Natural Resources Committee on Jan. 31st, 2012

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

But that would be feasible? We could get to a very clear conclusion and tell the Canadian public? That would be feasible?

[Hossam Gabbar]

It is feasible, yes.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Okay.

So knowing that it's feasible, Mr. Corey, would you agree with me that consultation...?

Sorry, I don't know what the English equivalent is. Do you feel that consultations and arrangements based on those conclusions are totally inevitable? Do you think that step is absolutely necessary further to analysis findings like these ones? Do you think that Canadians should be consulted before a long-distance pipeline project is developed and launched?

[Mark Corey]

Mr. Chair, pipelines are currently the safest way to transport oil. Therefore, they are the safest and cheapest way to transport large quantities of oil over long distances, for instance.

Just to give you some statistics on spills, because you were asking about statistics, petroleum spills between 2000 and 2011 were about 3,715 barrels per year, which represents 0.00037, about four-millionths of the volume.

I can also give you an idea of numbers recently.

There were two incidents in 2009. In 2010, there were eight, and in 2011, there were four by September.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

That does not quite answer my question. I hear your figures. I also hear Mr. Gabbar saying that the acceptability of a project could be assessed. I am wondering whether you feel that the parameters you have set out should absolutely be discussed as part of a public consultation? Do you think that consultation should be completed before a route or a pipeline is even planned?

[Mark Corey]

Absolutely. When a new pipeline needs to be built, the National Energy Board studies the project. That is often done in consultation with the Canadian Environmental Assessment Agency during project assessment.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Lapointe.

Your time is up.

We now go to Mr. Trost, for up to five minutes. Go ahead, please.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair.

I have to say, after listening to this presentation today, that if I had $6 billion to $8 billion, I probably wouldn't be putting it into a refinery. Having said that, there are people who had more than $6 billion to $8 billion and did things like buy Greek bonds.

[Voices]

Oh, oh!

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

So you never know where investment decisions will come out.

One of the things that caught my interest while listening to the presentation was when Mr. Boag mentioned regulatory issues and outcomes. That particularly caught my ear.

While I've often heard the general principle that regulations need to be outcome-based and that we need to do it most efficiently, it helps members around this table if we have specific examples. I hope I haven't put you too much on the spot, but do you have any specific examples that could illustrate the point you were making about outcome-based results and that would be useful for us?

[Peter Boag]

Yes, I can use a specific example, and it's a timely one, as a matter of fact. Right now both the provinces and the federal government are working to develop new air quality standards for conventional air emissions. I'm not talking about greenhouse gases; I'm talking about conventional air pollutant emissions from a number of industrial sectors across the economy, and clearly refining is one of those sectors.

One element of that effort is to advance some federal minimum standards for refinery emission improvements. In the consultation exercise we're looking at a number of models under what's called the air quality management system, or AQMS, which is the effort being led federally by Environment Canada. We're looking at a number of models and options specifically with respect to refineries and what's called the base level industrial emission reduction, or BLIER. I don't want to get into all of the acronyms. From an industry perspective, what we have been advancing and advocating is a system that is very much an outcomes-based process. It's the bubble approach: we put a bubble over a refinery and then, using a system that we've called the national framework for petroleum refinery emissions reductions, we determine the performance outcomes for various pollutants at refineries. Mr. McGuinty, you probably might know about that from your days when you were at NRTEE.

We're advancing a system that lets us establish the performance outcomes for various pollutants at refineries. What we're hearing as an alternative from Environment Canada is a very prescriptive one that sets out what each individual piece of equipment needs to do based on a specific technology. It's very much focused on a prescriptive approach that leaves very little flexibility and in fact drives performance improvements that are far greater than we think is in the philosophy behind AQMS. It certainly would require Canadian refineries to make investments that would bring levels of improvement that far exceed what's happening in the U.S.—

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

That's a good example, but I'm up to three and a half minutes. I'll move on to my next question. I don't want to cut you off.

In response to a question from Mr. McGuinty about national energy strategy—and I'm glad he doesn't use the words “national energy policy” too often when he talks about it—I think someone mentioned something about certainty, clarity, and consistency. Those are the words I wrote down. For a capital-intensive industry, I could see why that would be useful. What are the things, other than what we've mentioned on the regulatory side, that we can do to bring certainty, clarity, and consistency to the refining industry? We're not just talking about building new refineries; we're talking about whether or not decisions are going to be made to upgrade refineries as capacity and demand change. What can we do to bring certainty, clarity, and consistency?

I'd like a brief recommendation. I'm opening it up to anyone.

Go ahead, Mr. Corey.

[Mark Corey]

I can start out by saying that in terms of involvement by the Government of Canada, Natural Resources Canada does not have a lot of levers in this area. Most of the levers would be related to tax policy, which is finance. I think the Minister of Finance has been very clear that one of his objectives is to create and maintain a world-class tax system in Canada that will be internationally competitive. It has to do with the regulatory side and making sure that we have a system that deals effectively and efficiently with environmental issues through the review process and making sure that these decisions are made in the best possible way.

Those are the macro levers that we tend to use at the federal level. As for specifics, I note that at pre-budget consultations most industry associations will recommend things related to tax policy that tend to be in their interest. Those are some of the issues that would probably be important, I would think, to the refineries.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

I would focus in on one, and I think Mr. Corey made some reference to it already: a greater level of certainty and timeliness around the regulatory approval process. That would certainly be very significant to our industry, and probably more so to the upstream industry in the pipeline sector than it is even to the refinery business. Certainly a greater level of certainty and timeliness around regulatory approvals would be one very specific example that would be part of that national strategy. It was highlighted in the work that I and my colleagues did on the energy framework initiative. It was one of the key pillars we identified as being required in a broader Canadian energy framework.

[The Chair, Conservative, Leon Benoit]

Thank you, gentlemen. Thank you, Mr. Trost.

Before we go to Madame Day, I just want to say that we'll take about five minutes at the end of the meeting to approve the budget, which outlines the costs of having witnesses before this committee for these four meetings.

We'll go now to Madame Day, for up to five minutes. Go ahead, please.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

Good morning everyone. Thank you for joining us.

As you know, when all is said and done, Canadian consumers and families are the ones who buy the product. They want decent prices, a healthy environment and a steady supply. Companies add costs to account for pipeline transportation. The international market, the companies and people involved, and competition all play a part in that.

How can we ensure that the product's domestic price remains at a level consumers can afford?

[Mark Corey]

I first want to go back to what you said about prices in Canada really being international market prices. During the 1980s, Canada decided not to operate in an isolated system. In other words, we are really exporters of crude oil, and working with international markets benefits us.

I know we appeared recently before the industry committee and there were questions on gasoline pricing. We looked at that very closely. I know, for example, that the Competition Bureau has looked into the competitiveness of the industry. We also appeared with the Canadian Petroleum Products Institute. We also had representation from a lot of the small retailers of gasoline. It's a fiercely competitive marketplace.

That involves maintaining a system with very competitive markets. The government is responsible for ensuring competition in that system. According to our policy and our point of view, competition may provide us with the best prices in the long term.

[Peter Boag]

I would just add to your remarks, Mark, and say let competition work. Canadians enjoy some of the lowest prices for gasoline in the world and we operate on a competitive basis. We think the competitive system works well. My feeling is to let competition work.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

On page 9 of your document, you talk about contamination. You say that “shipping refined petroleum products over long distances and over multi-product pipelines can lead to increased sulphur levels, requiring very costly remediation at the final destination.”

I assume that the studies are fairly recent and that there is enough experience to determine whether there will be issues with increased sulphur levels. I would like to know what that really means.

[Michael Rau]

The reality is that we definitely can ship this stuff and we could take the sulphur out at the other end. It actually takes place in Canada right now. There's one pipeline that is shared between crude oil and some petroleum products. It goes from Edmonton to Vancouver, and the sulphur is removed at the other end, but it is quite costly. Peter can talk a little bit more about the cost and technicality.

[Peter Boag]

I can't. I don't have any specific figures, but suffice to say and reiterate that transporting finished products by pipeline over long land distances is less economically efficient than shipping crude. Yes, when you ship it long distances, some additional refining is again required to ensure the product is fit for its purpose and provides the kind of performance that it's required for, both in terms of regulated and legislated standards, as well as what consumers expect.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

Pardon me, but Mr. Gabbar could perhaps answer that question.

[Hossam Gabbar]

Sorry. I didn't hear the question in English. Is it in translation?

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

I can repeat the question. It's about items 2 and 3 on page 9 of your English document. It says that sulphur levels can increase when the product is transported.

I would like to know whether those levels are increasing and what the overall cost is when additional product refining or decontamination is required.

[Hossam Gabbar]

Thanks a lot for that question. I'm sorry I didn't hear it the first time.

In terms of the production cost in general, if we look at the production line from the beginning, we have the oil from the beginning of the production. Throughout that, the oil is actually moving through the refinery, the transportation, the refinery, etc. Each stage is actually adding additional cost.

In terms of contamination in particular, so far we have studied each block of the refinery process and looked into its impact on the contamination of the final product. We came up with a model that found it is actually very possible that overall purity of the product can be enhanced dramatically with proper adjustment or tuning of the refining process.

I'm not sure if that was the question.