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.