Evidence of meeting #81 for Natural Resources in the 41st Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was propane.
A recording is available from Parliament.
National Representative, Energy Quebec, Refinery of Suncor Energy of Montreal, Communications, Energy and Paperworkers Union of Canada-Quebec
Currently, they are supposed to ship as much as they can handle. The crude units are not all made in the same way. Ultramar can process some of the oil in its facilities. That being said, Valero is looking into possibly building some new units.
National Representative, Energy Quebec, Refinery of Suncor Energy of Montreal, Communications, Energy and Paperworkers Union of Canada-Quebec
Currently, projects are much less specific than they are at Suncor.
NDP
Denis Blanchette NDP Louis-Hébert, QC
Okay. Thank you.
Mr. Edwards, there is clearly some talk about reversing the flow of line number 9. I think that's important for future projects. You talked about “social licences” required for projects to be socially acceptable. In a way, Ms. Kenny talked about that at some point when she used the word “transparent”.
Can you tell me what the current obstacles are and how they could be removed, so that Canadians would find those projects acceptable?
Principal, Fairweather Hill, As an Individual
Perhaps I can speak in the context of the west-east pipeline and what it would face in New Brunswick.
There is already all-party support at the provincial level, provided that environmental and regulatory requirements are met. I think the public is obviously no less concerned about the environment on the east coast than it is elsewhere, but I think we're starting from a point where there is public sympathy toward the principle that provinces should be able to move their products across provincial boundaries without being unduly constrained.
That's not to say there wouldn't be opposition to a project. At the moment we don't have a route. If we're talking about a New Brunswick pipeline, we obviously have to look at the Saint John River watershed. We have first nations issues. We have marine issues. In the Bay of Fundy there are several commercial fisheries. There is the endangered North American right whale.
Clearly, I think any proponent that is coming into our region needs to get very close to the communities, all of the communities, early on, and deal with these local issues.
I would suggest that from the point of view of transparency, we tend to sell these things as being big job creators, that there's a marvellous set of opportunities and benefits coming our way. I think we would probably be well advised to talk up front about some of the risks, and in doing that explain what is proposed to mitigate those risks.
I think we need that kind of transparency at the very beginning. First, let's not raise expectations about benefits that perhaps won't accrue, but more importantly, let's address the other issues.
I think the west-east pipeline, the need to service Alberta's export requirements, is justification enough if there's a commercial case to be made for it. I just think there's a risk that we can oversell the benefits without dealing with the risks.
Conservative
Conservative
Blaine Calkins Conservative Wetaskiwin, AB
Thanks, Chair. I'll do the best I can. I hope my voice will hold out. I'm just going to ask my questions up front while I still can, and hope I'll use up the five minutes.
Mr. Facette, I have questions for you. First of all, I have a personal interest question. I have a lot of constituents who live off the natural gas grid and use propane and so on for the heating of their homes. I've never understood why propane, which comes from natural gas feedstock, whether it's ethane, methane, butane, whatever the case might be, is tied to the price of oil instead of to the price of natural gas. The price differential on those two creates a real issue for those consumers who rely on propane to heat their houses. When natural gas prices go down, those of us connected to natural gas see the benefit of that in our bill, but propane users don't. I'd like some clarification on that because I'm not sure I understand it.
The other question I have for you is about rail. You talked about a lack of cars, but as an Alberta MP I'm also concerned that if we use our rail system and increase the number of cars, whether it be for oil, natural gas, or propane, I can't send my farmers' wheat down a pipeline. I can't send my lumber companies' two-by-fours down a pipeline, but I can send all these other things from the oil and gas sector down a pipeline. I'm very concerned about that. I'd like to hear the concerns of your organization on that.
Brenda, way out back home in Alberta, could you just explain to us the importance of each of the pipeline areas for diversification. Whether it's east-west, Line 9, TransCanada's proposal, or Gateway and Kinder Morgan out to the west coast, or Keystone to the south, what does each of these actually mean as far as market diversification for Alberta or Canadian energy in general is concerned?
Thanks.
President and Chief Executive Officer, Canadian Propane Association
Thank you, Mr. Chair.
Two excellent questions. First off, you're right that the price of propane traditionally has tracked crude, up until three years ago. Right now the price of propane to the consumer is more akin to the price of natural gas. It's like anything else. If you want to go to your propane supplier and negotiate something a little bit different, I'd encourage you to do that. That's number one. And you can actually see it, at the gate: the price at the gate now is a whole lot less than it ever was.
As for rail cars, and being able to ship propane via pipeline versus other commodities, with our taking away from one and giving to the other—wheat or anything else for that matter—I would say this. If there's an opportunity to move propane or any natural gas liquid via pipeline, that would certainly be welcomed by the industry without any problem at all. The issue is whether or not we have the pipelines in place right now where we want to go, for example, to the Ring of Fire—which we do not. If someone is going to build them, that would be great.
It has already been said that a pipeline is the safest mode of transportation. We would wholeheartedly agree. If we can get more propane, more NGLs, to go via pipeline, that would be wonderful.
Thank you, Mr. Chair.
Conservative
The Chair Conservative Leon Benoit
Ms. Kenny, and your view on each of the pipelines and what they mean in the broad picture is...?
President and Chief Executive Officer, Canadian Energy Pipeline Association
Yes, there are a couple of different options going east, a couple of different options going west, from Alberta and, of course, south as well.
I think that what you're seeing is the fact that anyone with a commodity is best served by having a variety of folks they can sell to, whether the commodity is grain, potash, oil, apples, or maple syrup. It's the same thing; it's a positive market dynamic. It's also an ability to tap into various hubs that meet a variety of customer needs and opportunities in that fashion.
For context, the way I look at it, first of all, the issue of the value added or not added from a tube of steel a metre under the ground is really important in terms of those job choices, but not very important in terms of the infrastructure planning. You're still going to need to move energy and it will be more economical if you have that infrastructure in place. It gives you options and choices in changing service and direction, as we've seen in the Line 9 example over time.
Also in terms of scale, keep in mind that if Canada moves to produce to the level that it aspires to, we would essentially need as a country six Northern Gateways across the country, or in different directions, to meet that gradual increase in production over the next 20 years. So it's not an either-or proposition in these projects. It's not an either-or proposition in terms of destination, but certainly there are great opportunities in a variety of markets and the connection to the east has some wonderful direct implications in terms of existing refining interests and opportunities for consumers and jobs in the downstream. On a global refining basis—and Monsieur Cloutier would know this much better than I—these are very competitive undertakings, with high volume, large scale, and very stringent environmental demands. If we in Canada can provide alternatives for the feedstock to help them be even more competitive and more secure, that's good for Canadians.
Conservative
The Chair Conservative Leon Benoit
The next round is a Conservative round, if anyone would like to take that.
Mr. Anderson, go ahead.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
Thank you. Mr. Trost may have a question here as well.
I want to come back to propane. We haven't had you in before. Earlier you talked a little bit about some of the future tech highlights. You mentioned some plastic manufacturing, those kinds of things.
Can you talk about some of those things that are outside of the ideas we might have for propane use in the next 10 years or so?
President and Chief Executive Officer, Canadian Propane Association
I guess you went back to what I said about propane in terms of Williams, who recently announced their new PDH facility in the province of Alberta. The industry sees that, and I know for a fact—it's in print, so I can say this—that the Government of Alberta certainly sees that as a value-added opportunity for the province to go forward. In terms of how propane gets used in the manufacture of plastics, that's a very exciting one. Congratulations to the company for doing that, going forward.
I think in general, to go back to the mining thing, using more propane in the generation of power, getting away from the traditional thinking of shaft heating and heating of the camps, that's a volume-based opportunity, one where it's clean and green.
Then there is transportation, where you have an awful lot of pressure from fleet managers, be they government fleet managers or private sector fleet managers, to reduce their fuel costs, number one, and to run cleaner engines, cleaner vehicles.
We continue to go across the country and talk to people about this. When you can say that you get a return on your investment, depending on the size of your fleet.... When the City of Prince George tells our members at a conference that the return on their investment, switching to propane, is nine months—nine months—and the cost of installation of a propane fuelling facility is between $45,000 and $55,000—not in the millions, but in the thousands of dollars.... When you book all that in, those are pretty significant savings going forward.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
Okay.
I will go a bit different direction, and then I'll turn it over to Mr. Trost.
We've been reading a little bit about liquid natural gas and the challenge to the shipping industry to get the ships built here and manufactured, with a limited number of people building them.
I'm just wondering, do you face the same challenges they do in terms of export? Are you going to continue to rely on the pipelines going south? What are you thinking there?
President and Chief Executive Officer, Canadian Propane Association
Right now there is no propane shipped off of Canadian soil. It's done off of U.S. soil. There are ships that do transport propane into South America and into Asia, and I'm sure our members who are looking at shipping propane offshore are looking at that very issue of how they're going to do it, but it is currently being done.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
To the Canadian Energy Pipeline Association, we've had a little bit of discussion with other witnesses today, and at other committee hearings we've had, about the cost savings and the ability to put together electricity and pipelines because of engineering, site location, and various other things that would work together.
Have members in your association been active in those sorts of discussions around that with anyone in the electricity association, or is this something that really hasn't been looked at all that seriously?
President and Chief Executive Officer, Canadian Energy Pipeline Association
The use of corridors has been looked at many times, and continues to be. At this point, in terms of specifically electricity, we haven't been speaking directly with our counterparts at the association level, although I just met with Jim Burpee earlier this week on another matter.
Corridors are frequently used. For example, in Calgary right now ATCO gas pipelines is attempting to move its main trunk lines to affiliate with the rings designed for exactly that purpose. They can be very helpful, as one of the other witnesses described, in confirming an overall agreement in terms of land use and good front-end consultation that's not about one project but about an objective of public infrastructure—in our case using private capital, but nonetheless fundamentally about public interest.
Where you want to be careful is that sometimes trying to pre-guess all destinies in terms of infrastructure location can be challenging, and sometimes one single corridor is a good idea. Other times, actually utilizing a couple of different corridors for different purposes, or for different geotech interests, works a little bit better.
So there's great value in it. We've been active in policy conversations about that in the past, and look forward to continuing to see innovative ideas come forward.
Conservative
The Chair Conservative Leon Benoit
Thank you, Mr. Trost.
Mr. Nicholls, we'll close the meeting off with you.
NDP
Jamie Nicholls NDP Vaudreuil—Soulanges, QC
Thank you, Mr. Chair.
Mr. Edwards, I really appreciated your comments about transparency and talking about the risks up front. I know first-hand from my own constituents that they don't appreciate it when a company comes in and doesn't want to openly talk at the beginning of the process about the risks involved.
The regulator has a role to play in this as well, not just as a rubber stamp for industry but also to facilitate that openness and transparency.
My question more specifically to you is about a pan-Canadian energy strategy. Has the absence of a pan-Canadian energy strategy hurt any developments, in the Atlantic in particular?
Principal, Fairweather Hill, As an Individual
I'll take two aspects of that question.
First, going back to the bad old days of the national energy program, we did have a program called the petroleum incentives program. I think that was responsible for.... Of the 275,000 barrels a day of production right now, plus the Hebron project that is under development, all those finds were through the risk sharing that took place through the petroleum incentives program.
When the petroleum incentives program died—and it died in the early eighties, when we were preoccupied with trying to get our deficits under control—exploration on the east coast died with it. The level of exploration contracted quite dramatically, of course, as it did in the north.
We're now at the point where, I think this year off Newfoundland, we're talking about five exploration wells. That's quite a dramatic change from a few years ago when we were lucky if we could get a well or a well and a half in a 12-month period.
These are very expensive undertakings. Without some kind of risk sharing, I think we're going to be looking at a much slower pace of development, and I don't know whether we'll be able to replace the reserves we're consuming under that. So that's one aspect of having a broader national approach to at least risk sharing in that case.
The other example speaks a bit to energy corridors. I take the point that our witness from Calgary made about not wanting to guess and not being tied down to a physical corridor. In some respects I believe the important part is actually defining how corridors work.
We had the case in the early sixties with the upper Churchill project and Newfoundland having to sell their power at the border. If you look at the revenues generated by that project up until 2006, $1 billion in revenues went to Newfoundland and $19 billion went to its neighbour because of the arrangement of having to sell at the border.
I think there is a role there in brokering some broad policy around, at least, those two issues.
NDP
NDP
Jamie Nicholls NDP Vaudreuil—Soulanges, QC
It would be interesting to have a policy in place that took the public value for Canadians into account and used that as an organizing principle and let that trickle down all the way.
Are you familiar with the idea of public value in public administration, as defined by Professor Mark Moore? He's with the Harvard school of public administration.