Natural Resources Committee on April 25th, 2013

[The Chair, Conservative, Leon Benoit]

Good afternoon, everyone. We're continuing our study of market diversification in the energy sector. I think our first meetings have been very productive, and we have a very strong lineup of witnesses today.

We have, from the Conference Board of Canada, Michael Burt, director, industrial economic trends. Welcome.

From the Building and Construction Trades Department of the AFL-CIO, Christopher Smillie, senior advisor, government relations and public affairs, is here. Welcome again.

From Corporate Knights Incorporated, Toby Heaps, president and co-founder, is not here yet, but we'll look for him to come.

We have, by video conference from Calgary, from the Fraser Institute, Kenneth Green, senior director, energy and natural resource studies. Welcome to you, sir.

We'll have the presentations in the order that you're on the agenda, starting with, from the Conference Board of Canada, Michael Burt, director, industrial economic trends. Welcome, and go ahead with your presentation for up to seven minutes, please.

[Michael Burt, Director, Industrial Economic Trends, Conference Board of Canada]

Thank you for inviting us here today. For anyone who is unaware, the Conference Board is a non-profit think tank based here in Ottawa.

I was asked the question, “What is our export market diversity when it comes to energy?” before I came here today. The simple answer is “None.”

We export 70% of our oil production, 60% of our natural gas production, 7% of our electricity—all of it to the United States. We have one buyer for all of those products.

Now we also import a lot of those products. For example, much of the oil that's consumed in central and eastern Canada is imported. We import natural gas products, which are used as an eluent in the oil sands industry in Alberta. We are importers as well as exporters, but we are significant exporters of all of those energy products.

The system has worked until recently. What we've seen in recent years, the last couple of years in particular, is technological changes fundamentally altering the supply-demand relationship for energy in North America—oil sands development, horizontal drilling, fracking in shale oil, shale gas. There's been a big increase in the supply of energy in North America, but demand has been relatively flat. The end result has been lower prices for our energy relative to world benchmarks.

Why would it be desirable to diversify? First of all, we'd be able to take advantage of those price differentials. Let's just put some figures around this. Right now, the price of Brent oil is about $100 a barrel; the price of oil, West Texas Intermediate, in the U.S. is about $88 a barrel; here in Canada, Western Canadian Select is $72 a barrel.

Quality differences account for part of that, but a big part of it is that we have one destination for all of our exports, and that's the U.S. midwest. It's not even necessarily going to all of the U.S.; it's really just going to one fundamental location in the United States.

In the case of natural gas, prices are often two to three times what they are here in North America, if we look at markets in Asia or Europe. This is translated into billions of dollars of lost profits, lost tax revenues, lost royalty payments for our governments.

It can also have a negative impact on our investment and job creation in the energy sector. Just to give you an idea, drilling activity in natural gas here in Canada is now about 90% below its peak levels of activity. The low prices are having a definite negative economic impact on what's going on in our energy sector.

Another reason why we would want to diversify our markets is to reduce market risk. Demand for energy in North America is pretty flat right now. We're not seeing a lot of growth. But that is not the case worldwide. Emerging markets are seeing significant growth in energy demand. If we had access to those markets, we could take advantage of that growth.

The third reason to want to diversify our export markets is policy risk. The U.S. is our friend; they are our neighbours, but right now we're captive to their policies. Probably the best example of this is the proposed pipeline to the United States gulf coast, the Keystone XL Pipeline. There are other examples as well.

Basically, more customers mean more bargaining power, more options in what we can do with our energy products.

How do we achieve export market diversity? It's deceptively simple. We build the infrastructure that's required to get our products to other markets. But it's easier said than done. Basically we need to reach tidewater. If we can get our products to the ocean, we can ship them pretty much anywhere in the world.

In reality, as I said, it's easier said than done. In terms of electricity, it's really not feasible. We have one neighbour. Undersea cables are expensive. Our potential customers are far away. It's not really feasible.

With natural gas, it's possible. It's likely. We have several potential projects under development in B.C. right now to export liquefied natural gas from Kitimat, B.C., but those projects are still years away and they're not definite yet. We still haven't necessarily gotten all of the pieces in place for those projects.

In the case of oil, it's a necessity. Given the oil sands projects that are on the books right now, that are expected to be developed over the next 10, 20 years, you're talking about oil sands production doubling from their 2012 levels by 2020, and tripling by 2030.

Where is that oil going to go? There are potential projects already in place—the Keystone XL project that I mentioned, and the potential for a west-east pipeline here in Canada. But to help give you an idea of how much oil we're talking about, even if both of those projects are developed, that would still only account for about half of the total expected increase in oil sands production. We need to find other ways to move that oil.

We can do such things as move it by rail. That's something many rail operators are working with right now. But it has limitations; I've seen upward estimates that we may be able to move 800,000 barrels a day using rail. That's only about a quarter of the total increase we're talking about over the next 15 or 20 years, so essentially we need to find a way to move oil to market, if we're going to see the development of that product over the years to come.

Thank you.

[The Chair, Conservative, Leon Benoit]

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

We go now to the Building and Construction Trades Department of the AFL-CIO, to Christopher Smillie, senior adviser on government relations and public affairs.

Welcome again. Go ahead with your presentation for up to seven minutes, please.

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

The third time's a charm, right?

Thanks for having me back. We're the Canadian building trades; we represent about 550,000 skilled trade workers, in every province, coast to coast.

I received the invitation and thought about market diversification. I talked to some of our folks. Quite simply, market diversification for us means job expansion. It appears from your backgrounder papers that you're looking at export product and diversification of supply, so I'll talk about each of those quickly and then answer any questions you have about the job impacts.

As my colleague said, export market diversification means more customers for “made in Canada” products, so that ultimately Canada can become a price maker and not a price taker. Ultimately, for the skilled trades it means that the projects are more certain and that our employers can bid on more projects and on a more diverse scope of work, once that price-making ability is in effect.

Project diversification is interesting for us. Whether it's for diesel fuel in Sarnia or jet fuel at the refinery in New Brunswick, the work prospects for the skilled trades in those markets should be better.

If the demand for a particular finished product wanes or waxes depending on the economy, refineries in home towns and the resident workforces who live there are less vulnerable if other products are being demanded by the market and by other markets.

If we're exporting natural gas to global markets, that means more work on pipeline infrastructure, more work on holding tanks, on liquefaction plants. These all add to the work scope of the skilled trades in Canada. If we're exporting natural gas, we think the natural gas liquids should be stripped off here in Canada and that the plastic and the byproduct industries should produce here.

This is a potential increase in work scope for us. The Alliance Pipeline was a major success in getting Canadian resources to market. It spawned a series of industrial complexes just outside Chicago, but if we increase pipelines such as this, hopefully that kind of industrial complex will come to Canada.

Diversification of supply is also important. When oil sands facilities use natural gas feedstock or when electricity generation facilities in Ontario are using natural gas for feedstock, the abundant supply of these products means project certainty in Ontario. If we know that the natural gas is going to be there, people are going to be incented to build more co-generation facilities to produce electricity for Ontarians.

As for LNG, our becoming involved in the LNG business would do three big things.

It would increase the need for pipeline spreads, which require thousands of workers—even more, if we factor in, as I said, the stripping off of the natural gas byproducts.

It means thousands of jobs building and maintaining these LNG facilities. For every $1 billion a company spends on an LNG plant, there are about 4,000 direct construction jobs. Then, behind every 600 construction jobs, about 100 other jobs are created to support those jobs. The sustaining capital invested in an LNG plant—and there's a proposed one in Kitimat—really would be a game changer for workers in British Columbia and other places.

Also, LNG would increase jobs in the shipbuilding industry, because naturally you have to ship those products to every other market. It means that our shipbuilding industry will benefit as well; there would be tons of skilled trades jobs at those deep port facilities.

Let's talk about electricity, quickly. If we're going to be serious about electricity transmission in an east-west fashion, the line infrastructure associated with this move will provide work for thousands of workers. However, we have to be cautious. Does it make economic sense to generate electricity in remote locations and then transmit it long distances to where people live? What does make sense is for Quebec and Ontario to be able to produce electricity and sell it to one another. It also makes sense for Ontario electricity producers to be able to access the east coast without having to sell through New York State to get to other provinces in eastern Canada.

Should hydro energy produced in northern Manitoba or Labrador flow south to the U.S. market if there's demand in Ontario? Let's figure out a way to connect the grids for Ontario. There's a real need to have a plan in place for electricity generation.

I'll talk a little bit about west-east oil.

TransCanada Pipeline's “Energy East” pipeline makes enormous sense to us. It connects jobs between Alberta and New Brunswick. If the refineries in Ontario, Quebec, and New Brunswick want to buy the product that Alberta has to offer, which I'm sure they will—you talked about the discount—that will certainly benefit job prospects in New Brunswick, where skilled trades work has been flat for a long time. Whether it be an Energy East pipeline or a Line 9 reversal, it means jobs at either end. It also means jobs every 75 kilometres along the pipelines for pumping stations, maintenance, etc.

East-west pipelines may mean that Quebec refineries will be busy again. Maybe the old Petro-Canada facilities in Oakville and Clarkson will be busy again. Those are all good news stories for local constituencies and local workers.

I made a presentation previously on pipelines and the job prospects specific to them, so I would refer the committee to the numbers I talked about for those; I won't repeat them. What I do want to say before I finish is something I presented before: that developing some of these natural resource projects could be a show stopper. I think Canada can get it right, but we need to get the people thing right. To be an energy superpower, we have to be a labour force and training powerhouse.

I think there is $600 billion or $700 billion in the Major Projects Management Office, at the same time as there is a large demographic shift in our population. I took a look at our national membership data, and the “most frequent age”—my wife, who is an accountant, tells me that's the mode, and thinking back to my statistics course.... The most frequent age in our national membership is 52. What does that mean for projects that are planned for six years into the future, or for projects that are planned for 10 years into the future, or 15 years? We have to make sure we get the training and the labour force supply thing right if we are to be able to supply the people for these projects.

I've talked to the HUMA committee about some things that I think link back to things you're talking about here: there are inefficiencies in our training systems; there are negative perceptions about a career in the skilled trades, and I think we've all come across that; and there are employers who won't hire young people to get into an apprenticeship. Many young Canadians come to us on a regular basis who, after a post-secondary education, don't have any incremental attachment to the labour market. These people need to be directed to the skilled trades before they go into post-secondary education. There are issues with community colleges, but I won't go into those.

At the end of the day, to be an energy powerhouse and to do some of the market expansion stuff we're talking about today, we have to get the people thing right. The budget in March was a good start. It talked about encouraging new people into the skilled trades with the Canada job grant, revamping the LMDA and the LMA funding so that there is more federal control, and aligning training to jobs that are available.

My wife told me not to say this, but has anyone seen Field of Dreams, starring Kevin Costner? There is a saying from that movie: “If you build it, they will come.” My submission is that if we don't get the people thing right in the energy sector to build these natural resource projects, they won't come. Canada has a real opportunity ahead of us over the next number of years to succeed, and we need to get the people thing right.

Thanks very much.

[The Chair, Conservative, Leon Benoit]

Thank you for your presentation, Mr. Smillie.

We will go now to Calgary. By video conference we have, from the Fraser Institute, Kenneth Green, senior director, energy and natural resources.

Go ahead, please, sir, with your presentation.

[Dr. Kenneth Green, Senior Director, Energy and Natural Resources Studies, Fraser Institute]

Mr. Chairman, members of the committee, thank you for having me here today.

I am Dr. Kenneth Green, senior director of energy and natural resources at the Fraser Institute, which is a non-profit, non-partisan public policy research institution headquartered in Vancouver. I am working out of the Calgary office here in Alberta.

The views I'm going to present are my own. They don't represent those of any other people or those of the institute itself.

I've studied energy and environmental policy at think tanks in North America for about 20 years now, and if there is one overarching conclusion I've reached, it's that we are, in the literal sense of the words, an energy civilization or energy society.

Producing, consuming, and trading in energy commodities literally empowers us as individuals, as communities, and as a society. It's our access to abundant and affordable energy that enables the high quality of life we enjoy. So getting energy policy right is of huge importance to the Canadian people.

Recently, I co-authored a study with Fraser Institute senior fellow Dr. Gerry Angevine, looking at the question of Canada’s status as an energy superpower. Our conclusion was that rather than a superpower, Canada is poised to become an energy superproducer. My testimony draws heavily from that study.

Energy commodity production has a very large impact on Canada’s gross domestic product and employment. Oil and gas extraction contributed approximately $94 billion to GDP in 2011. Natural gas extraction alone, including drilling and support services, contributed $10 billion to labour income and $64 billion to GDP in 2008.

When you look at total employment in the sector, including direct and indirect employment, the energy sector as a whole accounts for approximately 663,000 jobs, or almost 4% of total Canadian payroll as of 2012.

Canada’s oil and gas producers contribute considerable amounts of revenue to government coffers. They contribute between $17 billion and $20 billion to the provincial and territorial governments every year in the form of royalties, land-lease payments, and licences.

But we can do more.

Among the world’s top ten crude oil producers, Canada ranks sixth, behind Russia, Saudi Arabia, the United States, China, and Iran. But that oil production is poised to increase substantially as a result of investments in facilities for the oil sands and to produce crude oil from shale formations.

The most recent long-term projection by the National Energy Board suggests that Canadian oil production could reach 4.5 million barrels per day by 2020 compared with three million barrels per day in 2010, which is an increase of 50%. Growth in the production of oil sands bitumen alone could contribute $50 billion per year in royalties by 2033 compared with $4.5 billion in 2011.

Canada is the fourth-largest producer of natural gas in the world, but it could increase that considerably. There are, as previously mentioned, projects under way in British Columbia pending approvals that could lead to a significant increase in natural gas exports.

We already sell considerable amounts of electricity in the United States, but our study found that we could double hydroelectric capacity in the future and sell basically twice as much as we do now. Virtually all of this, of course, goes to the U.S. market, which brings us to the importance of market diversification.

In the background information sent to me by the committee, there are several questions regarding market diversification. I will turn to a few of those with my remaining time.

What are the key drivers of energy market diversification? Why are Canadian energy producers looking to diversify their markets?

Well, the biggest driver of the need for diversification in marketing Canada’s energy products are the changes under way in the United States, where a combination of forces are quickly eroding America’s need to import Canadian oil and gas. According to the U.S. Energy Information Administration, America’s shale gas revolution has positioned the country to be self-sufficient in natural gas by 2020.

New methods of producing oil are also causing a renaissance in oil production in the United States, where there are predictions that the U.S. will overtake Saudi Arabia as the world’s largest oil producer by 2020. The IEA predicts U.S. self-sufficiency in oil by 2035.

In essence, the U.S. need to purchase Canadian oil and gas is on a rapidly diminishing trajectory. At the same time, Canada is poised to increase its capacity to produce oil and natural gas to a much greater extent than projected growth in domestic demand for those commodities would satisfy.

Canada has to realize the value inherent in its energy resources. Pathways have to be developed that will allow oil, natural gas, uranium, and other energy products to reach hungry and growing energy markets overseas, especially in Asia, but also in parts of Europe and elsewhere in the world.

Another question that was asked is what are the key advantages and risks involved in diversifying Canada's energy markets? Well, the advantages are sort of obvious. Having access to a number of new markets and growing markets that can replace the U.S. oil and gas import requirements would let us preserve the benefits we get from selling those products in the face of U.S. reduced demand. It would also make Canada less vulnerable to specific developments in the U.S. with regard to energy production or consumption, economic contraction, or political issues, because it would gain us access to countries that aren't influenced necessarily by what happens in the United States.

The risks involved in diversification strike me as being relatively limited. There are, of course, always risks involved in moving oil and gas, and we would have to pay careful attention to safety considerations when we talk about how we move natural gas and oil to tidewater. But again, these are very old technologies, well-understood technologies, and there's no reason to think we can't add pipeline capacity safely to move those goods to markets.

What are the key barriers to diversification of Canada's energy markets? Primarily it's opposition by environmental activists and first nations peoples to the construction of pipelines to transport oil from Alberta, Saskatchewan, and the Northwest Territories to refineries and coastal port facilities on Canada's east and west coasts.

Not only are environmental activists opposing the construction of new infrastructure such as Keystone XL, they are, in the words of Keith Stewart, the climate and energy campaign coordinator for Greenpeace Canada, who I was on television with a couple of weeks ago, increasingly gearing up to oppose the retasking, rerouting, or expansion of existing infrastructure in Canada that might in any way facilitate the movement of Canadian oil sands bitumen to any markets at all.

Their goal, as is the goal of Bill McKibben of 350.org—one of the most influential climate advocacy groups—and former NASA scientist James Hansen, is to keep Canada's bitumen in the ground.

Another major barrier to energy product development and diversification in recent years has been a cumbersome, duplicative, time-consuming, and costly regulatory approval process. The actions the federal government have taken to speed that process up have helped, but more can be done—for example, preventing the abuse of hearings we've seen in the situation such as the Northern Gateway project application.

Finally, what role can the federal government play in maximizing advantages and minimizing risks in Canada's energy market diversification? There are various actions the federal government could take to facilitate diversification.

As I've mentioned, they can and should continue streamlining permitting for infrastructure development. They can strengthen trade agreements and open new markets with other countries for Canada's energy products. They could help via immigration policy, as was previously mentioned, that ensures Canadian energy product developers have access to skilled labour and a trained labour pool. And they can continue to work to resolve the issues involving first nations land claims and legitimate environmental concerns.

Finally, they could help to ensure opportunities for investment in capital-intensive energy products are competitive with similar opportunities in other countries by ensuring Canadian cost allowances and fiscal terms are competitive.

Thanks for inviting me to testify today. I look forward to your questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Green, from the Fraser Institute.

If Mr. Heaps from Corporate Knights Inc. arrives, we'll halt proceedings and hear from him. Until then, we'll go on with the questions and comments.

In the seven-minute round we have Mr. Leef, followed by Mr. Julian and then Mr. Garneau.

Go ahead, please, Mr. Leef, for up to seven minutes.

[Ryan Leef, Conservative, Yukon, YT]

Thank you, Mr. Chair.

And thank you to both our witnesses present and the one appearing on video conference.

Mr. Green, my first question will be for you. You started touching on the vein I wanted to go down, right toward the end of your comments. You talked about the need to find these emerging markets, and some of the risks and risk management.

It has certainly been said before that there's always a cost to doing something, but there's also a cost to doing nothing. From your perspective, could you give us some comments on where we would be, or what is the cost if we did nothing, in terms of the trajectory we would follow? I see these numbers from 2012 to 2035, that there's going to be exponential growth, both in LNG and oil demand, and that's GDP contributions.

If we just stall out now and don't keep up with the pace in what was described in our last committee as a bit of an energy race...what will the cost mean in real terms to Canadians if we do nothing?

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Green.

[Dr. Kenneth Green]

If we do nothing, essentially we strand the resource. We lose the profits, the revenues, the byproducts, and the labour that are all associated with that activity. As we lose that economic activity in the country, our GDP, of course, moves backwards. When you're talking about something that contributes 4% or more to GDP—I think it's actually closer to 7% or 8%. If your growth slows by 2% or 3%, you're in a recession. If it slows more than that, you're in a depression.

The consequences are very severe if we choose not to do anything, and those are only the direct consequences of not being able to sell our product. The indirect consequences are that we're less attractive as a place for manufacturing. If we don't produce at higher levels, we also don't have the energy at the prices that perhaps the United States is going to have for natural gas, which makes us less competitive against our competitors and trading partners. There are competitiveness elements as well.

Then there's a global perspective. There's a moral perspective, in my opinion. There are two billion people in the world who live in energy poverty. They have virtually no access whatsoever to energy. Canada plays a positive role in world trade and it can play a positive role in world energy trade. I think there's a moral obligation to do that. So we would have moral losses as well as economic.

[Ryan Leef, Conservative, Yukon, YT]

We've heard in testimony that only a couple of projects are going to be approved as we move forward on specific pipeline projects, as an example, because they're long-term contracts signed with the producer and the consumer, due to the cost of infrastructure.

If we were to leave the bitumen in the ground.... As you noted in your testimony, there would be some extreme positions on this that would want to see the bitumen remain in the ground. There's no doubt that we hear some extreme positions where I'm from in the Yukon, in that they'd like to see the LNG remain in the ground. Would we ever catch up if at any point that were to win the day? Could you ever not do it and then...? How difficult would it be to catch up if you decided at a point that it was a mistake?

[The Chair, Conservative, Leon Benoit]

Mr. Green, go ahead.

[Dr. Kenneth Green]

Well, if we let the infrastructure wither, if we let the labour pool wither and be exported.... The labour is going to go where the jobs are, so the people who are skilled in the production of energy will move. If we let ourselves get far enough behind, ramping back up to try to compete is certainly going to take time. We'll be behind the diamond, and it will be more challenging to get back in production.

Perhaps this is just my innate optimism, but I can't really believe that people are going to...[Technical difficulty—Editor].

Sorry about that. I don't know what that was about.

At any rate, perhaps it's my optimism, but I believe that Canadians are going to be smart enough to realize the value of their energy resources and what it means to their lives, and it will be produced eventually.

[Ryan Leef, Conservative, Yukon, YT]

Do I still have some time, Mr. Chair?

[The Chair, Conservative, Leon Benoit]

You have two and a half minutes.

[Ryan Leef, Conservative, Yukon, YT]

Mr. Burt, maybe I can get your perspective on how important diversification is to smaller markets. You mentioned getting product to tidewater, and of course in the territory a lot of the tidewater accessible to us by road is into Alaska. Do you have any experience of or any input on what kind of relationship we have and what kind of work or what kinds of cross-benefits exist when we're moving through U.S. destinations and not just to U.S. destinations with product?

[Michael Burt]

There's the potential for that even with the Keystone XL, because it will be taking the product all the way to the Gulf of Mexico. We could potentially get it on ships at that point. If we can get it to ports in the U.S., whether it's through Alaska or through Texas.... There's even been talk about one of the pipelines that currently runs from Maine to the refineries in Montreal being reversed if we start shipping oil sands oil from western Canada to eastern Canada. It's possible, and it will allow us to have that benefit of access to foreign markets.

Obviously, some of the benefits, in terms of the jobs that go with pipelines, would occur in the United States rather than in Canada—for example, the pumping stations and these sorts of things—but we would certainly benefit in terms of some of the other risks we've been talking about, such as the difference in prices and the political risk that comes from having only one buyer for our product.

[Ryan Leef, Conservative, Yukon, YT]

That diversification would help offset certain costs in terms of development as well?

[Michael Burt]

From our perspective, if the projects that are on the books are to proceed, we need to have the capacity to move it to market somehow. It's almost as though that transport capacity is a requirement for those developments to take place. So essentially the costs of those developments will be offset; the cost of the pipeline developments will be offset by the development of the actual energy products here in Canada.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Leef.

We'll now halt the questioning.

Mr. Heaps, are you ready to make your presentation?

[Toby Heaps, Chief Executive Officer and Co-Founder, Corporate Knights Inc.]

Yes, Mr. Chair.

[The Chair, Conservative, Leon Benoit]

Okay. Go ahead with your presentation please.

This is Toby Heaps, chief executive officer and co-founder of Corporate Knights Incorporated.

Go ahead for up to seven minutes, please.

[Toby Heaps]

Thank you, Mr. Chairman. I would like to apologize to the members for being a little late. I was ushered to the third floor, to another committee room, and halfway through my presentation we figured out it was the wrong one.

I head up a group called Corporate Knights. We have a media investment and advocacy wing. The advocacy wing is called the Council for Clean Capitalism, and its comprised of the CEOs of nine major Canadian corporations, including Interface, Mountain Equipment Co-op, Teck Resources, SunLife Financial, TELUS, Vancity, and Catalyst Paper.

Together our members employ over 200,000 people, generate $50 billion of revenue, and control over half a trillion dollars of assets under management.

Today I'm going to talk about market diversification in the context of our abundant energy resources, a topic that lands square in the middle of our country's biggest economic opportunity of the century.

I'd like to start by considering what would happen if a Martian were to look down on our great continent today. What would he see? He would see a land rich in oil and gas bounty, and even richer, especially in the north, in fast-flowing water and fast-flowing wind. He would see that the north part of North America, Canada, has most of the clean and fossil energy potential on the continent, and the south part of North America, the U.S., consumes 90% of the energy, which makes sense because their economy and population is about 10 times larger than Canada's. If he examined trade patterns, he would see most of the energy flows north to south, and that while Canada provides the U.S. with 28% of its oil needs, it only provides 1% of its electricity needs.

If he looked at our national accounts, he might be perplexed to see how we could be running provincial and federal deficits in the middle of harvesting the fruits of an asset that took a billion years to forge.

If he looked at greenhouse gas emissions, he would note that the epicentre of Canada's burgeoning fossil fuel extraction, the oil sands, is responsible for about 50 million tonnes of annual greenhouse gas emissions, or about one-twentieth of the two billion tonnes that the U.S. coal-fired electricity plants belch out each year. And yet if he were to read the newspapers, he would note the energy conversation between business, government, and civil society is near monopolized by the narrow question of pipeline or no pipeline, how much Canada's economy needs more oil pipelines and how bad this is or will be for the environment. It's the old jobs versus the environment debate. It's bad for the environment because the pipeline will abet carbon-intensive oil sands. They will require loads of natural gas to steam out the oil, even though tapping a tiny fraction of the 11,000 megawatts of hydro potential lying fallow in northern Alberta would make the in situ oil sands close to a zero carbon operation.

At this point, the Martian might start wondering, given that Canada has economic clean electricity assets that far exceed their fossil fuel assets, why are the Canadians selling the Americans 28 times more of the oil needs than electricity needs? And why are the Canadians spending so much effort trying to sell the Americans their dirty oil and so little trying to sell their clean electricity? The main part of the answer to the first question is that we have a lot more pipelines than we do power lines. Most of our best clean electricity assets are stranded away from their potential customers. As far as I can see, there's no good answer to the second question beyond inertia, although one might note that the Canadian Hydropower Association seems to have about one employee for every 20 at the Canadian Association of Petroleum Producers.

The bigger issue is that the natural energy question is being tackled in an adversarial clean versus dirty energy kind of way. That is most unfortunate for both the environment and our energy-driven economy. What if we consider how clean and dirty, or conventional, if you prefer, energy can go together in a way where the sum is much greater than the parts? For example, imagine if Canada's oil sands were powered by hydropower, green power, by the high voltage backbone vision for Alberta that the ATCO group is calling for. Instead of being among the dirtiest, it would be among the cleanest forms of oil in the world, almost green from an extraction perspective.

Imagine if instead of fighting for pipeline corridors we were putting forward energy corridors, co-locating pipelines and superconductor electricity power lines that can fit in the same existing right of way. This is an idea that the Electric Power Research Institute, EPRI, has commended for investigation. There's no economic reason, and there's no engineering reason, why we could not be exporting clean and conventional energy to the Americans supported by these co-located corridors, which would double—this is important—our overall energy exports, including electricity and hydrocarbon, and cut in half U.S. greenhouse gas emissions from coal plants. It would be pretty hard to oppose this on environmental grounds or economic grounds.

We also happen to have companies with prowess in power lines and pipelines, from Enbridge and TransCanada to Brookfield, as well as large investors with an appetite for big infrastructure plays, from CPPIB, to OMERS, to BCIMC and La Caisse.

A wise Canadian energy strategy is one place where oil, water, and wind mix quite well. Instead, we put most of our eggs in the basket of natural gas-fired oil sands. The world has changed a lot since we made that bet. Thousands of people are circling the White House protesting against us, and indigenous groups are digging in their heels delaying pipelines. The U.S. has found out that it may not need as much of our oil as they thought, with massive discoveries aided by the new tight oil technology. In fact, by 2020, the International Energy Agency estimates that the U.S. will be a net oil exporter. Make no mistake, there is still a lot of prosperity to squeeze from the oil sands and our American customers, but it's not going to be as easy, or as prosperous, or as juicy as we thought.

Staring us in the face at this moment is a major economic opportunity to double energy exports by joining up at the hip our clean and conventional export strategy. What is stopping us from building these energy corridors and co-locating pipelines and power lines? One part is that we don't currently have a national answer to the engineering question—not the political question, the engineering question—of how much clean electricity we actually have in this country.

Assuming an optimally designed electricity grid, what would our electricity export potential to the U.S. be on a province-by-province basis? A public clean energy superpower map undertaken by the National Energy Board, delineating Canada's wind, solar, tidal, pump storage—crucially pump storage—and geothermal potential, would help delineate where to plan national interest electricity grid corridors and would be catalytic for the private sector to enter into this fray.

We also have to overcome the idea of electricity exports being some kind of zero-sum game between provinces. It's not. If we recognize the magnitude of the opportunity that exists, we will reframe the nature of the barriers. The convening power and leadership of the federal government could go a long way to helping Canadian provinces see how little our current slice of the U.S. electricity market is and the potential for an electricity export pie that is ten times bigger—ten times bigger—than today.

Instead of fighting over crumbs, a pan-Canadian, east-west, north-south grid co-located with pipeline energy corridors with multiple north-south shoots is a means to enhancing access to U.S. electricity markets, not a limiting factor.

The 21st-century energy corridors will require transcending historical cleavages and reframing the notion of an east-west grid in the context of a pan-Canadian enabler to supply the vast U.S. electricity market. The convening power and leadership from the federal government will be essential in this regard.

Other issues include an abundance of red tape and the high cost of capital. Both of these issues have held up the expansion of power lines. However, the lemonade from the lemon of recent changes to federal environmental regulations is that there is now much less red tape standing in the way of building major infrastructure projects. But there's still much to do. I would recommend that the committee take note of the German electricity network development plan, the U.S. Energy Policy Act of 2005, which has a provision to invoke national interest electric transmission corridors, and the Canadian Electricity Association's recommendations to plug the infrastructure gap by removing interjurisdictional trade barriers to electricity, removing regulatory impediments to much-needed electric infrastructure investments, and enhancing the efficiency of permitting procedures for international power line projects.

This should be a major focus of our foreign policy. On the capital side, the current Prime Minister has made a substantial contribution already by providing loan guarantees to Newfoundland's government to support the construction of a $6.2 billion lower Churchill hydroelectric project and underwater power cable to Nova Scotia, which is a gateway to U.S markets. This loan guarantee will save Newfoundland $1 billion in borrowing cost. The Prime Minister said that similar financial support will be considered for projects that meet three criteria: be of national or regional importance, have economic and financial merit, and significantly reduce greenhouse gas emissions.

A fourth criterion I would like to suggest could be to link these guarantees to the availability and to the implementation of national interest electricity corridors. This would be a tempting carrot to bring provinces on side. As well, repeating this pledge with explicit comment that the federal loan guarantee would also be open to private sector transmission projects would help galvanize private sector interest.

A map to inspire transmission runway, cleared of red tape, and a little credit enhancement would help us marry up clear and conventional energy and deliver the prize of economic prosperity for generations to come.

Thank you kindly.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Heaps, from Corporate Knights Inc.

We continue the seven-minute round of questioning with Mr. Julian.

Go ahead, please.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you very much, Mr. Chair.

Welcome, Mr. Heaps, Mr. Smillie, and Mr. Burt.

Picking up where Mr. Heaps left off, I know that each of your organizations has a keen interest in green energy sources. Building trades in my province talk often about that international potential of a $1 trillion market now that is going to a $3 trillion market over the next decade. I note with interest that the Conference Board of Canada, back in 2008, talked about instruments to reduce greenhouse gas emissions—just reading quickly from the abstract:

Green taxes and green investment tax credits are needed if Canadian firms are to accelerate their technological adaptation to a carbon-priced world. As a complement to green taxes, a cap and trade system should be implemented, combining regulation with market forces via emissions trading.

All three organizations have a keen interest in green energy.

I want to go back to you, Mr. Burt, and to you, Mr. Smillie. Could you talk about the potential around green energy, renewable energy, and a bit about a national energy strategy that takes into consideration that key issue of sustainability?