Natural Resources Committee on May 2nd, 2013

[Grand Chief Edward John]

For sure. These are budget implementation bills that contain numerous amendments to legislation that, from the perception of our communities and our peoples, have really undermined the environmental safeguards that we thought were in there. The net result is that the water we rely on, the fish that our communities rely on, and the game that our people rely on are at a significantly higher risk of jeopardy.

I'll give you a very good example. Maybe it's not directly related to this, but look at the Gitga'at people and the sinking of the Queen of the North near Hartley Bay. That Queen of the North is leaking fuel, and no one has done anything about it. It's within the area where the Gitga'at people continually rely on sea resources. If someone was able to demonstrate that they really are talking about marine safety, and if they're able to take measures to stop the flow of fuel into the marine environment, then maybe you'd make some believers out of the communities on the coast.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

You've also mentioned other projects that represent an unacceptable risk to your communities and to our rivers and forests and you ask for investments that are truly sustainable. Let's move the conversation to park diversification.

Can you talk about the kinds of projects that you would expect the government to support?

[Grand Chief Edward John]

It's not particularly projects, but the manner in which projects proceed and are reviewed. We've constantly said that we need to ensure that our communities are involved in environmental assessments. We need to know what the environmental standards are. We need to know how these standards are being applied in every project. We need to know under what standards these projects are being reviewed. Right now, those standards have been minimized. We step up to the front and say that we have a responsibility to our generation. Not only that but we have a responsibility to future generations.

I hear there are shale gas opportunities in the northern part of British Columbia and Alberta. It's estimated to be 100 years' worth of shale gas. That's three generations. What about four or five generations? What happens with those descendants of ours who have to make a living down the road? How do we ensure that we have some protections for them? When all of the resources are gone, what happens? How fast do we remove it and for whose benefit? What are the prices that are being generated? What is the price that goes back into the land? Who is putting money back into the land to ensure a healthy environment? As I said, water has an economic value. The food that we rely on has an economic value. Nobody measures that. Everything is about the cost of crude oil, bitumen, or natural gas. There's a lot of discussion that is important, but there's also what we, our people, rely on and how important it is to our communities. There has been that oil spill.

In British Columbia, first nations communities are opposed to, for example, the Northern Gateway, but the Union of B.C. Municipalities as well have passed resolutions opposing that particular project. In addition, some northern communities along the proposed pipeline route stand opposed to that particular project. The coastal communities and the first nations communities rely on the sea and the resources from the sea to feed their families and to provide for jobs and opportunities for them. The fishing industry is an important industry for them. What happens if you have a failed tanker?

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you. Well said.

I'd like to move on to my last question.

Mr. Rubin, you talk about the need for governments to help facilitate the transition with regard to the rising price of oil. Would you be favourable to the notion of putting a price on carbon?

[Jeff Rubin]

A price on carbon. I think a price on carbon is totally unnecessary. As I told Dr. Suzuki in our “travails” across the country, I'll take a global recession over a thousand Kyoto agreements.

You see, we're not going to emit, I don't think, half of the carbon that the IPCC says. All they're doing is extrapolating China's coal consumption, which is up around 3.5 billion tonnes a year, and just growing that at the same rate that it has grown in the last 10 years. But as you notice, China's not growing at the same rate that it was before, and neither is anybody else. What drives economic growth is oil and coal. They're the two major energy sources of the global economy. When the global economy doesn't grow, guess what: you don't combust as much oil and coal, and when you don't combust as much oil and coal, you don't emit. I think there would be an urgent need for carbon taxes if the global economy was continuing to grow at the rate that it has in the last 40 years.

But I've argued, particularly in my most recent book, that that's not the case. More importantly, if you look around the world, I think the evidence is overwhelming. I think the silver lining here.... The reason I went with David Suzuki is he's the only guy who thinks the end of growth is a bullish story. It's a bullish story only in the sense of its implications for our combustion of hydrocarbons, and the carbon trail that comes through that.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Liu. You're out of time.

We go now to Mr. Calkins, followed by Mr. Gravelle.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

I don't even know how to follow that up, Chair.

Mr. Rubin, I have a question for you.

You talked about rail earlier. I'm quite intrigued by this. The part of Alberta that I represent is very much an agricultural area, very much a forestry area as well. In the broader context of this committee, as a natural resources committee, of course if we're going to put pressure on rail to become the source of shipping for any oil or natural gas, I'm curious about your perspective as an economist. I'm hoping that you've had access to some information on this. If we're going to move from 1.5 million barrels of production up to where we think it's going to go, and we're not going to get the pipeline access that you say we need to get the price, the only way we can get to the tidewater will be rail.

Notwithstanding the various price things you've talked about, I'm worried about the pressure that will put on the other commodities Canada has, insofar as being able to compete with the oil and gas sector for the rail system in Canada. Do you have opinions, or any facts, that you could share with our committee on that?

[Jeff Rubin]

Well, I think what you want to look at very carefully is what's going on in North Dakota right now. They're producing 780,000 barrels, and a very small fraction of that has pipeline access. In fact, they're banking on the Keystone XL to pick up 100,000. I think that would be an interesting example to look at. They face the same issues as the tar sands producers do.

If rail can get Bakken shale oil from Williston to a refinery in Philadelphia, why can't rail get oil from Hardisty to the west coast? I think that de facto is what is going to be happening right now.

I point out that somehow pipelines, from the environmental movement, are not kosher and rail is. I'm not exactly sure I understand that. I think the reason is that very little has been moved by rail. I'm not sure that it will stay below the environmental radar screen if we start moving three or four million barrels a day in North America by rail.

But Blaine, I would seriously look at what they're doing in North Dakota. I point out that at that conference, people told me that it's the actual oil companies that buy all the rolling stock. It's not CP or CN. I think given the kind of pipeline bottlenecks that exist here, rail's going to be the de facto option.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Okay. That's much appreciated.

I also wanted to talk to you about the price differential. That's an issue that the province of Alberta is seized with. You've made your arguments here before us. We have the Brent price, the international price, and we have a North American continental price, and the separation between the two. If Canada can get a better access, do you actually see those prices coming to a merger, to the point where we actually wouldn't have a dual pricing system anymore? Will that ultimately happen, do you think?

[Jeff Rubin]

First of all, Blaine, I would take issue, because WTI is not the North American price.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

No, I'm just saying we have different prices.

[Jeff Rubin]

If we had access, if Keystone XL actually went ahead and there was a physical arbitrage to the Gulf of Mexico, we would expect that the price differential between WTI and Brent would dissipate, because once oil got down to the gulf coast, it would be Light Louisiana Sweet, which is Brent plus one dollar. So that differential would ultimately close, but you need to go that extra 450 miles from Cushing to the coast, and you need to be able to hook that up to Hardisty.

I'll point out that even if Keystone XL gets approved, we're talking 800,000 barrels plus or minus. You're going to need three Keystone XLs to hit the kind of production numbers that people are talking about in Alberta. Does that seem likely given what you've seen in the U.S. response to approving even one Keystone XL?

[Blaine Calkins, Conservative, Wetaskiwin, AB]

It depends on the administration, I would argue, but in this particular case it would probably take another election cycle.

The last question I have is in response to witnesses we had here previously. Some of these witnesses, the head of the Alberta Federation of Labour, and so on, insisted that the government should get involved in setting policy requirements regarding refining before export, and setting standards, for example, so that instead of just putting dilbit down the line, they would put some requirement in legislatively or through some other process, for a certain standard of product to go down the line.

Do you think that level of interference would be welcome in the marketplace?

[Jeff Rubin]

It's well intentioned, but I'm a market guy.

I think if crack spreads say to build a refinery, then build a refinery, but if crack spreads don't say to build a refinery, then don't build a refinery. As I said in my earlier testimony, if we were able to get anything close to Brent, I think all of this discussion about refineries would dissipate, because the refinery is a way of capturing Brent through the crack spread, in other words through the margin between Western Canadian Select and the gasoline or diesel that the refinery produces.

I'm a market guy. I believe that markets will decide. Prices are my religion. I think it's well intentioned. Let's capture the value added to the resource. I said let's capture the full value of the 1.5 million barrels before we start digging out three million barrels, but I think there are market ways of achieving that.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Fair enough.

[The Chair, Conservative, Leon Benoit]

We will go now to Monsieur Gravelle, for up to five minutes.

[Claude Gravelle, NDP, Nickel Belt, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for being here.

Chief John, a recent report, the Macdonald-Laurier report, offered two very different scenarios—one is positive and one is negative—on the direction the country will take on natural resources and aboriginal participation.

I have four first nations in my riding—Atikameksheng Anishnawbek, Wahnapitae First Nation, Nipissing First Nation at Garden Village, and Mattagami First Nation—and in all four cases unemployment is very low, because of the natural resources around them. The companies that operate there consult with them, and everything is going quite well.

Can you tell me more on the right way and the wrong way to negotiate with first nations?

[Grand Chief Edward John]

I'm not sure that there is a right way or a wrong way.

What's really important to understand is the underlying legal nature of the interests of first nations—in British Columbia, it's the issue of aboriginal rights, and aboriginal title in the northeastern part of British Columbia, Treaty 8—and to be respectful of the interests of those first nations. On the issue of shale gas development in northeast British Colombia, there are Treaty 8 tribes up there, and you should talk to them.

In terms of energy, Site C is a proposed project that theoretically would be the source of electricity for development of shale gas or other development for other energy. It's going to impact on people.

I think the simple saying that I've come to is that if you want to come into my house, knock on my door and ask to come in. Surely to goodness I will probably allow you into my house, but how long you stay, though, depends on how you act.

I think it's really important for industry to adopt an approach that's respectful, not condescending. There are many very good examples of where this has been the case. I would encourage that to continue.

There are some standards. First nations are going to say that we have to be mindful of generations down the road. We're mindful of the unemployment situation. We'll try to do what we can to take care of our interests now. Our people need jobs as much as anyone else. Our people need business opportunities as much as anyone else. Surely to goodness there's no reason that we can't take advantage of the resources in our own territories and develop those as well as anyone else who would come into it.

In some cases there are joint venture initiatives and equity participation. In some cases there are simply impact benefit agreements that are negotiated. Those are developing track records with first nations.

The set of standards I was referring to, the United Nations Declaration on the Rights of Indigenous Peoples, is an important set of standards. I wanted to refer to the UN Global Compact, where businesses around the world are taking the declaration and helping businesses incorporate human rights standards into their corporate policies in addition to the business policies or the business plans that they develop.

I think it's important that it's done and that we look at that in this case as well.

[Claude Gravelle, NDP, Nickel Belt, ON]

Thank you.

In some cases—in the Ring of Fire, and I'm sure in British Columbia with the pipelines—some companies will negotiate with the communities. There are lots of communities involved especially in the Ring of Fire. A company will negotiate an agreement with one community, and that community, as part of the agreement, is not allowed to tell other communities what the agreement is. They're pitting one community against another.

Do you think that's the right way to negotiate?

[Grand Chief Edward John]

Government does that to us all the time too, so it's nothing new. We find ways around it.

These confidentiality agreements that people insist on, sometimes maybe it's to the advantage of the first nations that they're negotiating, but in most cases these are private arrangements. If that first nation is willing to share that information with a neighbouring first nation, I think in most cases they would simply do that, but they're maybe violating the nature of an agreement that they signed with the company. I'm not sure that's an entirely good practice, but it's done routinely. I know in some instances what I've heard is that this one company will give a good deal to another community, but because this other community is smaller, less sophisticated in negotiations, they may not get as good a deal.

That's what happens, and it happens routinely. I don't think it's right, personally.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Gravelle.

We go now to Mr. Allen for five minutes, followed by Mr. Calkins, and then Mr. Bevington.

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

Thank you, Mr. Chair.

Grand Chief John, I'd like to ask you a couple questions.

I read through the briefing that you provided to us prior to the meeting. You talk about a first nations equity and capacity fund, and about the potential, over 10 years, of $650 billion of resource projects being developed and the significant benefits.

You brought up a minute ago the impact benefit agreements. One of your comments in here is, “Simply put, projects which have not reached agreements with First Nations are a greater investor risk—and many corporations recognize this fact.” You also say, “There are now some companies that share the profits and offer equity participation as part of their corporate practices.”

Can you talk about what some of those best practices are that those companies are employing to actually work through this with these first nations?

[Grand Chief Edward John]

Some are related to energy and some are related to mining, but nonetheless, engaging first nations is an important practice.

How do you engage first nations? How do first nations participate in the development of resources within their respective territories, whatever the nature? It might be fishery resources. It might be land development, for example, or other types of development in their respective traditional territories.

One of the biggest obstacles first nations routinely run into is getting access to capital in order to proceed with a project, and that's a difficult one. We have access to the resource under the legal nature of our rights. What we don't have access to is development of those resources. We've been suggesting that in addition to the funds raised earlier for ongoing training development, which is essential, that the government consider and perhaps set forth funds that could be used for supporting first nations that are involved in development of projects.

There's a small amount of funding under the National Aboriginal Economic Development Board that I'm aware of—I sat on that board for a while—but that fund is not very significant considering the magnitude of the projects that are potentially available right now. Whether it's potash development in Alberta or LNG on the west coast or forestry initiatives or fishery resource development on the west coast or on the east coast, access to capital is a really big problem for sure.

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

Continuing on that theme, we just wrapped up a study of resource development in the north. One of the things we were talking about is when it came to the infrastructure, many of the companies realized that they're going to be developing this resource and that one of the things they should be doing is, whether it be roads, rail, or whatever, they and not necessarily the government should be contributing to the infrastructure. In some cases the companies that are going to be the winners in some of this would be responsible for some of that infrastructure, some of that supporting investor capital.

I noticed under natural gas opportunities that in one case an agreement has occurred with some of the first nations and a pipeline company. Can you tell us how that transpired?

[Grand Chief Edward John]

That is a unique situation on the west coast, where a number of tribes along the corridor in northern British Columbia have work with an LNG proposal. It's been a constructive arrangement. It's working. I would think it might be important to take that specific example and look at it to see what's worked in regard to that particular proposal. There were a number of moving parts, one of which was training funds. The company, along with the federal government, was involved in providing some of the training resources to allow that to happen. As I was saying earlier, for the last year, that resource has not been available from the federal side, and there's been a lot of waiting and anxiety about whether or not that will continue down the road.

I'm going to give you an example. In the forest industry, which I'm particularly familiar with in British Columbia, in the 1970s and into the 1980s there was virtually a war in the woods. It was about jobs, trying to create jobs and to protect the environment where people made their livelihood. Over time, first nations have been accessing timber resources, and now they have their own sawmills and their own contracting companies in the communities, and people are working. There is dramatically less conflict now.

Lax Kw'alaams, for example, on the west coast, has an office in Beijing now and sells its wood products and lumber products and other products in China. As a result, I have been going to China for five or six years now talking to business people and state-owned enterprises and working on political development and constructive relationships. The chiefs in British Columbia have developed what they call the China strategy and have supported it and approved it in resolutions. We've been building on that. Recently we have been talking to the chiefs of Treaty 6, Treaty 7, and Treaty 8 first nations in Alberta regarding how we might bring our respective expertise and resources together for a greater impact for our peoples and our communities.