Natural Resources Committee on Feb. 2nd, 2012

[David McGuinty, Liberal, Ottawa South, ON]

Thank you, sir, and good morning, gentlemen.

I want to pick up on a couple of things and ask Mr. Ervin to begin to respond.

Our guests from the union here today testified that the two pipelines being contemplated are wrong-headed because it places us in a dependency position on the U.S., that we shouldn't be exporting our energy without securing our own energy security first, and that the NAFTA proportionality test should be revisited.

Can you take a second to comment on that? Do you agree?

[Michael Ervin]

I'll talk about the consequences of not building the Keystone XL pipeline or the Northern Gateway pipeline.

That would really close in production of Canada's oil sands to a significant degree. The line 9 reversal would by no means be sufficient to continue the progression of Canada's oil sands production. That's the first fundamental concern, if you will, or consequence of not proceeding with those first two pipelines.

Vis-à-vis energy security, I don't think there's as much of a concern there from a Canadian perspective as some might imagine. There certainly are a lot of safeguards already in place in a North American context. Should a worst-case scenario occur, the United States, for example, has a huge strategic reserve of crude oil that would keep that country going for quite some time—not weeks but months. Again, in a North American context and given the NAFTA provisions, we have a degree of security by that means alone.

I simply cannot imagine a scenario where the east coast could not receive supplies of crude oil from some source, given their proliferation of upstream capacity in non-OPEC countries, for example, non-Mideastern countries, right around the globe.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Gargiso raised the important question that we've all been kicking around here, which is this question of where we are going as a country with respect to energy.

Mr. Quinn, your company is a very large company. You're involved with refining and marketing, but your company is also involved in renewables. Has your CEO, your board, or your company spoken publicly about the need for a more coherent examination of where Canada is going on the energy front?

[John Quinn]

Yes. In fact, our current CEO, Rick George—who, as most people are aware, is stepping down in May, but he is still our CEO—has been quite vocal on the subject and very supportive of a national energy strategy.

I think what he would say is that it needs to go beyond energy production. We need to look at how we move ourselves around in this country. We need to look at how we build our cities and how we build our homes. We need to work on conservation ethics. We have what we call our sustainability triple bottom line: we have to worry about the economic well-being of our business and our broader economy; we have to worry about the environment; and we have to make sure that the social well-being of the country is considered in everything we do in our business. Rick's been quite vocal on that. He thinks we need to take a 10-, 20-, or 50-year view of where we're going on energy in this country, and we need to do it broadly—we can't just deal with one sector at a time.

So he's been very supportive—

[David McGuinty, Liberal, Ottawa South, ON]

This is a quick study on the current and future states of oil and gas pipelines and refining capacity, but when you say “broadly”, is your company, your board, or your CEO saying that we have to connect things that remain unconnected?

For example, what is the future of nuclear power in Canada? What is the future of geothermal in Canada? What is the future of biofuels in Canada? What is the future of energy conservation and renewables in Canada? What choices are we making as a nation-state, as a federal government? How are we partnering with provinces to give rise to different forms of energy?

Is that what he's talking about?

[John Quinn]

Absolutely.

[David McGuinty, Liberal, Ottawa South, ON]

Is that a belief or a view that's held in a widespread fashion throughout the fossil fuel sector?

[John Quinn]

I'm not here to speak for the other companies. I'm really not here to speak for Rick either. He is on record for—

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Ervin, do you think that's being talked about more openly? We've heard Premier Redford from Alberta raise it. The Premier of Ontario and the Premier of Quebec have raised it. Is this something now in the private sector? We just heard it from an important union here representing a lot of workers.

[Michael Ervin]

I don't want to speak for the industry, but the need for an integrated strategy is acknowledged. There is such an interplay among those factors you mentioned—nuclear, biofuels, and other alternative sources—and that will certainly have a big impact on decisions made in the refining sector, for example, which is today's topic. So the need for that is clear.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Ervin, why are Texas refineries running out of Mexican supply? Just this week we heard testimony that one of the reasons why we need to ship our crude to Texas refineries on the gulf coast is because they're running out of Mexican supply.

[Michael Ervin]

I wasn't here to actually hear that testimony and the background to it, but certainly all regions are depleting a non-renewable resource. That's the only thing I can add to that, without being provided with any more context.

[David McGuinty, Liberal, Ottawa South, ON]

Okay.

Mr. Newman, I think you wanted to respond.

[Keith Newman]

Yes, thank you.

You mentioned an integrated strategy. Our union developed one about 10 years ago, and we updated it a few years ago again because of all the changes going on in the area. We definitely believe there has to be an integrated view of all our energy sources, but underlying that we have two main things.

One is that we need our own energy security and independence, because we don't believe we can rely on good luck. We believe a prudent policy means that we take into account the possibility of bad things happening.

I live in Quebec, and I was actually moved into a shelter when we had the big power failures about 10 years ago. So it's not theoretical to me. That happened to hundreds of thousands of people. This could clearly happen to some if heating oil gets disrupted, to take a worst-case scenario. But in the real world these things happen occasionally—not often, let's hope.

The other thing that underlies our view is that we must try to get, as Mr. Gargiso was saying, the most economic activity, jobs, and well-being for Canadians as possible, given our incredible wealth in all of these things. We don't think exporting the stuff out of the country, without regard to all of our interests first, is a proper and prudent policy.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. McGuinty.

Continuing our questions and comments to the five-minute round, Mr. Calkins, you have up to five minutes.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Thank you, Mr. Chair.

As an Alberta member of Parliament, I'll probably be focusing my questions in that vein.

Mr. Gargiso, in his testimony, has suggested that Canada or Alberta exports raw bitumen products.

Mr. Quinn and Mr. Ervin, is that a factually true statement? Is the bitumen that's exported through a pipeline, or via a tanker or train, actually raw bitumen?

[Michael Ervin]

There are two kinds of products emanating from oil sands production. Alberta produces a great deal of conventional crude oil as well, some of which goes to the United States. But a great deal of it is used in Canadian refineries as well. Yes, bitumen is exported to the United States. It can be in the form of what's referred to as synbit, which is bitumen that has been—

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Is that actually the raw bitumen that comes right out of the oil sands?

[Michael Ervin]

No, it's not.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

So the answer to the question is no.

Mr. Quinn, would you agree with that?

[John Quinn]

It's a heavy oil that's exported. It's blended with diluent or synthetic crude to allow it to flow. It doesn't have sand in it, for example.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

At the first point of extraction, when the sand is removed from the heavy oil, is it transportable by pipeline?

[John Quinn]

No.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

So what does it have to be in order to get the flow?

[John Quinn]

It has to be blended with something else, so it's blended with a condensate.