Evidence of meeting #17 for Natural Resources in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was alberta.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Brenda Kenny  President and Chief Executive Officer, Canadian Energy Pipeline Association
Michael Burt  Director, Industrial Economic Trends, The Conference Board of Canada
Colleen Mitchell  President, Atlantica Centre for Energy
Gil McGowan  President, Alberta Federation of Labour
Clerk of the Committee  Mr. Rémi Bourgault

9:55 a.m.

Conservative

The Chair Conservative Leon Benoit

Thank you, Ms. Mitchell, and thank you, Ms. Crockatt.

Continuing the five-minute round, we will go to Ms. Duncan, followed by Mr. Calkins and then Ms. Moore.

Ms. Duncan.

9:55 a.m.

NDP

Linda Duncan NDP Edmonton Strathcona, AB

I have a set of three questions I'm going to put to Mr. McGowan and Mr. Burt. I went through some of your report, Mr. Burt—thank you very much—which notes that by far it's Alberta, my province, that's benefiting from the oil and gas sector by perhaps a thousandfold if not a hundredfold. But there is an area that is a mounting deficit, and that's the environmental deficit.

My question would probably be to you, Mr. Burt, but Mr. McGowan might like to speak to this. What percentage of the investment The Conference Board of Canada has reported in the oil and gas sector is being spent on environmental controls, climate action, and reclamation including employment?

My second related question is, who is actually benefiting economically from the delayed duty to reclaim, the delayed duty to reduce greenhouse gases, and the delayed duty to reduce, for example, PAH emissions? In other words, it's a perverse subsidy right now. Somebody is obviously benefiting by that. Who is getting the economic benefit? I think that's plenty.

I went to the NSERC presentation yesterday. There's a lot of good investment in research in the lab. But what I'm hearing when I go to the oil sands trade shows is that there are delays in the uptake or the creation of jobs in manufacturing in Canada because there's no regulatory driver, including in pipelines, so you might want to speak to that.

Maybe Mr. Burt, first.

9:55 a.m.

Director, Industrial Economic Trends, The Conference Board of Canada

Michael Burt

I guess I'll try and address the question around what share is spent on environmental. I don't know off the top of my head. How we did our assessment is....Basically, we know the oil and gas businesses spend their money in a certain way right now and we assume they will continue to spend that—

9:55 a.m.

NDP

Linda Duncan NDP Edmonton Strathcona, AB

You don't have to tell me right now off the top of your head. You have an overall report. My question is, have you done the breakdown, and if so, can you provide that?

9:55 a.m.

Director, Industrial Economic Trends, The Conference Board of Canada

Michael Burt

I could go back to the statistics and find out what the actual spending categories were.

9:55 a.m.

NDP

Linda Duncan NDP Edmonton Strathcona, AB

I'd appreciate that if you have that information.

On the second side, regarding who is currently actually benefiting economically from these delays, Mr. McGowan or Mr. Burt, do you have a comment?

9:55 a.m.

Director, Industrial Economic Trends, The Conference Board of Canada

Michael Burt

From our perspective, spending money is good, economically speaking. If you spend money on pollution control, there are still benefits as there would be if you spent it on something else.

I'm not sure who is benefiting. There are definitely benefits associated with spending money on pollution control as well. It's sort of a reallocation in terms of where the benefits are, if you will.

9:55 a.m.

NDP

Linda Duncan NDP Edmonton Strathcona, AB

Mr. McGowan, do you have a comment on that?

9:55 a.m.

President, Alberta Federation of Labour

Gil McGowan

From the Federation of Labour's perspective, we think we don't have to make a choice between the environment and job creation. But what's missing from the oil sands development in the Alberta situation is direction from the provincial government.

We know there are good technologies out there. We know all sorts of advances are being made in terms of reclamation, water use, and pollution, but unfortunately, our provincial government is leaving it up to industry to decide when and if to implement a lot of this stuff. We would like to see more direction from the government, as the steward of the resource, to actually require that industry adopt best practices. So far that hasn't been the case.

I think we could have a win-win situation, as Mr. Burt suggested, if we implemented these new technologies. We could help create jobs all through the chain and also produce a product that is cleaner and less environmentally damaging. By taking a more aggressive approach to sustainable development, we could actually improve Canada's reputation on the energy front as opposed to what we've been doing for years, which is winning awards for our backward approach to environmental protection.

10 a.m.

NDP

Linda Duncan NDP Edmonton Strathcona, AB

Any of the witnesses can feel free to answer my second question. The Conference Board of Canada report talks about where the benefits are spread across Canada, again with the majority of them in Alberta. I know Albertans appreciate the revenue, at least the portion of royalties that is coming into their coffers.

I understand, from the people coming to my office, that there's a growing concern that particularly smaller to medium-sized companies in Alberta, in the Edmonton area, are being—

10 a.m.

Conservative

The Chair Conservative Leon Benoit

Ms. Duncan, I'm sorry your time is up.

There wasn't really a question there, so we won't have an answer.

We will go now to Mr. Calkins, followed by Ms. Moore and then Mr. Leef.

Go ahead please, Mr. Calkins.

10 a.m.

Conservative

Blaine Calkins Conservative Wetaskiwin, AB

Thank you, Mr. Chair.

I'm going to touch on something. I want to follow up, because I think there was some misleading information presented in the form of a question by my colleague Mr. Julian when he said that raw bitumen is being shipped out of the country.

Ms. Kenny, can you tell us if raw bitumen is transportable in a pipeline?

10 a.m.

President and Chief Executive Officer, Canadian Energy Pipeline Association

Dr. Brenda Kenny

Well, diluted bitumen is moved in pipelines and there—

10 a.m.

Conservative

Blaine Calkins Conservative Wetaskiwin, AB

But that's not the raw bitumen that comes right out of the first stage of the plant, right?

10 a.m.

President and Chief Executive Officer, Canadian Energy Pipeline Association

Dr. Brenda Kenny

Generally it's diluted with condensate.

10 a.m.

Conservative

Blaine Calkins Conservative Wetaskiwin, AB

That's right. And that process of dilution, diluting it and putting a solvent or a diluent in it—where does that come from?

10 a.m.

President and Chief Executive Officer, Canadian Energy Pipeline Association

Dr. Brenda Kenny

The diluent is a side product of other production. It's a type of hydrocarbon, but it's lighter.

10 a.m.

Conservative

Blaine Calkins Conservative Wetaskiwin, AB

Right. It usually comes from the natural gas side of things, where everything—whether it's the midstream process or whatever the case might be, which is a full value-added aspect of the natural gas side of our economy—uses those by-products as part of the shipping process for our oil sands product.

And I believe it was you, Ms. Kenny, who said that the lack of capacity we have right now is costing us $50 million per day. Did I hear that correctly?

10 a.m.

President and Chief Executive Officer, Canadian Energy Pipeline Association

Dr. Brenda Kenny

That is correct.

10 a.m.

Conservative

Blaine Calkins Conservative Wetaskiwin, AB

Could you elaborate on that?

10 a.m.

President and Chief Executive Officer, Canadian Energy Pipeline Association

Dr. Brenda Kenny

There is a distortion in the market when you don't have sufficient capacity to give the market choice. We've seen it before at other points in history when a shortage—whether it's a highway capacity to move manufactured products or pipeline capacity—will cause a deterioration in the prices that one can get.

We're always further ahead in Canada to have a little bit too much pipeline capacity rather than a bit too little. Right now we have too little and that is costing us in the order of $50 million per day. The numbers will vary slightly, depending on the actual commodity prices as they move through the year, but I think that's a reasonable estimate. You heard similar numbers from the Conference Board as well.

It's very grave when you put it up against the fact that a large new pipeline can be constructed for considerably less than what you lose in a given year. So the macroeconomics of the delay are problematic for Canada.

10 a.m.

Conservative

Blaine Calkins Conservative Wetaskiwin, AB

That's interesting. So what you're saying is that every minute we wait on some of these things, whether it's the change in direction of Line 9, or the building of Keystone, or the building of the Northern Gateway pipeline, there's an economic or a multiplier effect in place. Is that right? Did I hear you say that?

March 4th, 2014 / 10 a.m.

President and Chief Executive Officer, Canadian Energy Pipeline Association

Dr. Brenda Kenny

Absolutely, and that multiplier is not just revenue to companies, but lost government revenue as well, in the order of about $8 billion every year that could otherwise go to higher education, health care, tax reduction, or whatever you would choose to deploy.

I want to restate something that I mentioned in an earlier response as well. We are decidedly agnostic about the use of that tube of steel a metre under the ground. Our job is to build it with state-of-the-art technologies and keep it as safe as possible for decades to come.

As for Canada's future energy needs and choices with respect to upgrading or what is moving, we can adapt to that, as we have done and as we will continue to do in the decades forward, whether it's natural gas, refined products, diluted bitumen, or—who knows?—maybe future products that we've not yet seen.

10:05 a.m.

Conservative

Blaine Calkins Conservative Wetaskiwin, AB

Okay.

Mr. Burt, could you talk to us a little more about the general economics of the North American locked energy system that we currently have due to the fact that we don't export a lot of our natural resources? Could you give us an update? We've talked many times in this committee about the price differential between the North American market and the international marketplace right now. What would the effect be on not only our broader Canadian economy, but also on the provincial jurisdiction and at the local level, if possible? Because I don't know what that price gap is right now, but I know it's significant.

10:05 a.m.

Director, Industrial Economic Trends, The Conference Board of Canada

Michael Burt

Well, it varies from day to day, to be honest.

Basically with the price gap, what we usually look at is, first of all, the difference between Brent, which is an international benchmark for light oil, and West Texas Intermediate or Canadian Par. It's been averaging $10 to $20 a barrel in the last couple of years. Normally those trade on par, so we're losing $10 to $20 a barrel in revenue for the companies, and of course that translates into fiscal impacts for light oil products. For heavier oil, we look at the differential between.... There are different heavy oil benchmarks. The one we look at is Western Canadian Select relative to West Texas Intermediate, and that differential has been as wide as $40 a barrel. It's normally more like $20.

We're losing $10 to $20 on light oil and another $10 to $20 more than usual on the heavy oil. The heavy oil is as much as $40 a barrel less—total—than what we would consider normal for heavy oil. That's where these figures come from, this $50 million a day that Brenda mentioned. We estimated that the total cost was $25 billion in 2012 if we got international benchmark prices for our oil, and of course that feeds through to fiscal impacts as well.