Environment Committee on March 28th, 2018

[The Chair, Liberal, Deb Schulte]

Linda, I know you know that the time's up.

Mr. Bossio.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

I'll be splitting my time with James, and I'll let him go first.

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

Thank you, Madame Chair. Thanks, Mr. Bossio.

Ladies and gentlemen, thank you for your presentations.

I'm not a regular member of this committee, although I've met many of you before. I'm the chair of the natural resources committee, and it's that capacity that brings me here to talk to you.

Our committee has been working collectively—in fact, all of our members have been working and sort of pushing in the same direction—trying to find ways that we can help the resource sector. My conversation, notwithstanding some of the comments you've heard from around this table.... We don't hear those kinds of comments at our committee, which is quite a refreshing approach, frankly.

Mr. Bloomer, my question is for you.

I was quite surprised to hear your level of pessimism, in particular the comment that you don't see how another pipeline could ever be built. I think you were backing off from that a little when you were thinking about your mother, and I was glad to hear that your mother was more of an optimist.

My question is this. You're saying that Bill C-69 is what made you make that statement, but our government has approved three pipelines since we came to power two years ago. It's done so under the guise of the interim provisions that were implemented in January 2016, which formed the foundation of Bill C-69.

I'm wondering how you reconcile your position with those approvals, given that it's our government that approved and in fact championed those three pipeline approvals.

[Chris Bloomer]

Thank you. It's a good question.

The perspective is that on the Kinder Morgan, Line 3, and so on, those pipelines were already in process for a number of years and were based on the previous regulatory review process. The interim piece was put on there, there was additional consultation, and there was a decision made on Gateway, Kinder Morgan, and Line 3—two positive, one negative. However, they were, let's say, the fruits of the ongoing system that was not necessarily a perfect system either.

Now we're in a situation where we've had almost two years of consultation on regulatory reform, NEB reform, to put in place policies that will hopefully lead to clarity and certainty on pipelines going forward.

I'm talking about major pipelines, tens of billions of dollars of pipelines. When we look at the new proposed legislation without having all the details of how all of this is going to mesh together and work on the early engagement process, how all these other policy things are going to come in and affect the process, we say, well, this is very problematic, because it's very uncertain as to how this is going to proceed in the future. We need the clarity, and the clarity is not there.

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

In fairness, I've been hearing time and time again from your group and other groups—in fact from almost all the groups sitting at this table and many others—about uncertainty based on the way it was prior to our government taking office, yet here we are with the interim principles that resulted in that approval process.

Is it fair to say that you could be or should be more optimistic than you are, because you don't know how it's going to play out because of the reasons you just said?

[Chris Bloomer]

You know, the past is prologue in a way. If you look at the projects—Kinder Morgan, for instance—if somebody was going to look at doing that today, investing that kind of money in the face of the uncertainty around how that process is going to go and the definition of how the engagement process is going to work and so on, I think they'd be very reluctant to do that.

We're talking about two different eras. We've got to a point where we had existing pipeline projects that have been out there for years. We're looking forward and asking how this new process is going to attract companies to invest in those kinds of projects going forward.

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

Thank you.

I'm going to turn it over to Mr. Bossio.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

In the minute that I have—you've talked about how it hasn't been a perfect system—maybe you could give us a sense of your concerns about the uncertainty and unpredictability under CEAA 2012.

[Chris Bloomer]

I didn't hear all of the question.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

You talked about how this uncertainty and unpredictability has been going on for some time, so maybe you can give us a sense of your concerns around CEAA 2012.

[Chris Bloomer]

Again, CEAA 2012 was intended to improve a process that was from 2008, I believe, to move forward, but it didn't really solve the existential problems of getting projects approved and the clarity. We work within that process. A lot of events.... Let's just be clear. Through this period of time, pipelines became the focal point for a whole lot of different issues, and that impacted the review process and the ability to get these processes to conclusion.

[The Chair, Liberal, Deb Schulte]

Thank you so much.

Go ahead, Ms. Kusie.

[Stephanie Kusie, Calgary Midnapore, CPC]

Thank you, Madam Chair.

Mr. Abel, I'll start with you. On January 2 of this year, I read an article in the Calgary Herald, which was incredibly troubling for me and for the constituents of Calgary Midnapore. This article stated that 2017, not surprisingly, was not a good year fiscally for the city of Calgary and the province of Alberta.

One of the major factors that the author, Mr. Chris Varcoe, pointed to, was the absence—I should say the fleeting—of foreign investment in the city and in the province and in the country.

This is not just one or two corporations we're talking about. Marathon Oil, Norway's Statoil, ConecoPhillips, Apache, and Royal Dutch Shell are corporations that have been major players in Calgary, in Alberta, and in Canada for years and are now selling off their investments, something very concerning for me and for my constituents.

Can you please speak to the impact this bill will have on the energy industry in terms of organizations, corporations, taking their investments outside Canada, following the implementation of this bill, and what this will mean for competitiveness for Canada on the international stage?

[Terry Abel]

Again, further to my comments to Ms. Duncan, we're not here to say that Bill C-69 is at the root of every problem. We acknowledge that. What I will say is that, overall, compared to other jurisdictions, Canada has a history. I think my colleague, Chris, highlighted the fact that there are a number of policies that all have a potential negative effect on the competitiveness of our industry. They are all collectively incrementally adding cost. You can take any one of them and say, “Well, it's 20¢ a barrel,” but you add up five or six of them and it adds up to a dollar a barrel or $1.50 a barrel. You compare that to margins that under the current commodity price environment are very tight. You see the effect that you have: companies that have assets in other jurisdictions look at where they can make a fair return for their investors. Right now, granted, we haven't gotten to the end of the review of Bill C-69, we haven't gotten clarity on a lot of the policies, but what we have is uncertainty and no clear signals that Canada is taking steps to address some of those additional costs.

I think one thing I've always been proud of—and most of my career was as a regulator—is that Canada did have very stringent environmental and social requirements, and our industry was very good at innovating to find ways to continue to be productive and economic with those policies. As a result of innovating them, you're able to move that technology into other jurisdictions, raise the bar in other places. But what we're seeing right now is increasing difficulty being able to bear all of those costs and continue to innovate.

Canada doesn't generate enough capital in and of itself to fund an industry like ours. You heard the numbers. In 2014: $80 billion. I'm sorry, Canada can't do that. It needs to come from foreign investment. When you're competing in a world now with many choices there are many places you can go with your investment. It's not 10 years ago where we had a limited supply of oil and gas throughout the world. I would argue a lot of that investment is going to jurisdictions that don't have the same environmental and social standards. We're not saying, relax those standards in Canada. In fact, we want to celebrate those standards. My opening comments were that we're clearly reflecting that. We think that's an advantage for Canada, but you have to take additional steps to make sure you implement policies in a way that minimizes those costs. Where costs are unavoidable, you have to look to the rest of the world and see what's going to make this industry competitive or not competitive, and then take other steps to address that.

It is unfortunate, but what you're describing are companies that have choices, and, as any good business that has shareholders—maybe even some of you—they're going to places where they can make an appropriate return on that investment.

[Stephanie Kusie]

Mr. Bloomer, as the former deputy consul general for Dallas, Texas, from 2010 to 2013, I worked tirelessly to move Keystone XL forward, from the previous government. This, of course, was resurrected in March 2017 by the present U.S. administration. TransCanada, on January 18, continued to confirm commercial support for this. Of course, this would export more than 830,000 barrels per day to U.S. refineries.

Does this bill hurt the uncertainty of the industry and companies putting pipeline projects forward?

[Chris Bloomer]

As we've said in our statements and so on, this bill does impact the certainty of being able to get new projects put forward and developed.

[Stephanie Kusie]

Thank you for that.

Finally, on a carbon tax, I couldn't believe it this last weekend when I paid $122 for gas, with an additional 12¢ being proposed. Will a carbon tax reduce emissions ultimately, in your opinion, Mr. Bloomer?

[The Chair, Liberal, Deb Schulte]

I hate to do this, but there really isn't any time to answer. I'm hoping in the next circle of questioning you'll be able to get the answer to that question.

Mr. Bossio.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

Thank you, Chair.

I wanted to ask the other two groups the question as well. What are your concerns with CEAA 2012, based on the uncertainty, the unpredictability, and the lack of clarity that existed under that same regime as well?

[Terry Abel]

As Chris said, CEAA 2012 wasn't perfect either. We didn't have a lot of projects moving through on the upstream side. It had some of the same elements that created uncertainty in the process. It did have timelines. We did see the governments and the agencies working closely to try to stick to those timelines. It had weaknesses in working with the life-cycle regulators and having those processes work more seamlessly.

Like anything, it's how it gets implemented. I don't know that all the provisions of CEAA 2012 were followed, at least in the way we understood the intent. We have engaged in this process because we felt improvements could be made, and Bill C-69 and the associated legislation would be an opportunity to address some of those challenges, most of which, in my mind, are focused on having a competitive regulatory regime that does those processes and reviews efficiently. They add value to the decisions that need to be made, and everybody comes through that process feeling there is certainty.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

Thank you, Mr. Abel.

Sorry, I have a limited amount of time.

I guess once again it comes back somewhat to a number of things. In Canada we have a higher cost for oil production. We can look to the low price of oil right now versus that cost, and therefore the uncertainty that this creates within the market. Therefore, it depresses the amount of money that's going to be invested into that market because of those areas.

We can also look at the fact that a lot of pipelines have been approved and are going to be built. Therefore, do we have the capacity to build more pipelines in the near future, based on the amount of oil we're producing?

I would put those questions out there, as well, as at the end of the day, we need certainty within the process to build, and not just certainty for you as a company, but certainty as far as public trust is concerned. Earlier on you said you are interested in meaningful participation with the public, with indigenous communities; I heard it in your speech. Too many times those organizations say yes, it's great to consult, but it's just a checking-box type of process.

Maybe you could help enlighten us on those three particular areas: the cost of production, the low price of oil, and the fact that we've got a substantial number of pipelines in the works. Once again we're trying to get back the public trust.

[Terry Abel]

Commodity price affects everybody in the world, and the North American market certainly has its own price regime, which is a little lower than the global market, which is why we're so interested in market access.

Global investment is up in the oil and gas sector. It's up in the U.S. substantially: 18%, I believe. It's up in the North Sea. I think it's 4% or 5%. Production is—

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

The cost of extraction in those markets is far less than it is in Canada, in the oil sands in particular.

[Terry Abel]

The costs in 2014 were very different from the costs today. Costs have been reduced by 30% to 40% across our industry. Our costs are very competitive. Yes, in the more northern regions it is slightly higher, but I think it can still be competitive in the end.

My point is that we are seeing increased investment in other jurisdictions. In Canada it's down 3% or 4% this year, maybe more. We'll see what the latest numbers are.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

Mr. Bloomer, could you comment on the number of pipelines out there and the capacity to fill the ones we've got?