Natural Resources Committee on April 30th, 2013

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you, Mr. Chair, and thank you to our witnesses for being here.

We did get at least a little bit of an agreement on the usefulness of a pipeline going west to east, and the refining capacity in Atlantic Canada, particularly Irving and Montreal, and the displacement of offshore oil that's being brought in there.

My question is for Mr. McGowan and Mr. Mintz. Do you both believe that this so-called spread would actually...? I guess the higher-cost oil we're currently getting in Atlantic Canada would be offset as we start to gravitate toward world prices. Is it just as much an issue of security of supply, as it would be of price, for Atlantic Canadians? I ask because I'm not convinced that Atlantic Canadians would see lower prices in the long term.

[The Chair, Conservative, Leon Benoit]

Mr. Mintz.

[Gil McGowan]

Who would you like to take a crack at this first?

[Dr. Jack Mintz]

You can get started.

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. McGowan.

[Gil McGowan]

I think you're right that we can't presume that the spread between Brent prices and WTI will remain. If you look at the last 20 years, it's only relatively recently that they've diverged. In fact, they've been converging again, so there's no guarantee that there'll be a big price savings for consumers in eastern Canada. Having said that, I think it's still worth doing because of Canadian energy security issues, and also for Canadian-based job creation.

The one thing I would add is that both the refinery in Montreal and in New Brunswick are cracking refineries, so from the Alberta Federation of Labour's perspective, we'd still like to send synthetic crude down the pipes eastward, as opposed to raw bitumen. That would have the added benefit of requiring less pipeline space, because in order to ship bitumen you have to dilute it with 30% diluent, which we're increasingly having to import from Saudi Arabia and other world markets. By focusing on raw exports we're in this perverse situation of becoming more dependent on imports of condensate from places like Saudi Arabia.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Mr. Mintz.

[Dr. Jack Mintz]

I would agree on the Atlantic thing. The consumers may not get that much of a break once you end up.... That's not the way pricing operates anyway. Pricing operates based on import prices coming in, and the retail price is set by the import price. You will get a squeezing of that, once we get more of this pipeline capacity being built in the United States itself. I think the Brent price and the WTI prices are going to converge. The last time I looked they were only $10 apart instead of $20, so there's been quite a convergence even in the past couple of months.

The other part of it is that maybe Mr. McGowan would like to have even more jobs in Alberta. I would like, from an economics point of view, to place jobs according to where the greatest value-added is created in the country. The thing about existing refineries is that they can actually do upgrading more cheaply than those that are being built anew.

That's why no investor was willing to take on something like the North West upgrader unless they got a guarantee for market risk. They know that those margins are going to get squeezed on the refining side because the heavy oil price is going to go up and those margins are going to get squeezed as a result. It would be great if Quebec refineries could make some money and create some jobs in Quebec. I think that would be good for the Canadian economy. I think that's exactly the way the market should operate.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you.

Mr. Willis, I want to bring you in here.

One of the things the chamber has talked about is the appropriate levers on the west to east pipeline, and that the federal government should facilitate that pipeline. What are some of the key things you see as the federal government's role in that, other than on the regulatory side?

[Scott Willis]

I think there's certainly a regulatory role, but I believe there's also a role to act as convenor. The case has been made that regardless of what we're exporting, it is in Canada's national interest to export to more than only one country. If there's a role for the federal government to act as convenor, that could be through a regulatory process; it could be by banging heads together. I'm not sure what the most appropriate form would be.

I've certainly seen and appreciated some of the public service announcements that have come through the EcoAction program. As far as raising awareness, I think that CAPP and CEP are doing a pretty good job of trying to educate Canadians about the importance of the oil and gas sector, bringing things to their attention that they may not realize.

We represent Canadians from coast, to coast, to coast. I think we can all agree that provinces tend to act in their provincial interests and don't always consider what would be in the national interest. It would be nice to be able to point to things that we do because we're Canada, not because we're from Alberta, Ontario, or Quebec.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Allen.

We go now to Mr. Nicholls for up to five minutes.

Go ahead, please.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Thank you, Mr. Chair, and thank you, Mr. McGowan.

In terms of the social licence, people in my riding would rather see synthetic crude going through the 9B pipeline than dilbit. So I thank you for your comments on that.

Dr. Mintz, you've said publicly before that Norway is the poster child for good governance, and we certainly agree over here. The Arbeiderpartiet is a labour party like the NDP. It's a social democratic government and has ruled for a long time in Norway, so we can learn a lot from Norway.

Norway was the third largest exporter of energy, and coupled with these massive exports of energy it has a climate policy that's quite interesting. When they implemented this climate policy, they tripled the funding for R and D through a government agency.

So my questions are actually for Mr. Wiborg about the sovereign wealth fund. Am I correct to understand that the sovereign wealth fund is the world's largest wealth generating fund? Is this correct?

[Rolf Wiborg]

No, not really. It's getting there fairly quickly, but I think we're number three at the moment, if you go and look at some of them.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

How much is in that fund presently?

[Rolf Wiborg]

More than 4,000 billion kroner.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Wow! What does that translate to in Canadian dollars?

[Rolf Wiborg]

Oh, it would be a little less than $1,000 billion Canadian.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Wow, as opposed to the $16 billion that the Alberta heritage fund has accumulated over a similar time. Don't you agree, Mr. Wiborg, that if Norway frittered away the wealth as Canada has with its natural resources, Norwegians would be up in arms with their government about giving their wealth away to foreign nations? Wouldn't Norwegians be angry?

[Rolf Wiborg]

Norwegians wouldn't allow any type of resource production if we didn't have the tough conditions we have. Actually, we have gone around the world teaching other nations to do the same. If you go to China, you will need to have the same type of policy as an Exxon or a Shell have. The same type of policies that Norway created in the seventies are run by the Chinese if you come in as a foreign company. That's because Statoil went to Beijing in 1976 and told them how to do it. The Russians are doing the same. Of course, they're doing it the Putin way right now.

[Some hon. members]

Oh, oh!

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

I can tell you that a social democratic government in Canada would take the lessons seriously that Norway has to offer and would protect our natural resources from foreign encroachment.

I'd like you to touch upon Enova's role in innovation in Norway. This is the agency that Norway created in 2001 to deal with the climate policy. Could you tell us a bit about Enova.

[The Chair, Conservative, Leon Benoit]

Mr. Nicholls, could you keep your questions on the topic we're here to discuss, which is diversification of markets. Just connect them somehow—you can do that, I'm sure. Go ahead.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

I've asked the question about Enova, which, I believe, drives innovation and probably diversification in the energy sector, looking for a path forward for Norway to deal with climate targets.

[Rolf Wiborg]

It's one of the many creations, but the most important one is actually part of the 10 oil commandments: thou shall not produce oil and pollute and ruin the nation and the world for future generations.

We have a CO2 policy and a CO2 tax that applies to all offshore production, because we only have production offshore. That tax goes towards some of the things you are alluding to, but there are a lot of other things too. This is part of former Premier Gro Harlem Brundtland's legacy, if some of you remember the Rio de Janeiro declaration—and that's sustainable development.

However, by producing oil and gas we are increasing somewhat our pollution in Norway. But we are exporting our gas to Europe and they are reducing their use of coal, which is a lot more efficient. So we still develop gas fields right now at a questionable return to the nation to participate in the European effort to reduce pollution. That means our fishing lakes in the mountains now have trout again. That used to be impossible up there, because they got all the coal, all the CO2, all the SO2 from Europe.

So I think most Norwegians are pretty happy about playing that role, and at the same time as oil and gas prices have been increasing, as they normally have, albeit not always, we have also been making some money from being the good guy. Canadians can do the same.

[The Chair, Conservative, Leon Benoit]

Thank you, and thank you, Mr. Nichols.