of those are going to be studied and will show truly what the negative impact would be if the shutdown were to happen, which we certainly hope doesn't happen.

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

Thank you.

So this study will be done later. This committee would like to receive it once it's completed. It might be helpful for us as we move forward.

I know your statement is based more on an observation than on a study. Still, I'd like to ask you how much of an increase in gas costs you anticipate.

[Bill Walker]

Again, I don't have any specific number off the top of my head, but I can tell you that it will be in the billions. When you start to factor in, again, 5,000 direct jobs and 23,500 indirect jobs just in the Sarnia region alone.... Then you start to look at the refineries across Ontario and the refineries in Quebec, the impact to Alberta and Saskatchewan. This is going to be in the billions, and the ripple effect on every single product that you're consuming is going to have an impact and be impacted if you have to go back to transporting using trucks. Again, that's not to mention the impact to the environment and the environmental costs that that will induce as well.

I don't have an exact number, but I'm certain that it will be in the many billions of dollars.

[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.

I've said it before at committee, but I think it bears repeating. I think there are two things that distinguish the issue of the Line 5 pipeline from other pipeline debates we've had recently in Canada, whether it's about the TMX pipeline or the Keystone XL pipeline.

The first is that Line 5 actually supports value-added work in the oil and gas sector in Canada by having refining done in Canada, as opposed to elsewhere, and then either imported back into Canada or sold on the international market as a finished product from outside Canada.

The second is that it represents existing production. Line 5 isn't about taking more barrels of oil out of the ground in a day than we currently do. It's not a model predicated upon expansion of our daily production; it's a model that represents what Canada is already doing.

From a climate point of view, the New Democrats are certainly of the view that we can't continue to expand our daily production and meet the kinds of greenhouse gas emission reduction targets that we have under the Paris accord in order to keep global warming effects to 1.5° C.

The Line 5 debate is different in that regard, and of course we heard some ministers today talk about some of those pipelines that are based on an expansionary model, whether it's Keystone XL or the TMX pipeline. We've also heard the argument that somehow those pipelines would then help Canadians in eastern Canada to not have to import oil from elsewhere.

It seems to me there's always a bit of a tension in this argument. TMX is a pipeline designed to get product to tidewater in order to sell on the international market. We hear proponents of TMX talk about how that's going to result in higher prices for Canadian oil and gas on the international market. Likewise with Keystone XL, it's a pipeline designed to send more product out of the country as raw material destined for refineries in the southern United States.

I'm wondering, Minister Savage, if you could speak to what you think needs to be done. Whether it's Keystone XL or TMX, those don't seem to me to be pipelines that actually have to do with supplying Canadian oil and gas to Canadian consumers. Those are pipelines that have to do with getting a higher price and making more money in the international market, not the domestic market.

Do you want to speak a little bit to that question, and how it is exactly that Canadians might expect to have more Canadian oil and gas refined and upgraded in Canada [Technical difficulty—Editor] over the TMX pipeline?

[Sonya Savage]

I think the one thing we learned very decisively last year, about this exact time last year when we had an OPEC price war, is that the movement of crude oil is global. It's global supply and global demand.

If we're not supplying the crude from Alberta, from Canada, those same refineries are going to source it from somewhere else, so with [Technical difficulty—Editor] would have moved 830,000 barrels a day to refineries in the gulf coast. Well, guess what? Those same refineries in the gulf coast are going to be supplied by oil. They'll just have to source it from Venezuela, Mexico, or Saudi Arabia for heavy oil supply. Each and every one of those jurisdictions don't have the ESG standards that we have in Canada, and particularly Venezuelan and Mexican heavy oil are at a much higher carbon footprint.

It's the same with refineries in Canada. They're sourcing supply from places outside Canada. You're bringing in oil that doesn't have the same environmental standards.

I think you need to look at the energy supply and demand. You look at the North American market as an integrated market, and I think that needs to be supplied from somewhere. I think that has fundamentally hit home with Line 5 on how interdependent we are with the United States for our energy market.

Production from Alberta, I think, beats hands down production from anywhere else in the world. I think displacing it by cancelling pipelines and not supporting pipelines, trying to differentiate KXL or TMX from Line 5, is not helpful to finding solutions for climate change.

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

To be clear in that case, then, you're not making the argument that Keystone XL or TMX would mean more Canadian extracted oil and gas at the pump for Canadian consumers. It's an argument about feeding more Canadian oil and gas into the international supply.

That's the argument. It's not about people in Canada purchasing Canadian oil and gas; it's about more Canadian oil and gas in the international supply.

Is that a fair characterization of your position?

[Sonya Savage]

KXL would have provided over $30 billion a year to the Canadian economy. That benefit, $30 billion a year, pays for health care and education. It pays for innovation. It funds the types of innovation and technology to our industry that reduce climate change.

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

If global supply and demand continues and if it's the global market that continues to dictate what's available at the pump, it may well be that, even with a pipeline like Keystone XL, if it were to have gone ahead, Canadians would continue, in eastern Canada, for instance, to be pumping Saudi oil into their vehicles. Multinational companies and international supply and demand determine what you're buying at the pump. It has nothing to do with whether a new pipeline is built or not.

[Sonya Savage]

Well, Line 5 feeds Line 9, which moves oil from Sarnia to Montreal. If Line 5 were to be shut down, then refineries in Montreal, the Suncor and Valero refineries, would have to source supply either by rail or by truck from western Canada, import it from the United States by the Portland, Maine pipeline or bring it in by tanker down the St. Lawrence and bring in OPEC oil and other supply.

The point I'm making is security of supply. It's an interrelated North American energy market and, if you don't supply it from Alberta, you're going to supply it from somewhere else.

[The Chair, Liberal, Raj Saini]

Thank you, Mr. Blaikie.

We will now go to the second round for five minutes.

Go ahead, Ms. Alleslev, please.

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

Thank you very much.

Thank you to the witnesses.

If I understand correctly, it sounds like we're all in violent agreement that Line 5 is critical to Canada's economic and energy security by being the only major pipeline for Saskatchewan oil, with 70% of Saskatchewan oil transported by it. For Alberta we're looking at 400,000 barrels a day. It represents 53% of Ontario's crude oil and 66% of Quebec's. It's a critical supply of propane, diesel and jet fuel for eastern Canada and has many other critical economic and energy impacts. Canada is highly vulnerable and at great risk if anything happens to interrupt Line 5.

We're lucky, it seems, that at the moment the shutdown is a diplomatic decision, and therefore diplomacy might be able to solve this problem. However, it doesn't negate the fact that we're at risk if anything happens. Sometimes other forces like tornadoes or other impacts could affect this line.

I'd like to ask each of the witnesses if this should be a wake-up call. Should Canada be looking at an alternate approach that would protect Canada's energy security so that all of our eggs are not in the Line 5 basket, but that we could protect energy security in Canada for this critical resource from east to west?

[Sonya Savage]

I could jump in first on that. You're talking about energy east, which was cancelled by the proponent, TC Energy, in 2017. It would have had an all-Canadian route to get supply from western Canada, from Alberta and Saskatchewan, to refineries in Ontario and Quebec using an all-Canadian route. It would have used the existing TransCanada gas pipeline, converted it to oil and ensured that our supply didn't enter into the United States. It would have ensured that we weren't at risk for the United States' not letting the supply out or shutting it down.

The interesting thing is that the Enbridge main line, which was built in 1950, chose to use an American route at the time, as it was the most economical route and the easiest route to build a pipeline from an engineering perspective. It went through the United States to come back into Canada to Sarnia. Six years later, when the TransCanada main line was built, it was determined that Canada wanted an all-Canadian route to protect the security of supply. In 2017 we would have had an all-Canadian route under way called energy east. Unfortunately, that dream was cancelled.

[Bronwyn Eyre]

Yes, and it's become a diplomatic issue now, based on the very unilateral decision of Governor Whitmer of Michigan. It's now a diplomatic and legal issue.

As for energy east, I think we all know some of the difficulties around that. One would need, again, a private proponent. The pipeline would cross a number of provinces, so again, Bill C-69, the environmental assessment act, certainly would come into play. Every province involved would have to be on board, so it's not an effortless thing to overcome, but it certainly would be a desirable one.

With regard to Mr. Blaikie's point earlier about where product is going, I guess it's so important to keep in mind—with regard to Minister Savage's points—that there is a very clear export aspect to this and that price is affected for smaller and larger operators through the differential as a result of the fact that they can't get product to tidewater because it's interrelated also through exports like potash, uranium and many commodities. It's not only a buy local, stay local sector. I think that is absolutely crucial to point out.

Obviously, energy east would be buy local, stay local, except to get to the refineries out east, but as we say, it's not as if that isn't an issue now, certainly, with the Panama Canal situation we saw last year. That was to get to a refinery out east, and the company had to use the Panama Canal to get to a refinery in its own country. It's not as if contortions aren't taking place here, and we have to address them through whichever means possible, including this issue with Line 5.

[The Chair, Liberal, Raj Saini]

Thank you very much, Ms. Alleslev.

The next five minutes go to Mr. Housefather, please.

[Anthony Housefather, Liberal, Mount Royal, QC]

Thank you, Mr. Chair.

Thank you to the witnesses for coming today. It's always amazing to have provincial cabinet ministers join us at a committee. I really appreciate your taking the time.

I think it speaks to the multipartisan agreement that Line 5 is absolutely necessary for Canadian provinces, for our national identity, for jobs in Sarnia and across the country, and also for the economic future of Michigan, Wisconsin, Ohio, Pennsylvania and our American colleagues. It's only logical. A lot of times politics get in the way—political ideologies and political manoeuvring. I encourage all of us to remember that this is one of the cases where we all agree, so let's keep the issues that we don't agree on—perhaps some other pipelines or climate change or whatever—out of this discussion, and let's all agree on our strategy on Line 5 and how we get Line 5 to stay in place.

My questions are going to revolve around the legal strategy. I'd like to hear from all of the different witnesses. We heard from Enbridge that they would like the federal government to intervene in the court case in Michigan. I can certainly see a rationale for that, for the government to argue that the 1977 treaty and the federal jurisdiction in the United States cover the inability of Michigan to end the easement.

I would like to know, from each of the three governments, this: Have you considered intervening in the court case? Would you only do so if the federal government did? Might you do so anyway? Also, have you had any conversations directly with the executive in Michigan as a state-province relationship?

Whoever would like to can go first—west to east, east to west, whatever you prefer.

[Bill Walker]

I'm happy to jump into this one.

I think you've hit on the key here, the non-partisanship and the diplomacy. I think, again, that this has to be a team Canada approach. This has to be all of us doing what we are able to do and capable of doing and what we bring to the table.

We've spoken directly, as a province, to some of our Michigan counterparts. We've done the Ontario Chamber of Commerce to the Michigan Chamber of Commerce to try to take a look at it from that perspective.

Ms. Alleslev brought up the risk; there is a concern. The cost is of concern. Supply is going to be decreased by 45% if this is to close, which will have a huge impact. It's going to impact the environment. It's going to impact jobs, and it truly is a wake-up call. Again, I go back to this: I don't think you can shut it down just overnight without wondering what the impacts are going to be on all of those families, on all of the people who are impacted.

I believe that this is something that needs to be maintained as a team Canada approach. It's going to impact all of our country one way or the other. At the end of the day, I think that if we can all bring that diplomacy to the table to put our strengths to work collectively, we will find a way to also work collaboratively with our colleagues across the border because they are going to be impacted equally as much as we are here in Ontario and in Canada. Certainly, I think we're prepared to work collaboratively and collegially wherever we can with all of our partners to try to find a resolution.

[Anthony Housefather, Liberal, Mount Royal, QC]

But intervening in a court case, Mr. Walker.... Has Ontario considered intervening?

[Bill Walker]

I don't believe at this point that discussion has been held. I think we'll look to the federal government to lead this, but we'll certainly be there with them arm in arm, every step of the way, to do what we need to do to protect jobs and families in Ontario.

[Anthony Housefather, Liberal, Mount Royal, QC]

Thank you.

Ms. Eyre.