Natural Resources Committee on Feb. 7th, 2012

[The Chair, Conservative, Leon Benoit]

Good morning, everyone.

We're here again to continue our study of the current and future state of oil and gas pipelines and refining capacity in Canada.

We have four groups of witnesses today, including two by video conference. From the Canadian office of the Building and Construction Trades Department of the American Federation of Labor, we have Christopher Smillie, senior advisor for government relations. As an individual, we have Larry Hughes, professor of electrical and computer engineering at Dalhousie University. And by video conference as individuals, we have Jack Mintz, Palmer chair in public policy at the School of Public Policy at the University of Calgary, and Michal Moore, professor at the School of Public Policy and ISEE core faculty at the University of Calgary.

Welcome to you, gentlemen.

From the Canadian Energy Pipeline Association, we have Brenda Kenny, president and chief executive officer.

Welcome.

We'll have the presentations in the order listed on the agenda. We'll begin with up to ten minutes, and if you could do it in less time, we would appreciate that.

Mr. Smillie, go ahead, please.

[Christopher Smillie, Senior Advisor, Government Relations, Building and Construction Trades Department, AFL-CIO, Canadian Office]

Thank you.

Good morning, Chair, members of the committee, fellow witnesses—it's Larry's first time—and guests. It's my pleasure to come to you today to try to give you a “tip of the spear” view of what pipelines writ large mean to regular people in Canada, what they mean to job prospects, short and long-term employment, and how pipelines make a difference right now in the skilled trades in Canada.

We're the Canadian building trades. We represent 14 international construction unions and about 450,000 members here in Canada in the skilled trades. Today I've compiled information from some of our construction employers, the companies small and large who do pipeline construction and maintenance work in every part of this country. I've also compiled information from the trades we represent. Hopefully when I'm finished you'll have an understanding of the importance of these energy assets to the Canadian economy and our folks.

I'm not usually in the habit of using quotes when I appear before committee, let alone Al Gore quotes, but this one hits home. He said: “Why do reason, logic and truth seem to play a sharply diminished role in the way America makes important decisions?”

I hope you'll see that pipelines and related energy projects should be considered in Canada as what Al Gore would call important. They deserve serious consideration. They deserve rational debate on the future of Canada's place in the world energy economy. They deserve more than partisan attacks, blind obstructionism by opponents, and sound bites. These endeavours have real-world implications for working people: paycheques, jobs, and food on the table.

With that said, I learned early on in this job not to assume people have an understanding of what's involved in industrial construction. Being a political science grad and a banker by trade, I had some studying to do myself. So here's the seven-minute summary of what's involved in pipeline construction and what's at stake for Canada.

First, what exactly is a pipeline? By definition, it's a conduit that connects a production source to an interim or ultimate user. But the pipeline is more than a connection for products. The pipeline links together jobs from one end of the production chain to the other end of that chain. The uninformed think a pipeline is just a few short-term jobs, but they're wrong. In the oil sands, for example, petroleum, however defined, is extracted. It can't be stockpiled for very long except in expensive tankage, and it has to move to the next stage in the process.

The extraction jobs and initial processing are 50-year jobs that last for as long as the line is being used.

It moves to an upgrader, where it's turned into synthetic crude oil, or to a combined upgrader or refinery to be upgraded. A large number of high-paid skilled jobs are found here. They are also 50-year jobs, and there are more maintenance and operations jobs created over the lifetime of the plant than there ever were in constructing it.

The synthetic crude goes to a refinery where it becomes products. The same equation is present at the refinery. There are jobs sustaining construction, operations, and maintenance. Those jobs are there for 50 years. Pipelines link those jobs together. If there's no pipeline to markets, those other high-paying, high-skilled, and challenging jobs don't exist. The pipeline moves both the oil and the jobs down the line to the end user. Some of the finished products move in other pipelines back to ultimate consumers.

Pipelines require four major construction activities and four major skilled trades: heavy equipment and side boom operators; back hoe operators to dig and move material; specialty pressure welders to make precise welds so that the pipe is sound and can withstand constant pressure; labourers to provide a myriad of jobs on the line and to coat and protect the pipe inside and out. Teamsters who are represented here today string the pipe before it's welded and lowered into the ditch and operate all manner of vehicles.

The other trades, the ones most think of when they think of construction, build the pumping stations and facilities along the right of way in the same way they do in any other industrial plant. So numbers...that depends on the size of the pipe, the length of the line, the nature of the terrain, and capital investment. For instance for the Northern Gateway—there's been some discussion of that project in this committee—the numbers I ran through job calculators indicate initial construction jobs in the 2,700 range for three construction seasons. Interestingly enough, that agreed with the numbers that the proponent, Enbridge, came up with. Total jobs for a $6 billion project—direct jobs—I calculate in the 12,000 mark.

This makes a bunch of assumptions like any economic model that's used. My major assumption, which I want to share with you, is that the average salary of someone who works constructing pipelines is $110,000. These jobs are top quality, well paying and support working-class families.

Being a pipeliner means that you're mobile. You get on a plane or in your pickup truck—at your own expense, by the way—and you go to where the work is. It means these pipelines are not merely local projects but are national and of national importance to folks in the construction industry. On the four pipeline spreads on the go right now—that's industry lingo for what is being built—in northern Alberta, there were 1,633 employees at the end of last week, and 811 of them were from outside Alberta.

This is roughly the same percentage that is found inside the extraction, upgrading, and refining plants. These jobs are not merely Alberta jobs; they're Canadian jobs. The payroll on those four spreads for the week was about $6 million. From this, it's pretty clear that these projects make a difference across the country. The Northern Gateway pipeline, the Keystone, or Mackenzie—take your pick—are important not only for the initial jobs associated with construction but for the longer-term viability of Canada's place in the North American and world energy market.

Pipelines mean some kind of resource extraction in all of the economic activities associated with those processes. The pipeline job may only last three seasons, but the other jobs—the vast bulk of jobs created—last for 50 years or more. For instance, we represent about 80,000 to 90,000 skilled trade workers who in one way or another in Alberta work in the energy sector. Nationally, approximately 30% of our membership is engaged in oil and gas at any one time.

By the way, we have more than 25,000 apprentices in Red Seal training programs in Alberta alone. The oil sands in our view are a global classroom for Canada's young workforce—25,000 apprentices. Think about that.

If it's not welding pipe at an oil sands plant or doing concrete work or excavation at Kearl Lake, it's building the office towers in Calgary for the energy sector's thousands of employees. Speaking of Kearl Lake, I was up there recently. Do you know that Imperial Oil hired more than a thousand trade contractors, employing more than 18,000 skilled tradespeople? Some 18,000 are on the job today—all to produce products to fill these disputed pipelines.

When opponents to the various pipelines say no to pipeline projects, they're saying no to a broad spectrum of working-class Canada that depends on these jobs to raise families, pay taxes, buy houses and vehicles, spend money in restaurants, and so on. When opponents to the project say no, they're saying no to all the prosperity these things bring to our country and they're saying no to other jobs linked to the pipeline.

In Alberta, the oil sands are being used for unique policy tests for government policy, things we're working on: vital changes to Canada's immigration system, changes to Canada's workplace, health and safety system, and changes to Canada's industrial policy. The list goes on.

In industry, we're testing drug and alcohol programs. We're using multi-employer pension plans for workers and mutual recognition systems for foreign credentials. This list is not exhaustive. We're also trying to work with government to set up a reasonable tax credit for travelling to these national work projects. Without megawork sites that pipelines connect, none of these ventures with our employers and governments would be possible.

The community benefits from Gateway and Kitimat and all along would be exponential. There are a number of other industrial endeavours being planned in northern B.C. Natural gas investment by the likes of Apache and Shell, with each having a more than $5 billion investment, is under consideration. These natural gas projects are also great work opportunities for skilled tradespeople. What an opportunity for Kitimat and natural gas market needs. Gateway would give Canada another market for our oil and not have us beholden to oil politics in the United States.

Suddenly, our natural resource pricing is not dependent on one customer. What a legacy we could leave for future generations and future building trades members. A pipeline from Alberta to Sarnia—that's been discussed in this committee—could make Canada free of imported oil. If this ever made sense in the marketplace, we would certainly support it. The revenues generated by the Government of Canada from future profits is a valuable resource for future generations.

The last time I checked, the cost of health care is not going down. Neither is the cost of funding education. We can't forget where Canada gets revenues for everything we enjoy. It's either from companies paying taxes or people who go to work. Projects like these fund social programs for future generations. Is this what opponents have in mind when they say no? They're in effect saying no to 50-year job creation projects here in Canada. Talk about killing the golden goose.

Before I conclude, there has been some discussion in the media of the regulatory systems surrounding these types of projects. The position of our organization is that we support changes to the system to facilitate large projects, though not at the expense of safety or environmental review.

What we do not support is a 12-year or 15-year regulatory dance that impedes economic development and employment for our members. We don't think pipelines or oil sands facilities should be delayed unnecessarily, nor do we think our country should be subjected to unfettered industrial poisoning. We want something that's fair, streamlined, and rigorous. We live here; our members live here. We won't see the place despoiled for a few paycheques. We leave it up to the committee to talk about the number of changes that could take place in the regulatory system.

I hope I've provided a decent picture of what pipelines mean to the skilled trades. In summary, they mean good-paying jobs for skilled trades for many decades to come, not to mention training opportunities on the pipeline directly and in the oil sands. The pipeline links opportunities and jobs.

I remain available for your questions—and be gentle. Thanks.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Smillie.

We go now to Larry Hughes, professor, electrical and computer engineering, from Dalhousie University. Go ahead with your presentation, Mr. Hughes.

[Professor Larry Hughes, Electrical and Computer Engineering, Dalhousie University, As an Individual]

Thank you. When I was invited to the committee by Mr. Stewart, I was asked if there were pipeline and refinery issues in Atlantic Canada. I said there were no refinery issues per se. We have three refineries in the four Atlantic provinces, but we don't really have any pipelines to speak of, although we have some natural gas pipelines leading to the United States. The issue is, where do we get our energy from? More to the point, it's an energy security issue. That's what I'd like to talk about today with respect to potential pipelines to Atlantic Canada.

When we talk about energy security, we are talking about three things. The first thing is availability; that is, the availability of an energy source, or specifically an energy product, that is available to those services that use the product. We also talk about affordability. How affordable is this energy source? Can people actually pay for it? Can families use this energy source? We also talk about acceptability. How acceptable—environmentally, politically, and socially—is this energy source? This is based upon the International Energy Agency's definition of energy security.

If we look at Atlantic Canada's energy mix, it's very similar to Canada's. There's natural gas, there's coal, there's oil, and there's hydroelectricity. However, unlike the rest of Canada, what you find is, and as you know full well, that although we're an extremely rich country with respect to our energy resources, the resources are not evenly distributed. What you find, of course, is some provinces are extremely well endowed with hydroelectricity—Quebec, Manitoba, and British Columbia—whereas others are well endowed with hydrocarbons, such as Saskatchewan and Alberta, and to a lesser extent Manitoba, and, to a degree, offshore Newfoundland and Labrador.

Unfortunately, in the case of the three regions of eastern Canada—that's Ontario, Quebec, and Atlantic Canada—what one finds is that, surprisingly, most of the oil in this region is imported. In Atlantic Canada—and the numbers are very similar in Quebec—about 80% of the oil comes from imported sources. Now, one can argue, what's wrong with this? Globalization works. We should be happy with globalization, and it does work. There is no disputing that. Atlantic Canada has done very well out of globalization. The world price of oil is more or less the same. It's not entirely true. Of course, Brent, which Atlantic Canada pays for its oil, is at a higher price than WTI, which much of western Canada and perhaps Ontario pays for its oil.

One can then ask how Atlantic Canada is any different from the rest of Canada. Unfortunately, as you are well aware, the first issue is that many Atlantic Canadians are not as well-to-do. The second issue is how the energy is actually used. In Atlantic Canada we have very little natural gas. About 90% of the natural gas we do have, most of which is from Nova Scotia, is exported to New England, although some of it is actually used for electricity in Nova Scotia. This means that in terms of home heating specifically, Atlantic Canadians are using upwards of 50% for both home heating and commercial buildings, whereas in the rest of Canada we're probably talking the reverse of that, which is probably that about 60% of buildings are heated with natural gas. Due to the price differential between natural gas and fuel oil, many Atlantic Canadians are feeling the pinch, if you will. This raises the whole issue of energy security and affordability. What we see in Atlantic Canada is that it's not an availability issue. There is lots of crude oil and light fuel oil available for space heating. It becomes an affordability issue.

We're seeing this manifest itself in a number of ways. Perhaps the best example is the cost to the homeowner. If you take the definition of energy poverty as being 8% to 10% of the household income spent on energy, that would put the household into a state of energy poverty. Some Atlantic Canadian provinces are already at 6%. Prince Edward Island is one, for example. The rest are well over 5% and some are pushing 6%. What you are finding is that the average cost to a household in Atlantic Canada is reaching an energy poverty level, if you will. That's not all, of course, but it's the average. One is finding that.

Could we address that? Yes we could. However, there's another issue, and that is energy availability. That is something we should be greatly concerned about in Atlantic Canada and Quebec, because most of our major suppliers have either peaked—good examples include the U.K., Norway, and Nigeria—or are in politically volatile regions. We rely on Saudi Arabia, for example, and of course countries in the Middle East or North Africa are politically unstable. We've gone through the so-called Arab Spring. We don't know where this is going to lead and what types of governments will result.

If there are problems in the Strait of Hormuz between Israel, Iran, and the United States, we could very well see oil prices increasing, but more to the point, we could see oil availability declining dramatically. This would perhaps be a boon to western Canada, with more production, but it would certainly have a great impact on Atlantic Canada.

What can be done about this? I'm arguing that western Canadian crude should be made available to Atlantic Canada, and the question is how. People have justifiably said that given the size of the Atlantic Canadian market, it really doesn't make sense to build an entirely new pipeline. I agree wholeheartedly with that. But there are at least two other possible routes. One is the Montreal-Portland pipeline—reverse that to take western Canadian crude to Montreal. There's talk of reversing Enbridge's line 9, shipping it to Montreal and then to Portland, and distributing it from Portland by tanker—as it already is—to Atlantic Canada's three refineries. An alternative to this, if there are very strong objections in the United States—the second approach I discuss in my brief—is to carry the crude by tanker from Montreal to Atlantic Canada.

One can argue that this will improve availability, which will improve the energy security at that level, but it won't address affordability. It may not address affordability, but the crude oil will be available, and, equally as important, those people in need could be given some form of subsidy.

So the options really open to policy-makers are energy reduction, in which households are encouraged to reduce their energy consumption through government grants, and so forth; replacement, which I just discussed; and restriction. Restriction policies are those that encourage people to change both their source of energy and the way the energy is consumed. We do have limited resources. We have some hydroelectricity. There is also some biomass that could be used. On the reasoning behind this, we should really take into account what Dr. Fatih Birol, the chief economist of the International Energy Agency has said: we have to leave oil before oil leaves us.

If nothing else, Atlantic Canada should be doing everything it can to both get off oil and find more secure sources. Essentially a no-regrets policy would be something like a tanker route from Montreal to Atlantic Canada.

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Hughes, for your presentation.

We'll go now to Calgary, by video conference, to Jack Mintz, Palmer chair in public policy, School of Public Policy, University of Calgary. With him is Michal Moore, professor, School of Public Policy and ISEE core faculty, University of Calgary.

Go ahead, gentlemen, with your presentations, please.

[Jack Mintz, Palmer Chair in Public Policy, School of Public Policy, University of Calgary, As an Individual]

Thank you very much, Mr. Chairman. It's our pleasure to be here.

I'll just say a few remarks, as I want to give time to Michal Moore, who, with his colleagues from Stillwater Associates and Los Alamos laboratory in the United States, has done a very fine study on pipelines with respect to what opportunities we can have as a country. It's a very comprehensive study, I should say, and I commend it to all members if you haven't had the opportunity to read it, as it does lay out, I think, a lot of important options and economic issues associated with pipelines.

In terms of general comments, I always like to start by thinking about the objectives of what we are trying to do.

One of the things I've learned with respect to pipelines is that even though we think there's a world price for oil—and natural gas, some people argue, although it's not as much in that case—there are arbitrage possibilities as a result of some issues around the transportation of oil around the world. Those transportation costs, if they could be reduced, could actually create a significant opportunity for higher net wealth, particularly for oil exporters. Of course, that includes Canada, as a major oil exporter in the world.

When I think about the three objectives in terms of what we want to do with pipelines in the future, I like to think particularly of these three. First is what I would think of as market efficiency in terms of how best to allocate resources to put them to their best use. In particular, to the extent that we can save transportation costs, that would improve netbacks. We could therefore get higher returns from the oil we export internationally. That, of course, I think, is something to keep in mind. It's also important for consumers in Canada, because we want to try to keep costs for energy as low as possible, as they have to consume it.

The second objective is environmental stewardship. We have a number of regulations, which are important to the pipeline industry, to minimize spills and other things. It's very important to have the right environmental stewardship in place to make sure that we minimize any type of environmental problem associated with it.

Third is what I'd like to call market diversification. Here I'm thinking very much in a geopolitical sense in terms of what we think of Canada's trade opportunities internationally. In the case of oil and gas, we are effectively, to a large extent, dependent on one customer for our needs, at least with respect to our export markets. I think that's a very important issue to keep in mind. One of the arguments for actually having alternative markets, and I like putting this in game theory terms, isn't so much a point of risk diversification as it is about the opportunity to improve our leverage as an exporter, particularly with respect to a customer that is ten times larger than we are and that has strong negotiating powers. It doesn't mean that we completely take away all of our exports of oil to our most important customer, especially since there's a huge infrastructure there and we have significant opportunities exporting to the U.S. market as a result. But I think it is important for Canada to develop some alternatives. In my view, that actually strengthens our ability to negotiate with the United States, because they see that we have a credible threat available to us in the sense that we could look at other exports.

I think these three objectives are very important to consider.

I'd like to turn it over to Michal Moore, who will talk a little bit more specifically about the issues in his study and the importance of it to Canada as a home.

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Moore.

[Professor Michal Moore, School of Public Policy and ISEE Core Faculty, University of Calgary, As an Individual]

Thank you, Mr. Chairman and committee members.

Recently we completed some work at the School of Public Policy, looking at the amount of what we call “headroom”, that is, the price spread in world markets that could accommodate additional revenues or additional netbacks to Canadian producers.

We were looking at the difficulties, in world markets and in actual transfer capacity, that limit some of the access of Canadian products to world markets and that prevent Canadian producers from collecting the full rent available in those markets.

I'll review for you some of the findings. The first, and perhaps most important, is that in trying to get to tidewater ports, whether in Houston, Kitimat, Burnaby, or even on the east coast, the pipeline capacity is critical. This is the capacity to get all the way to a tidewater port without interim support from rail or barge or trucks, which support adds tremendously to the cost.

In respect of the United States, when we work around the current constraint at Cushing, Oklahoma, which prevents our products from getting to a refining facility, we give away a lot. In the Houston market, in moving down to that gulf coast market, we give away about $10 a barrel in potential headroom to producers. In the California market, where the reserves of heavy crude are declining in the California basins, we give away even more, up to about $13 a barrel, depending on conditions.

Our report suggests that trying to improve that access is critical, which means that getting access to more pipeline capacity is at the heart of things. But more important, getting long-term contracts to address those markets is key to their stability.

The second piece of our puzzle is trying to understand how this world is changing, and how fast. I'll go to the world price first and suggest that the current reliance on Brent crude, as a price differential from West Texas intermediate, is changing very rapidly. The new standard is likely to be something called light Louisiana sweet, LLS. When we can imagine our products priced against that, the attraction is much greater for actually getting to tidewater ports, like Houston, where the product doesn't actually leave the coast but gains access to what's known as Padd III, where there is a large reserve of refining capacity. This means that a world price for our heavy crude products is actually a smaller differential than Brent crude, which is based on what's happening in Europe today. The new standard is based more on a North American standard than a European one. It makes it more attractive for our products. It also shows that we can get a higher price if we can get access to the refining markets capable of processing our crudes.

The same phenomenon is present on the west coast. Getting access to California crude refining, where there is excess capacity, can improve the netback and the returns to our producers.

Again, the world is changing rapidly. Right now there is a surplus of natural gas from unconventional sources. That's likely to mark what happens in the future. We don't want to be behind that market. We want to make sure that we're planning for new reserves of resources like natural gas. This is going to support an electric market that is going to demand a different kind of infrastructure, not just pipes. It's going to demand an electric infrastructure that we have to anticipate. If we look forward, we'll see that the movement of natural gas, especially on the east coast, is likely to be from south to north, at least in the near term and quite possibly in the long term as well.

Some of the questions of energy security that were brought up earlier are really going to be solved, or at least addressed, by looking long term at a gas market instead of an oil market.

Looking at these issues regionally, we can see that we need a very diversified strategy for investment in hardware and infrastructure, as well as an understanding of the scope and structure of those markets.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Mintz and Mr. Moore, for your presentations.

We go finally to Brenda Kenny, president and chief executive officer from the Canadian Energy Pipeline Association. Go ahead, please, with your presentation, Ms. Kenny.

[Brenda Kenny, President and Chief Executive Officer, Canadian Energy Pipeline Association]

Thank you very much.

You've certainly heard some excellent presentations so far, and I'm sort of in wrap-up mode. Then we'll move to questions. I hope this will be a helpful way to cap it off.

I think you're well aware that CEPA represents the large transmission pipeline companies that, together, move about 97% of the oil and gas going overland in Canada every day.

I'm reminded by William Bernstein's hallmark text, The Birth of Plenty. He identifies four key pillars for the creation of wealth in the modern world. I just want to share them with you, for context.

He outlines the need for property rights first, backed with an effective system of law. That of course includes eminent domain, where there are critical pieces of infrastructure necessary for society to succeed.

Second is the acceptance of scientific rationalization and rationalism. Again, your first speaker, Christopher Smillie, talked about this as well. For me, it goes right to the heart of the need for evidence-based decision-making on these significant questions.

The third point Bernstein makes is the effective functioning of capital markets, and I think your last speaker spoke to that very well.

Finally, there is the need for infrastructure to move energy, ideas, and products around quickly and efficiently.

So as you look at the task at hand, clearly Canada is one of the successful nations that indeed does have a fair amount of critical infrastructure, whether that's in roads, rail, or communications, and thankfully pipelines as well. This is a critical underpinning for our country.

Over the past 60 years the Canadian pipeline industry has been building and operating a vast network of energy highways across Canada and the United States. Through sound engineering, balanced regulatory decision-making, and a firm commitment in safety, this network has connected producing regions to export markets, meeting Canadian needs.

To that end, today often Canadians don't think twice about using energy. The reliability that has been built out over time across a number of different modes of energy is wonderful, but we need to understand that for oil and gas, that is across a foundation of buried infrastructure, topping about 100,000 kilometres so far.

Happily, Canada does have one of the safest networks of pipelines in the entire world. The ongoing technological improvement, comprehensive pipeline integrity, management systems, emergency response, and sharing of best practices are all things that have contributed to this outstanding record. Clearly, in meeting social expectations and needs, that is an absolute centrepoint.

But in terms of the prosperity that contributes to our ability to have jobs, you know the numbers. The annual volume of energy transported on National Energy Board regulated pipelines has topped $100 billion over the last several years. That's the equivalent of almost $3,000 for every man, woman, and child in Canada. In addition, we see that energy exports are contributing about one-fifth of our total merchandise export revenues. In fact, in 2010 it rose to 22%.

To achieve energy security and prosperity, it is really important that we have the right infrastructure in place at the right time and it must work. We all know the consequences of inadequate road systems and the cost that results from congestion, lost time, and bottlenecks at borders. A computer network that's inadequate can kill a business. This need for adequate infrastructure is critical.

You've heard from the last speakers that currently there are some market distortions in North America. In total, depending on the numbers, that can cost Canada anywhere from $14 billion to $18 billion a year. That is in addition to lost tax revenues, fewer dollars for reinvestment in Canada, and lower returns to all shareholders, many of whom are pensioners.

The potential loss of economic and export trade opportunities is a critical discussion Canada needs to have. The developing global energy trade situation is increasingly volatile and unpredictable, and we must remain competitive as a country.

One of the key points I want to make is that Canada must not be complacent in addressing this issue. It could lead to continued significant economic loss for the nation.

The pipeline sector is working well under market conditions, but to complement this we do need to establish a more deliberate and strategic policy framework that recognizes the interdependency between energy security, prosperity and jobs, environmental conservation, and social well-being. Central to this, of course, is an effective, efficient regulatory system that focuses on predictable timelines, balanced fact-based decisions, and trade opportunities. We must go toe to toe with others around the world to be successful, and at the same time we must uphold fairness and responsibility in appropriate developments.

Converse to a shortage of capacity is adequate pipeline capacity, perhaps even with some built-in reserve. It enables industry to efficiently meet the needs of energy users and creates opportunities for flexibility in the marketplace. This removes bottlenecks, opens options, and allows energy trade to happen more fluidly, and at the end of the day we have better pricing and energy security for consumers and effective investment that creates those important jobs for the many key tradespeople and workers across the country.

Prompt, efficient, and effective decision-making is critical. Sometimes quicker project decisions are aided by improved land use planning and even pre-assessed infrastructure corridors. One avenue that has not been actively explored in Canada is the possibility of regional infrastructure evaluations with an eye to potential future options. For example, as we've heard, if there is a pressing policy concern about energy security in Atlantic Canada—which, by the way, is not our position as we do not believe that energy security is a key issue at this time—governments could consider the possibility of advancing a likely corridor, perhaps, for a pipeline between Montreal to refineries in Saint John, New Brunswick, and have governments complete an environmental assessment in advance of the potential future need. This would provide an avenue for possibly faster deployment should infrastructure become necessary.

It is very important to note that the pipeline sector itself provides transportation options to shippers who are looking to connect to various markets. We do not determine the need for those transportation options. In a market-based approach, that need is determined between shippers and downstream markets, and we support that.

Just in closing, I do want to point to the fact that occasionally government policy will provide added impetus to market-based choices where far-reaching national interests are clear. It has been referenced even this morning. Of course, the original line 9 that was built between Sarnia and Montreal in the 1970s was designed to address and mitigate the potential threat of an OPEC embargo and concerns at that time about energy security in eastern Canadian markets. Once the political threat from the Middle East had receded, by the late 1990s, oil imports through the eastern port became more reliable and affordable so the market signalled the need to reverse, and oil has been flowing from Montreal into Sarnia.

At this point in time again, line 9's re-reversal is a perfect example of a pipeline company responding to new market conditions and opportunities. I must say, though, unfortunately, despite the fact that this existing infrastructure is below ground and is essentially unchanged by the flow direction, the National Energy Board has decided that a hearing will be used to consider the application and that the oral part of that hearing will not take place until the fall of 2012—that's 15 months after the application was filed. I think it's very important that within our regulatory framework we make good judgment calls on where it is necessary to have oral hearings and where it is necessary to take stock of the actual questions at hand.

Keystone XL and Northern Gateway projects are also undertakings that respond to emerging market conditions. One, of course, is to connect oil sands to one of the largest refining complexes in the world in the U.S. gulf coast, and the other is to provide an option for Canadian oil producers to access the growing Asian market, as well as the Trans Mountain expansion that is being pursued.

In conclusion, Canada has built and operated a world-class pipeline infrastructure that's been affordable and reliable for Canadians for decades. We're the safest in the world, and environmentally sound over land. The Canadian pipeline sector is very sophisticated, highly specialized, and has a proven record of adapting to changing needs efficiently and safely.

I just want to point out one final note. There are many pipeline sectors around the world. Some are appended primarily as financial investment instruments, such as in Australia. Others are largely operated by producers. The Canadian sector is quite unique and one that Canadians should take stock of and take a lot of pride in.

I thank you and look forward to your questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Ms. Kenny, for your presentation.

Thank you all for some input into our study, which will be very helpful for the committee.

We'll get directly to questions and comments now, starting with Mr. Anderson. You have up to seven minutes. Go ahead, please.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Mr. Chair.

I want to thank the witnesses. I think you and the other folks who have come before the committee here are making this well worth our while, so it's been a good set of hearings, and that's continuing today.

I want to talk a little bit about market diversification. Mr. Mintz, I think you wrote on December 16 in the Financial Post that:

It is certainly in Canada's geopolitical interest not to depend on a single energy market...which can take advantage of a monopsonist position as the sole buyer for our product.

...it is politically and strategically wise to look for alternative routes to deliver oil and natural gas....

I'm just wondering if you were interested in expanding on that statement and maybe talking a little bit about the impact of returns and jobs and opportunity, as a couple of the other witnesses referred to.

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Mintz.

[Jack Mintz]

Thank you.

I'd be happy to do so. That is really consistent with what I talked about in terms of the gains to diversification that I laid out earlier in my comments.

What I do think is that we have to remember that the world is a complex place. Energy and oil markets have always been important, not only in an economic sense but also in the political sense. You just need to re-read Daniel Yergin's book, The Prize, to understand the importance of the politics behind oil.

Of course, as we've seen recently with the Keystone XL decision in the United States, politics can really take over some of the economic interests on the part of everyone with respect to building pipelines. Of course, we have to be careful in Canada not to be too reliant on only one market, and there is some value to diversification as a result.

In fact, in the case of shipping either to California or to Asia, as my colleague Michal Moore has well laid out, there's also economic gain to that. It's not just a political one but also an economic gain that is quite significant. It does potentially increase the GDP in Canada, as I recall, by about a percentage point over the next number of years, if we do export to either Asia or California, partly because we can achieve some better pricing for our product. That's assuming that we also deal with the Cushing inventory problem, where oil has to be sent at a high cost down to the gulf coast. It's more pipelines set up, and we do see an elimination of differential between the international price and the west Texas intermediate price, which will be a big gain for Canada as well.

The main point is that there is economic value to market diversification, but there is also a political value to Canada to achieve more market diversification as well.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

You're talking about 1% on GDP.

Mr. Smillie, I think you talked about 12,000 jobs being created. I'm just wondering if you would address a little bit the training opportunities for young people. We've been doing a study on northern energy as well, and we've talked about training programs for young people. I'm just wondering what the benefits are in that system, the training system in Canada, for moving ahead with some of these projects.

[Christopher Smillie]

Thank you for your question.

The apprenticeship system in Canada relies on employment. In construction it's not a system whereby young people sit in a classroom for four years. For a construction apprentice, it's basically the same in the 14 industrial trades; it's 80% on-the-job learning. So in terms of benefits to young people, energy projects such as pipelines and oil sands work, and all the spinoffs provide a really good opportunity for teenagers and young adults to get hired and become apprentices.

Those apprentice programs are three to four years, depending on the trade, and it requires the participation of employers, the government, and the unions for young people to move through the system. The way it works is a young person goes into an apprenticeship program. It's a four-year program, and they learn the competencies in a structured way, but to do that, to be adding value to the training system and being involved, they have to work.

I talk about the oil sands as a global classroom. These megaprojects and pipelines provide an opportunity for young people to gain employment. So lots of folks from Newfoundland and New Brunswick get on a plane and become tradespeople in Alberta. In fact, in Ontario, to be flexible and nimble during the recession, a lot of the training centres we represent started teaching Alberta curriculum. So now there are folks graduating and working who are based in Ontario but are getting their hours in Alberta. The benefits are twofold: one, you get a job right away as a young person; and two, it's a way to transfer knowledge from people who are moving out of the workforce, to grab that knowledge from plumbers and pipefitters, carpenters, and stonemasons.

Without these work opportunities, the apprenticeship system could become stagnant.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I just want to shift a bit on that then. All of us, I think, would support jobs in the alternative energy sector, but the NDP has argued in the past that those alternative sources of energy will basically take over the jobs that would be lost if we shut down the oil and gas sector.

Do you see that as realistic? I don't think we would. Is it realistic to say we can create some alternative energy sources, which right now provide a very small percentage of our energy resources, and say those jobs will take over from all the jobs we could lose by shutting down the oil sands, for example?

[Christopher Smillie]

Thanks for your question.

Not to be overly partisan, the experience in the skilled trades thus far, with windmills and solar-powered farms and the like, the green or the alternative project, shows they're not huge job creators, and in some cases in New Brunswick we've been fighting to even have local workforces put up those projects.

So when you're looking at a project such as Kearl, which employs 18,000 people, versus farmers who are putting 10 or 15 or 20 windmills on their properties, the long-term maintenance associated with those windmills is certainly not as great in terms of employment opportunities as maintenance on a refinery, which requires thousands of people each year.

So some direct jobs are created by alternative energy projects, but the vast majority of the skilled trades are engaged in oil and gas.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Anderson. You're out of time.

We go now to the official opposition, Monsieur Gravelle, up to seven minutes.

Go ahead, please.

[Claude Gravelle, NDP, Nickel Belt, ON]

Thank you, Mr. Chair, and thank you to the witnesses.

Mr. Smillie, I'd like you to answer this question, please.

The NDP brought this study on pipelines and refineries because we're concerned about the decline of the refining industry and the loss of jobs due to the export of raw materials. We believe Canada needs a new clean energy strategy, one that creates opportunities for green energy jobs. The Minister of Natural Resources promised last year to produce such a strategy, but none has yet appeared. We now have a large team working on an NDP clean energy strategy for Canada, and we call on the Conservatives to join us in our efforts.

We believe Canada can harness our best minds and our wealth of resources to become a clean energy superpower and a leader in the development of renewable energy, but we have to act now. Other countries are moving forward with major investments in renewable power. Canada needs to maintain its competitiveness in the global economy.

Most witnesses appearing at these hearings have called for a new national energy strategy, including those appearing here today.

My question to Mr. Smillie is this. You have said Canada needs a coherent national energy road map with federal government leadership on the environment. You have said there's a natural link between the way in which we plan, use, and distribute energy in Canada to the policy we set for dealing with byproducts from those energy products.

Could you comment more on your ideas for a national energy strategy?

[Christopher Smillie]

Absolutely.

I think some sort of overarching framework is required. Our organization has views similar to those of industry, and I think you're bang on. That's exactly what we need. At the end of the day, we have vast resources in our country. We have to figure out a way to move forward in developing those resources responsibly. I'm not calling for socialism or grand government planning. What I'm calling for is the involvement of all levels of government, which I think we have to some extent now, to talk to industry and get input for some sort of plan.

I would also say in response to your question that no energy plan—I don't want to say plan. Sorry, guys. I know some of the westerners get upset about that.

My pitch would be that no strategy can be in place without also considering a workforce strategy. If we're talking about a national energy strategy, we have to talk about a workforce strategy around that as well. Again, it's not grand socialism or central planning, but it's using all the levers of government and industry that are involved.

Sure, we can decide what the elements of a national energy strategy, or a policy framework, would be, but there are a couple of other things we need to do at the same time. I really wouldn't want to say either way about the minister's plan being released or not. I'm like everyone else. Let's see how things develop. But I think there are a number of players in this country—big CEOs, small trade contractors, regular working unions—that are looking for some guidance, absolutely. We can't plan where to send 20,000 or 25,000 people in the next five to 10 years if we don't know if the projects are going ahead.

I am also supportive of fixing the regulatory system to assist in workforce planning. We can't have a 15-year dance before a project is approved. We don't know when to train people, we don't know where to send them, and we don't know how to harness those resources. So a change to the regulatory system—something that's responsible and rigorous—would be necessary as part of the grand strategy that I would put before the House of Commons, if I were allowed to do so.

I hope I've answered your questions. Regulatory changes, workforce stuff, and industrial planning are all important elements of any national involvement.

[Claude Gravelle, NDP, Nickel Belt, ON]

Thank you.

Mr. Hughes, could you comment on the national energy strategy?

[Prof. Larry Hughes]

It's a very important question. I know, as Mr. Smillie just pointed out, that it is a red flag to some, especially western members.

What strikes me, from listening to what various witnesses have said today, is that we are moving towards an energy security policy for energy exports. You see this in many major exporting countries. A good example is the former Soviet Union, or Russia, in which the Soviet Union at the time, and now Russia, had essentially one market for its oil and natural gas, and that was western Europe, and now effectively all of Europe. The Russians have done what is being advocated. They've diversified to Asia. So now they have, from an energy exporter's energy security view, two markets in which they can effectively play one off against the other, which is more or less what has been suggested by a number of the witnesses.

That being the case, we now have in Canada, surprisingly, the need for energy security to address the energy import issue. As it stands right now, it really isn't being addressed in eastern Canada. We've been told there is infrastructure in eastern Canada to handle the natural gas, because the natural gas will start flowing from the south to the north. This, as it stands right now, is not true. If the infrastructure were there, natural gas would be certainly making larger inroads into Atlantic Canada. It isn't.

We do need a national energy strategy of some sort to recognize that the country is both, at present, an energy exporter and an energy importer. We should be addressing the need for energy security from both the exporter perspective and the importer perspective.

Thank you.

[Claude Gravelle, NDP, Nickel Belt, ON]

How much more time?

[The Chair, Conservative, Leon Benoit]

You're actually out of time.