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.