Natural Resources Committee on May 9th, 2013

[The Chair, Conservative, Leon Benoit]

Good afternoon, everybody. Welcome to this meeting.

We're continuing our study on market diversification in the energy sector. We have with us today five witnesses from four groups.

First of all, as individuals, we have Dr. Stephen Harrison, professor, Department of Mechanical and Materials Engineering, Queen's University. Welcome. We also have Michael Edwards, principal, Fairweather Hill. Welcome to you.

Then we have, from the union of Suncor's Montreal refinery, Mr. Daniel Cloutier, national representative, Communications, Energy and Paperworkers Union of Canada, for the Quebec energy sector. Welcome to you.

From the Canadian Pipeline Association, we have Mr. Jim Facette, president and chief executive officer. Welcome to you.

We have, by video conference, from the Canadian Energy Pipeline Association—

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Mr. Speaker, is that propane or pipeline?

[The Chair, Conservative, Leon Benoit]

Propane. It's the Canadian Propane Association. Did I say pipeline? Oh my gosh. I guess pipelines are on my brain lately, but it's propane.

Thank you very much, Mr. Garneau.

By video conference from Calgary, Alberta, from the Canadian Energy Pipeline Association, we have Dr. Brenda Kenny, president and chief executive officer.

Welcome to you all. I hope Dr. Kenny will get online soon.

We'll start the presentations in the order they are listed on the agenda, starting with the presentations from Dr. Harrison and Mr. Edwards.

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

[Dr. Stephen Harrison, Professor, Department of Mechanical and Materials Engineering, Queen's University, As an Individual]

Thank you for giving me the opportunity to address the committee today.

I wish to discuss the role and the challenges of implementing solar energy as a renewable energy source of thermal energy, sometimes referred to as “green heat”.

In Canada, energy use in the residential and commercial sectors accounts for approximately one-third of the nation's energy consumption, and contributes roughly the same fraction of greenhouse gas emissions. Approximately 70% of this energy consumption is used for space and water heating. In 2010 this represented 20% of the country's total secondary energy use.

In Canada, low-grade heat for building space and water heating has traditionally been supplied by conventional energy sources. However, solar thermal technologies are particularly well suited to supply a portion of these loads.

It is also acknowledged that renewable or non-renewable conventional energy sources come with a substantial environmental and health cost, in part due to greenhouse gas emissions. The use of solar energy will reduce the consumption of conventional fossil fuels and thereby reduce CO2 emissions. For example, a single-family solar domestic hot water system will reduce greenhouse gas emissions by approximately one tonne of CO2 per year. For one-third of the 7.3 million single-detached houses in Canada, this would represent approximately 2.4 megatonnes of CO2 emissions eliminated each year, and even more if a portion of the space heating load were displaced.

Many parts of Canada receive higher levels of solar radiation than much of central Europe, where solar energy is widely used. For example, in Germany solar thermal is used for domestic hot water heating. In Austria it's used for combined hot water and space heating. In Denmark it is used to supply heat to communities through district heating systems.

Increasingly it is used to supply air conditioning and cooling. Worldwide over 200 million households use solar hot water collectors.

Solar thermal has been used in virtually all regions of Canada for the past 30 years, and has become well developed and a proven technology. Canadian technology is world class, and has produced many achievements, including a low-cost building integrated solar air heating technology used worldwide; packaged micro-flow solar domestic hot water systems suitable for Canadian use; and the Drake Landing Solar Community, located south of Calgary, which stores solar heat collected during the summer for use in winter. Last year 97% of this community's space and water heating energy requirements were provided by Canadian solar thermal technology. In 2011 this project was selected from more than 6,000 entries from 161 countries, and awarded the prestigious international Energy Globe Award. In addition, national standards and product certifications for solar heating hardware have been established.

However, the implementation of these technologies faces significant challenges in the marketplace. In the past, the solar industry has suffered frequent setbacks due to the volatile market pricing of conventional energy and the lack of a consistent policy for the use of solar energy in Canada. Other jurisdictions around the world have set targets for the implementation of solar energy. For example, the European Union, through the renewable energy directive, has set mandatory national targets for achieving a 20% share of renewable energy by 2020.

In the past Canadian incentive programs have been temporary and have often left the industry susceptible to volatile market swings in conventional energy. Most recently, in January 2012, the federal government's subsidy for solar hot water systems under the ecoENERGY home retrofit program, which was matched by provincial grants, was closed. Coupled with the sudden oversupply of low-cost natural gas and a downturn in the economy, many manufacturers and suppliers were unable to compete and saw their markets decline in many regions of the country.

The economic viability of renewable energy systems is particularly sensitive to the cost of competing energy sources. Without price stability in the marketplace, it is extremely difficult to support a decision to invest in renewable energy.

When considering an energy source, it's important to consider all the costs associated with the extraction and distribution of this energy, as well as the environmental and social costs. For example, fracking technology has contributed to extremely low natural gas prices, but recently the viability of this technology and its environmental impact have been questioned. A glut of low-cost natural gas can have a devastating effect on the solar heating industry, hindering the development of a viable renewable energy sector and discouraging energy conservation and energy efficiency.

I believe that Canada has demonstrated that it has the potential to be a world leader in renewable energy technologies and that a strong Canadian solar industry can be established if meaningful targets for renewable energy use are implemented.

Therefore, I would propose that Canada establish targets for the use of renewable energy resources within the energy supply mix, encourage the use of renewable energy through incentive programs that help to lower costs to early adopters and provide a sustained market growth to support cost reductions, and quantify the environmental costs and impacts of various energy sources used by Canadians and establish a pricing structure that reflects these costs.

Finally, solar thermal energy offers diversity of supply, energy security, and environmental sustainability. Canadians have invested in the infrastructure needed to utilize it. However, if the current market trends continue it is likely that solar thermal will disappear from Canada, leaving Canadians susceptible to future energy increases. The loss of this industry and its technical expertise will also leave Canadians out of the worldwide green technology economy.

Thank you for your attention.

[The Chair, Conservative, Leon Benoit]

Thank you, Dr. Harrison.

Mr. Edwards, do you have a presentation, as well?

[Michael Edwards, Principal, Fairweather Hill, As an Individual]

Yes.

[The Chair, Conservative, Leon Benoit]

Is it very brief?

[Michael Edwards]

I will go until you stop me.

[The Chair, Conservative, Leon Benoit]

There's really only half a minute left in the time. If you could make—

[The Clerk of the Committee, Mr. Rémi Bourgault]

They are not together.

[The Chair, Conservative, Leon Benoit]

My apologies. The way you're grouped on the agenda here makes it look like you are together. I apologize for that. You have seven minutes.

Go ahead, please, with your presentation.

[Michael Edwards]

Thank you very much, Mr. Chair, for giving me the time, literally.

Thank you, committee members, for giving me the opportunity to speak to you this afternoon.

For much of the last two and a half decades, I've provided advice to governments and industry on Atlantic Canadian energy and natural resource issues. Since I retired from the public service in 2010, I've remained active in the natural resources and energy fields, providing policy and business development advice to both the public and private sectors. I appear here today as an individual, and the opinions I express are my own.

Time permitting, I will outline my perspective on the Canadian situation, with a focus on petroleum fossil fuels. I will identify some threats to our position as an energy exporter, offer some advice on how we should use the benefits that come from export diversification, and identify some things we need to do to facilitate the integration of our domestic markets and to increase exports.

In the fall of 1957, Ernest Manning came to Ottawa to enlist the help of Prime Minister Diefenbaker to solve Alberta's oversupply of oil. He faced essentially the same problem we're facing today. Existing transportation infrastructure had been overwhelmed by new production from Leduc, and even then the east was a net importer of foreign oil. Fifty-six years ago, Canada might have developed a national vision that included energy corridors from coast to coast to coast. These could have supported market integration for all forms of energy.

Instead, we traded an integrated domestic market for a series of export-driven projects that, with the exception of the TransCanada natural gas pipeline, created infrastructure running north to south. These served important projects and producing areas but did little to create a national domestic market.

Canada's energy developments have been largely driven by and have benefited from demand from the largest single energy market in the world. But U.S. market fundamentals are changing and Canada is paying a price. According to a report commissioned by the U.S. government, U.S. transportation bottlenecks will cost Alberta producers as much as $65 billion a year by 2030, if they aren't addressed.

New technologies, which have enabled this production that has created the bottlenecks, as well as climate policies that are reducing demand are not unique to the United States. They're part of a global trend that we may not be able to outrun by simply changing our market focus, even if that new focus includes the rapidly growing economies of China and India. While many see the economy as a key preoccupation, others are seeing climate change return as a top-of-mind issue. The heads of the International Energy Agency, the IMF, and the World Bank have all stated recently that renewed action is required to curb the growth of emissions.

Just last month, the U.S and China struck a working group to foster low-carbon economic growth, and in its latest five-year plan, China has also stated its intention to peak its use of coal. And of course, this week, Minister Oliver is back in Brussels fighting the European plan for a low-carbon fuel standard.

While policy risk is all around us, the technology revolution is opening up new supplies worldwide. The U.S. Energy Information Administration has estimated that with new technology, China's recoverable shale gas resources could be 50% bigger than those of the United States. If China can deal with its internal inertia, it will have substantial gas supplies of its own to compete with imports from countries like Canada, though it will become the world's largest oil importer by 2030.

According to the IEA, new sources of supply coupled with a slowdown in emerging markets and generally lower demand growth “raises the prospect of a more comfortable supply/demand balance in the medium term”. This is, in my opinion, not a recipe for higher prices.

How can we remain competitive, then, if the upper end of our cost to production for new oil sands-derived crude overlaps the low side forecasts of the world price, especially when these new supplies and policy risks are factored in?

Market diversification is part of the solution in the near term, as it can buy us time to address high cost structure and environmental challenges, but we must also position ourselves with a counterbalance of supply sources. The oil sands, yes, but we must also invest in our offshore frontier. Newfoundland and Labrador production can compete with the best in the world, but we must encourage higher rates of exploration to replace declining reserves. The federal government, as a resource owner and co-manager of our offshore areas, needs to step up and match provincial efforts.

Domestic markets can provide new customers for western crude as well as for electricity from renewable sources across Canada. This can only occur with the support and cooperation, of course, of the provinces, and a willingness by industry to invest in the required infrastructure. We need a national energy corridor, one that can link our multiple domestic markets into a stronger whole, providing security of supply through diversification of sources, a corridor that allows Alberta bitumen to reach tidewater and allows Canadians to take advantage of renewables that are currently stranded away from major centres of demand.

Investors need certainty of regulatory process. They want to know what is required and when, with predictable outcomes. But we mustn't discourage involvement of ordinary Canadians in civil society. These projects must have a social licence. All of this would be helped, of course, by a national consensus on energy, one that ensures we are competitive both as a producer of energy and as an exporter of manufactured goods that are competitive because we have a domestic supply of affordable and sustainable energy.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Edwards.

Again, I apologize for the confusion at the start of your presentation.

We go now to the Suncor union from the Montreal refinery.

Mr. Cloutier, go ahead with your presentation, for up to seven minutes, please.

[Daniel Cloutier, National Representative, Energy Quebec, Refinery of Suncor Energy of Montreal, Communications, Energy and Paperworkers Union of Canada-Quebec]

Ladies and gentlemen, honourable members of the House of Commons, good afternoon and thank you for inviting me.

I am the Communications, Energy and Paperworkers Union of Canada, or CEP, national representative attached to union locals at the Suncor Energy refinery in Montreal, the Ultramar-Valéro refinery in Lévis, the Canterm Canadian terminals, the Shell terminal, the Parachem petrochemical plant and a number of others. I work with them every day, supporting them in all the challenges they face, and in the process maintaining and developing jobs.

The CEP is Canada’s biggest union in the oil and petrochemicals sector, representing workers in the industry in almost every province.

Before discussing the situation at the Suncor refinery in Montreal, and without repeating all the comments and proposals made by CEP National during its appearance—statements I am happy to embrace personally—I would like to reiterate something. The CEP members working in Quebec, and more particularly the employees of Suncor, Ultramar, Shell, Parachem and Canterm, support the proposal to reverse Line 9 to bring Alberta crude to Quebec. They support the proposal as long as the highest environmental standards are applied to maintenance, monitoring and inspection, and as long as the crude that flows through the pipeline is processed in Canada. That would result in benefits for the development of the industry in Quebec and Canada, and generate wealth for this country.

On the subject of job creation and maintenance, let's get back to the situation at Suncor in Montreal.

The Montreal refinery is a reliable, productive and diversified facility. It employs some 500 people, about half of whom are unionized. And in good times and bad, the refinery uses the services of hundreds of subcontractors to assist with maintenance, plant shutdowns and so on. The number of indirect jobs attributable to the refinery is also very high. When the Shell refinery shut down in 2010-11, it was determined that the number of indirect jobs was three or four to one. We believe that the same ratio applies in this case.

This means that thousands of Canadians derive their livelihood, in whole or in part, from this undertaking. This is a good employer, providing good working conditions and occupying pride of place among employers in eastern Montreal.

The refinery has nothing to be ashamed of in comparisons with its competitors, except on one point: profitability. While in many respects it posts results comparable to or better than those of North American refineries as a whole, it fails to achieve comparable profitability, and by a substantial margin. The difference is due to the price of its raw material: the crude.

How, in fact, can it compete with refineries supplied at $25 a barrel less? Sometimes, the difference is even greater than that. At a capacity of 130,000 barrels a day, it thus has to bear an additional burden by comparison with other refineries at over 3.2 million a day. Imagine the pressure generated by having to compete with a disadvantage like that. It is easy to understand that, in such an environment, generating the capital required for further growth, or even survival, becomes increasingly difficult.

We all remember the recent closing of the Shell refinery. We saw colleagues losing their jobs. We saw them moving away, unable to continue in their respective sectors or maintain comparable working conditions. We also saw the impact on everyone else: suppliers of every kind, subcontractors, merchants and all the rest. All of this was due, in very large part, to the fact that the Shell refinery had become less profitable in the circumstances, which I just described, and therefore less attractive to investors.

The Shell story provides a very good example: the company found it more profitable to produce on another continent and deliver the final product here by ship. Conversely, the same refinery using western crude would have been profitable enough to justify substantial investments in its growth. The same situation is also threatening Suncor and even Ultramar.

We therefore believe that for the future viability of the Suncor and Ultramar refineries in Quebec, we need a reliable supply of affordable oil that will allow us to compete on equal terms. Maintaining the refineries is also indispensable to the petrochemical industry. The Parachem and CEPSA plants in eastern Montreal, for example, are very much dependent on the survival of the Suncor refinery. Losing the Montreal Suncor refinery would, therefore, likely create a chain reaction affecting a number of other employers and threatening to cause them to shut down as well.

The Line 9 reversal project is currently generating the kind of excitement that has not been seen in eastern Montreal for years, a decade in fact. We now see a number of projects in preparation, with all the players positioning themselves. And we know right now that the reversal will lead to investment in Quebec refineries, which will have to develop, among other things, units that can handle Canadian crude. This will create jobs in a sector that lost a great many of them with the closure of the Shell refinery.

In our view, needless to say, the new units will have to incorporate the best technology in terms of environmental protection. They, nevertheless, represent new opportunities and growth for everyone. These projects will not only guarantee the future of existing facilities, but also make it possible to create the right environment to attract new players.

We are talking about high-quality, stable and well-paid jobs that will no doubt contribute to increased collective wealth.

With respect to energy security, Quebec refineries receive only 13.5% of their crude oil from Canada. The rest is imported, mainly from Algeria, the North Sea, Kazakhstan and Angola. Some of these countries have experienced political turmoil and even civil war in recent years

In 2012, the refineries in the Atlantic provinces were also importing nearly all their oil from foreign sources. In Quebec, year after year, we have to import both crude and finished products to meet consumer demand. The situation has become worse since the closure of the Shell refinery. This means that we depend on foreigners to ensure our energy security. The situation is similar in Ontario where, even though nearly 80% of the oil refined comes from Canada, the province’s energy security remains uncertain, given its inadequate refining capacity. As a result, the province is dependent on foreign sources for refined products.

Following the closure of the Oakville refinery in 2005, since Quebec had a surplus at that time, it was nevertheless able to make up most of Ontario’s shortfall created by the closure. But since the closing of the Shell refinery, Quebec is no longer able to meet all of its own needs. In these circumstances, further refinery closures considerably increase the risk facing Canadians.

According to a recent study by the Conference Board of Canada, we can estimate that the closure of the two refineries—Oakville and Shell—has reduced Canada’s refining capacity by 6.5%. As a result, GDP has dropped by $2.6 billion, and income tax revenues have fallen by $330 million.

We believe it is essential to develop energy security for the country as a whole. To do that, we believe it is important to preserve and develop our independence in Quebec in terms of refined petroleum products. We also believe that we have to safeguard our energy independence and Canada’s complete security, by ensuring that oil moves from west to east. That goes hand in hand with respecting the highest environmental standards, provincial jurisdiction and aboriginal lands.

Further, we believe it is important to reduce our dependence on foreign oil. Enbridge's Line 9 reversal project would do that, subject to the condition that crude from western Canada replace imported oil. It is important to remember that the combined nominal capacity of the two Quebec refineries is about 400,000 barrels a day, which is 100,000 barrels more than the existing Line 9 can transport.

In short, the Line 9 reversal project between Sarnia and Montreal is vital for the maintenance and development of Quebec’s petrochemical industry. It will not only ensure the future of the existing refineries, but also promote their growth. The reversal will also position Quebec so as to promote the entry of new players into the industry. Such growth will encourage employment, with all the resulting tax revenues. It is therefore a good thing, both for the government and for workers.

Lastly, the reversal will definitely help to reduce Quebec and eastern Canada’s dependence on other countries, and increase energy security for all Canadians. It is therefore a major project that Quebec and eastern Canada cannot do without.

Thank you all for your attention.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Cloutier.

From the Canadian Propane Association, we have Mr. Facette, for up to seven minutes.

I thought I'd put you back with the Canadian Propane Association, being as we have Dr. Kenny here to talk about the pipeline stuff.

Go ahead, please.

[Jim Facette, President and Chief Executive Officer, Canadian Propane Association]

Thank you very much, Mr. Chairman. I think guess that just goes to show how much work we have yet to do, to get people to get our name right.

This committee has an awful lot of work ahead of it to do. I don't envy you. There's a great many issues to be covered.

For the next six and a half minutes or so, I will talk a little bit about who we are, talk about the propane industry in Canada, discuss some recent changes to supply and demand, and then get right to the issue we've been asked to address, which is the diversification of energy supply sources and where we see some new stuff happening in the industry today that you may or may not be aware of.

We have more than 370 member companies in our organization, and they cover the entire spectrum of the industry: producers, retailers, marketers, and small suppliers from coast to coast. Companies in the propane business from the largest companies to the smallest are members of the Canadian Propane Association.

Canada is the sixth largest propane producer in the world. Canada is the ninth largest consumer of propane in the world. The propane industry's contribution has about $10 billion in impact annually on the Canadian economy. It generates just slightly less than $1 billion a year in taxes and royalties, and supports the livelihoods of more than 30,000 Canadians.

Propane is produced in Canada. It is a commodity that is traded on the open market. Propane exports account for about 43% of our total demand. This is actually down from 65% where it was three years ago, and I'll come back to that in a few minutes.

As just a little bit about storage capacity and what happens to it, here in the province of Ontario, for example, southwestern Ontario has a storage capacity of approximately 7.5 million barrels, to meet demand in this part of the country. This country supplies of about 11 billion litres of propane. In Canada, 82% of the propane comes from natural gas exploration; the balance is produced at refineries; and a small amount—about 2%—comes from imports.

The 43% we export is down by more than 20%. It is down largely because of the supply now being generated out of the United States through shale gas exploration. That's quite a lot. That's a big change. So there is an excess supply of propane in the marketplace today. That's had an obvious downward pressure on price.

But 27% of the propane is used domestically in the mining and oil and gas extraction area, 20% in commercial, 20% in non-energy use such as petrochemical feedstock, 10% in manufacturing, 9% in residential, 7% in transportation, 5% in agriculture, and 2% in construction.

We believe propane is an energy solution. It is safe, it is clean, it is abundant, it is cost effective, and it is portable. Currently, as I said in the outline of uses, industrial, commercial, and residential are three main areas.

In terms of diversification of supply sources, and diversification of its use across the country, the industry gets an awful lot of attention on exploration techniques including fracking. You hear a lot about hydraulic fracking. You don't hear much talk about propane fracking. In fact there is only one company in Canada that does it, just north of Red Deer. It fracks for whatever the customers want—oil or natural gas—using propane. It actually turns the propane into a gel and runs it down the mill, and it can actually recoup 100% of the propane. There is no water used at all, and the company contends that its drill space usage nears 100%.

In addition, there is mining—typically you think of propane use in mining as for heating mine shafts and work camp-related uses like cooking. You can also use it for power generation. There are companies around the world that are actually looking at using more propane for power generation, looking to change out from diesel.

Recently in Alberta one of our larger members, Williams, announced a new propane dehydrogenation facility, the first of its kind in Canada. This facility will convert propane into higher value polymer-grade propylene—it's a petrochemical feedstock used in the manufacturing of plastics.

From diesel to propane is what everyone is talking about these days, looking for lower costs and for greener technology. Right now the Canadian Propane Association is working with the governments of British Columbia and Manitoba to change northern remote communities off diesel to propane.

The largest area of opportunity, perhaps, in the transportation sector rests with fleets. Propane fleets are very much on the minds of our members across Canada. There are light and medium duty, DieselFlex technologies. Propane will reduce greenhouse gas emissions by 26% lower than gasoline. There are more than 21 million propane vehicles worldwide, 40,000 in Canada, and more than 2,000 propane refuelling station sites across the country as well.

Another opportunity for diversification is government policy. One example is right here in the province of Ontario with the Ring of Fire. It's a large potential mining opportunity that I know this government has assigned a lead minister to. We believe that as governments work together to look at energy infrastructure sources, propane deserves an equal opportunity to be an energy resource when it comes to government infrastructure.

We've been talking to the New Brunswick government as well about considering propane, as it tries to solve its challenges with the growth of natural gas in that province. We believe that propane can be that bridge to bringing New Brunswickers a green technology, a wonderful energy source that would make them on par with what the rest of Canada has.

Mr. Chairman, to wrap up, we have a couple of simple asks—though nothing is ever simple. What we ask is that starting today, this government and committee acknowledge that propane is in fact one energy solution. We're not saying it's the only one, but it is one part of the mix. The next one is quite simple: to treat propane and the industry as an equal partner as the government develops energy policy, whatever that may be.

Mr. Chair, thank you very much for the opportunity today. I look forward to the questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Facette.

We will go now by video conference to Calgary, Alberta. From the Canadian Energy Pipeline Association, we have Dr. Brenda Kenny.

Welcome to our committee again, Dr. Kenny.

Go ahead, please, with your presentation.

[Dr. Brenda Kenny, President and Chief Executive Officer, Canadian Energy Pipeline Association]

Thank you very much.

It's wonderful to be here with you this afternoon. I'm sorry that I couldn't be there in person, but it's a pleasure to appear before you and share some of the views of the Canadian Energy Pipeline Association on your diversification study.

The pipeline industry, which CEPA represents, serves Canadians by safely transporting about 97% of all of our oil and natural gas produced and used in Canada. These members are essentially like energy highways that are moving across the country. We currently operate over 100,000 kilometres of transmission pipelines, which involves transporting 3.2 million barrels of oil and 14.6 billion cubic feet of gas every day.

We employ over 8,000 full-time employees among our companies, but of course that is a very trivial number compared to the many hundreds of thousands of jobs that are enabled by having energy move across the country.

We are an integral part of a reliable energy system that enables the quality of life Canadians enjoy and ties our country together. It provides services on a daily basis from heating our homes, fuelling our vehicles, and powering our manufacturing, etc.

Obviously, we make an important contribution that is very much central to the question of diversification of supply and enabling the Canadian economy to grow and meet its needs. We have investment plans, over $20 billion worth of projects of national significance, which enable other much larger investments affiliated with the energy value chain.

All told, today you've already heard a little bit about the tension between internal and export markets. We don't see it at all as an either-or proposition. Fully one-quarter of Canada's mercantile trade value today moves by pipeline, so that's $1 in $4 new dollars in our jeans, if you will, coming from that energy trade enabled by pipelines.

At the same time, of course, this has become an industry that's very much in the public eye. There are very high profile, very helpful, and important energy-environment-economy debates under way. We've been out of sight, out of mind, for over 60 years and are happy to be able to step up and communicate more fully.

But our first accountability, of course, is our own safety performance. That is our number one duty to Canadians. We welcome the scrutiny and are moving forward on a number of safety measures that go well beyond compliance with regulation, and we are increasing our transparency. I invite anyone to look at our about pipelines.com website for more information.

But let me move now more specifically to the question at hand with respect to market diversification. Pipelines today are the backbone of energy transport across the country. Over 60 years of practice and growth have us touching virtually every kind of terrain you can imagine across this great country.

The developments have been both market-led and in the public interest in every case, beginning in the late forties with a connection from Edmonton to the Lower Mainland in the Trans Mountain pipeline, providing citizens in that important region of Canada with the fuel they needed to get around every day. The Westcoast pipeline connection for natural gas was around the same time.

Of course, the Enbridge system developed in a way that went south of the Great Lakes, and then back up into Sarnia, taking advantage of a variety of other interconnects, enhancing our energy supply in Canada through those interconnects.

The original mainland TransCanada pipeline of course created the pipeline debate of the 1950s, which led to some profound and important Canadian decisions. Indeed, we look to major pipeline and infrastructure development by using private capital in a well and thoroughly regulated manner. In the case of that natural gas connection, it was preferred to see that on Canadian territory.

One other example of Canadian public policy that led to pipelines is the one that's already been mentioned today, that being Line 9. Let us not forget the history of that line being built in the 1970s at the behest of the federal government, in the wake of oil embargos and very legitimate concerns about energy security. The federal government approached a major pipeline company—in that day, Interprovincial, and now Enbridge—to say, could you please build a connection to Montreal. It operated as such for 20 years, then was later reversed when it was recognized at that time that energy security on a global active trading market was really not as much of an issue as more flexible interconnects was.

Those flexible interconnects and a market-based approach have again led to the very logical conclusion that when you have increasing oil supply in Canada and lower pricing, a very effective and smart choice would be to go back to the original intention for Line 9, which was to have it flow from west to east.

There are a couple other examples of regional interconnects. The Norman Wells Pipeline, halfway up the Mackenzie Valley, has been there since the mid-eighties. The Mackenzie Valley gas pipeline has been approved. Unfortunately market conditions right now are making that a soft proposal, but the future could see that occur. Of course, there are also the Sable Island connections through the Maritimes and the northeast.

In conclusion, I just want to point out that the pipeline industry has been, is, and will continue to be able to connect any region in Canada safely using world-class standards, evidence-based assessments, and full life-cycle regulation, which has been very tried and true over decades in meeting Canadian needs. We can change service; we can expand existing systems; we can build new linkages. We are a metre under the ground, running 24/7, and are clearly an important part of the fabric of Canada. We continue to be here to meet evolving needs as energy supply and diversification continue to be hallmarks of this country's nation-building.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Dr. Kenny

Thank you, all, for your very informative presentations, and thanks for keeping them down to the time we had available.

In our first seven-minute round, we have Mr. Anderson, Mr. Nicholls, and Mr. Garneau.

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

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Mr. Chair.

I want to thank everyone for being here today. I think these are interesting presentations.

Mr. Cloutier, I appreciated your presentation. We have, through the NEB, required more audits on pipelines and examinations and those kinds of things. I assume you're comfortable with pipeline safety and you feel that's a safe way of getting the product to your refinery.

[Daniel Cloutier]

I would compare it with an airplane.

When there's a leak in a pipeline, the situation becomes crucial and escalates significantly. But, if you consider moving oil via pipelines as compared with rail, ship or truck, you see that pipelines are the safest, and most effective and efficient option.

It is always possible to improve safety while respecting environmental standards. Certainly, our efforts should not focus solely on that objective.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Okay.

Ms. Kenny, did you have anything to say directly regarding your association's position on pipeline safety? You're the spokesman for it. Is it safe to transport material through pipelines?

[The Chair, Conservative, Leon Benoit]

Dr. Kenny, did you get the question?

[Dr. Brenda Kenny]

Yes. I'm sorry, I thought it was a secondary question to the previous speaker.

Of course, we stand by the safety of our systems, and we feel that the track record is second to none in the world. When you look at benchmarking, we have a very strong safety record. Our goal is zero incidents, and we have a number of active programs under way across the industry right now to improve our prevention and our emergency response. We believe there is always room to strive for improvement, but by any measure at this point in time, Canadians can rest assured that their systems are among the safest in the world for moving energy, which they do use, and also that the regulation, through the National Energy Board, for the long major transmission systems is very robust. The standards are transparent and referred to around the world as some of the best.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Mr. Edwards, you mentioned something that another witness had brought forward earlier, that being a national energy corridor. They talked not only about pipelines but also about electricity and transmission lines and those kinds of things. I'm just wondering if you have any thoughts on that. I'd certainly be open to Ms. Kenny or the Propane Association talking about that notion of a national energy corridor and what it might mean.