Natural Resources Committee on April 10th, 2014

[Peter Howard]

We do it a little bit. I'll give you a couple of examples.

We investigate, monitor, and challenge the industry's relationship with first nations. What we've found over the past years is the collaboration between the oil sands producers and the first nations groups and the pipeline companies and the first nations groups, especially in British Columbia, is improving day by day almost. So the talking is going on, if you want to use that. The potential financial involvement is being discussed, and elements like that.

On the oil sands specifically, we do a fair bit of work on the emissions side of the spectrum, which is a social responsibility. Our analysis is suggesting we are getting to the point now where oil sands production is no longer the dirtiest production. It's actually getting to the point where it's getting very close to conventional oil production. So can you say it's addressing the fuel standards? Very simply put, yes, it is and that's all about innovation and technology use in the oil sands. We do look at that.

One thing we're looking at right now is the increase in emissions coming from the conventional oil side. That's something we'll be reporting about over the coming months.

[Megan Leslie, NDP, Halifax, NS]

Great. Thanks. I imagine my time's up.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Leslie.

We go now to Mr. Regan, for up to seven minutes.

Let's all remember that we're here to study the cross-country benefits of the oil and gas sector of the Canadian economy, and let's try to keep our questions and comments focused on that.

Go ahead, please, Mr. Regan.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much, Chair.

I heard a beep on the clerk's clock and I wanted to make sure he wasn't starting my time when you were still talking.

[The Chair, Conservative, Leon Benoit]

I'm very careful.

[Geoff Regan, Liberal, Halifax West, NS]

I'm sure.

Thanks very much to the witnesses for being here.

Mr. Van der Put, one of the interesting witnesses we've had, I would say as a Nova Scotian at least, was Mr. Mike Priaro. NuStar Energy is looking at a marine terminal at the Strait of Canso, where Cape Breton meets mainland Nova Scotia. There's a lot of interest in Atlantic Canada about this project, particularly in New Brunswick, of course, and the benefits there are important. The idea is that if TransCanada were to expand its pipeline by 300 land miles, it would still benefit New Brunswick, but it would also mean that with the marine terminal at the Stait of Canso, you'd be a day and a quarter closer by sea to the Mumbai terminal in India, for example. They've also suggested there would be other benefits.

I guess the question is what the considerations are for TransCanada in looking at a proposal like that.

[John Van der Put]

TransCanada builds pipelines in response to market need.

The energy east pipeline project was announced officially on August 1 last year based on the interest that was demonstrated in the commercial open season that was conducted during the spring and summer of last year. We have long-term 20-year contracts that shippers have signed to transport crude oil from Alberta and Saskatchewan to various points that I described in Quebec and New Brunswick.

We're always assessing the market, and we are obviously always open to meeting the market need. If potential shippers were to demonstrate an interest in serving the specific point you mentioned, then that's certainly something TransCanada would be happy to look at.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you.

In looking at the Deloitte report that you provided us with regarding the economic benefits of the mainline conversion project and energy east, I was a little surprised, actually. Obviously, it's important that the benefits be spread across the country, and that's a good thing. I actually thought that the benefits for New Brunswick, i.e., the percentage increase in economic activity and GDP and jobs, would be a little higher than the 8% increase in GDP and 12% increase in jobs, and so forth.

There are two things. First, are there other things that might happen that might increase the benefits in a place like New Brunswick and in other parts of the maritime provinces, for example? Second, what actions is your company taking to help train and employ workers from different provinces?

[John Van der Put]

Certainly the benefits in each of the provinces are significant.

In New Brunswick we'll be building about 400 kilometres of new pipeline as well as, I believe, five pump stations, a marine terminal, and tank terminal. So the benefits for New Brunswick, as you mentioned, are significant. Significant infrastructure is being proposed for the other provinces as well, and so you get some different results.

In terms of what specifically we are doing to ensure that we maximize opportunities, particularly for the workforce and for equipment and services and suppliers in each of the provinces, one specific example I can point to is that we have provided $1 million to Canada's building trades, specifically aimed at training for apprentices, for young workers, to be focused in the regions where the pipeline project will be going in.

As well, in all of our dealings with our prime contractors, who are the world-scale companies that will actually manage the construction, there is an expectation that they will focus on opportunities for local service providers. We're also going to be conducting what we think of or what we call supplier open houses in different parts of the country, to which we will invite local suppliers to come and find out more about our company, about the project, and about what it takes to be qualified to provide services to this kind of a construction effort.

Those are some examples of measures we're taking.

[Geoff Regan, Liberal, Halifax West, NS]

We've heard that refineries value diversity of supply. It's certainly important to Saint John and I'm sure elsewhere.

You've indicated that TransCanada is working with refineries along energy east, and along the line on that route, to provide direct delivery connections. Can you talk more about the details of the benefits for the refineries in Montreal, Quebec City, and Saint John? Is there any reason to think that having the line go to Saint John might have benefits as far away as Dartmouth, Nova Scotia, where recently a refinery has shut down? What would be the chances of that refinery reopening because of the supply in the region?

[John Van der Put]

In terms of diversity of supply for refineries, the very positive thing from a pricing standpoint is obviously the more suppliers you have, the greater the potential that you can get better pricing. Also there are benefits in terms of security of supply. If one of your supply points for whatever reason goes down, then you have other supply points you can rely on.

A number of factors point to the benefits of having diversity of supply. Certainly, the Irving refinery in New Brunswick having access to western Canadian crude supply to replace, in large part or in whole, the crude supply they currently get from foreign sources is a good thing. Ultimately, there would be benefits for the region overall. Specific quantification of those isn't my domain, but in general terms there would be benefits. Of course, when I talk about the region, I'm talking about the Maritimes in general.

I don't have a specific comment on the specific status of the refinery in Dartmouth. Those are based on lots of different economic factors that I'm not qualified to comment on.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Regan and Mr. Van der Put.

We go now to the five-minute round, with Mr. Trost, followed by Ms. Crockatt, and then Monsieur Labelle.

Mr. Trost, go ahead, for up to five minutes, please.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Mr. McCrea, I found your presentation very well-organized, so I'm going to start with the point you made about enabling entrepreneurship.

You said the oil industry opens up and enables entrepreneurship. Who can get in? Who are the small businessmen, the people, who can get in? Isn't the oil industry only for big companies, like Exxon, BP, Schlumberger, companies like that? What sort of background do you need to be an entrepreneur in the oil and gas industry?

[Bryan McCrea]

Thank you, Mr. Trost.

What's interesting about being an entrepreneur in the oil and gas industry is that it opens the door to a variety of backgrounds in everything from starting a janitorial service, which may not require significant post-secondary education, to fabrication shops, which require some trades, to working on the leasing side of the business, which requires a finance background. In other words, there's huge variability in the opportunities that exist within the oil sands, which is what is so attractive about it to me and to so many others.

There are small, medium, and large enterprises that participate in all aspects of the supply chain. Although we may not always contract directly with the owner, or TransCanada, for example, we may contract with their prime contractors, or the subcontractors of those prime contractors. There's a great trickle effect in oil sands development, starting from the top with the large companies that are basically financing the development of this, to the resources, to the small and medium companies that exist primarily to serve the oil and gas industry.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

In your presentation you also noted, in point four I believe it was, that this is an industry that's important to rural and semi-urban areas of the country. Why is it important that those areas have this economic benefit? Again, you're talking to Saskatchewan MPs, so this is a rhetorical question. Why can't they all exist purely on farming?

[Bryan McCrea]

I think you're seeing larger and larger farms, and so people are looking to re-create and reinvent themselves. Not everybody in Saskatchewan wants to be a farmer, believe it or not. I have lots of friends who came from rural areas to attend the University of Saskatchewan, and after finishing their education, they were evaluating opportunities. They asked themselves if they wanted to move out to Calgary, like many folks do, or if they wanted to start a business or work in Saskatoon, or maybe they'd return home and be a part of the family business there, or start their own business, or go work for a company there. There's more than just farming opportunity now. It's important, I believe, because those small towns and rural areas are part of the fabric of our province.

Furthermore, a lot of the infrastructure gets developed largely due to the resource development. Northern Saskatchewan is a particularly good example of the infrastructure development that's occurred because of the uranium industry. The same holds true in oil and gas areas, if you look at Estevan, and Weyburn and area. Continued infrastructure development is possible because of the industry that exists in the area.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Look down the road to 10 years from now. We're assuming you're still president of a growing corporation. What sort of potential is there for expansion for companies like yours? Can they grow beyond their base in western Canada? Can they grow across Canada? Is there international opportunity? I don't just mean for places close by, like North Dakota. For Canadian businesses, what is the opportunity for growth if you start off in the oil and gas sector, even if you're not an official oil and gas producer?

[Bryan McCrea]

When we started our company, we identified the oil and gas market as sort of the low-hanging fruit that was going to really allow us to get our feet under us and then grow. For the last three years that's the market in which we've been building our business, but it's not the only market we are focused on, in the long term. It's basically financing our growth into other geographics and markets, including potential residential developments and affordable housing within Canada and outside of Canada.

We deal a lot with Canadian drilling companies, in particular, that have operations overseas. What they do is they get comfortable working with Canadian companies who provide a certain standard of product and service, and then they basically bring us with them to their international operations because they know us, they trust us, and they want to continue to see us grow. There's a tremendous opportunity geographically and across other industries, but the oil and gas industry is really what has allowed our company to grow. It kind of takes the risk out of that first leap in starting a business.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Trost.

Mr. McCrea, I have a question for you. Is it mandated under Saskatchewan law that an entrepreneur must be a Riders fan, and are you, in fact, a Riders fan? You don't have to answer that question.

We'll go to the next questioner, who is Ms. Crockatt. Go ahead, please, for up to five minutes.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Thank you to the witnesses for coming.

We're winding up this study now, but I think it has been eye-opening to a lot of people to see just how widespread the benefits of the oil and gas industry are across the country. All three of you are bringing that message home today.

Mr. Howard, I'd like to start with you, please. CERI is a very storied research organization in the energy field. I'm wondering if you can tell us what your research has shown about what the U.S. agenda is of denying Canada the benefits of expanding its oil and gas sectors.

[Peter Howard]

I'm not sure I can define the agenda. I would suggest it's probably just politically motivated. But I do—

[Joan Crockatt, Conservative, Calgary Centre, AB]

Maybe I can just clarify.

We've seen that the oil and gas industry is moving full steam ahead in the U.S. The U.S. component of Keystone is moving ahead, and the Canadian one is being blocked. I'd like to have the benefit of your knowledge and thoughts there.

[Peter Howard]

Okay, I'll answer it this way.

On the gas side of the spectrum, it's all about supply. The U.S. is going to be in an oversupply position within the coming years, so Canadian gas is not going to be needed in that market, at least on a net basis. On the oil side, we've looked at this in many different lights and we do not see where the U.S. can become oil independent any time in the next several decades. That means imports are going to be required. I think they'll be coming from Canada. I actually believe Keystone XL will be approved, probably in the next administration. But, on a go-forward basis, Canadian crude is still needed in that market.

[Joan Crockatt, Conservative, Calgary Centre, AB]

So you can't shed any more light on why the U.S. is specifically discriminating against Canadian oil and gas?

[Peter Howard]

No, I can't add any light to that.