Natural Resources Committee on March 31st, 2015

[The Vice-Chair, NDP, Guy Caron]

It's already been five minutes.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you very much. I appreciated it.

[The Vice-Chair, NDP, Guy Caron]

Thank you very much.

We now have Mr. Trost, for five minutes.

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

Thank you, Mr. Chair.

Mr. Blakely, we're going to keep you busy here for a little while.

You made, I think, a fairly interesting point that I'd like you to elaborate on. You said that someone sitting at a desk may have a slightly different perspective than someone who's in the water with the water flowing in from all directions.

In reference to pipelines, as they relate to the bill that we're doing today—again, we're talking in generalities here—could you give a concrete example for somebody who has never worked on a pipeline of what you might be referring to?

[Robert Blakely]

The pipeline itself, the stuff that we do to build it?

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

Yes.

[Robert Blakely]

If something goes wrong there won't be a big calamity because the pipe's still empty. If you go to Calgary to, say, TransCanada's Operations Control Center—they have a redundant control centre in Okotoks—it's like going onto the bridge of the starship Enterprise. They can tell you what's going on in every bit of their pipeline in pretty much real time. When something goes wrong, they either have a number of automatic systems that will shut things down, reroute them, or do whatever is needed, or the human beings who are there will be in a position to do something. After that, it is the workforce that is being maintained by the operator that will go out and do the spill containment. The person on the ground—in the navy we would call that the on-scene commander—probably has a better appreciation of what is going on than the guy back in his office somewhere. That was my point.

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

What you're calling for is a change in the legislation that would give the person on the ground more discretion. Am I getting that correct?

[Robert Blakely]

Someone needs to make a decision as to whether the operator is dealing appropriately with the response. I would say that 95% of Mr. Donihee's operators are people you can rely on and take whatever they say to the bank. There are still some other people who occasionally have problems. Somebody needs to have the discretion to say, “Gee, here's the risk. Here are the consequences. These guys don't have a great track record. Maybe I'm taking over.”

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

Do you have a specific recommendation for how that could be addressed in the bill?

[Robert Blakely]

I'd have to think about it. What I can do is write something. I'm not a great draftsman—that's why I'm doing this, I guess—but I'll try to put something together and send it to you.

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

Okay.

I'll turn to Mr. Donihee.

One of the questions we asked after previous testimony was about the economic impacts of this legislation on the industry. Quite rightfully, we got the answer that it really is going to vary depending upon the company because their situations are so different. I realize that's probably the context of it, but could you give a more definitive answer than the other witnesses—I believe they were from Natural Resources Canada—as to what the industry is looking at? I realize it will vary by company, but could you give us an idea of the scope of the economic impact this legislation might have on your member companies?

[Jim Donihee]

I'd also like to build on the previous comment about the command and control piece if there's a moment at the end of this.

I have to say that, at the moment, while we're waiting for further consultation in terms of the approval of the bill, various companies are taking a look at what sort of financial mechanisms they would have to put in place in order to ensure the availability of that billion dollars or whatever amounts of money are going to be mandated as being immediately necessary. Ultimately, we require greater clarification at that end.

What I can say is that all of the members of the Canadian Energy Pipeline Association are such substantial companies and of such a longstanding financial history—with strong balance sheets, and assets such as the pipelines themselves on the ground that are worth billions of dollars—that they will be capable of this. But as to exactly what the financial consequences are, we don't have enough information yet to assess what kinds of mechanisms they will have to put in place to provide the assurance to the National Energy Board that they have full access to the necessary monies.

If I may make a brief comment on the command and control piece that Mr. Blakely addressed, like him I give all my respect to the senior service. I served in our air force for 28 years. I think it's extremely important to realize that there's a significant cost to readiness. Our company is already mandated to be ready, evidenced, as I said, by some 300 emergency response exercises last year, and nobody knows their systems better than they do. I think, ultimately, you want to ensure that they are positioned to exercise the command and control for which they are fully liable. I think the suggestion is that we would not want to see the NEB step in hastily. However, in the event that a company is ever deemed to be irresponsible they should immediately step in.

[The Vice-Chair, NDP, Guy Caron]

Thank you, Mr. Donihee. I need to stop you here.

Thank you, Mr. Trost.

Next will be Ms. Leslie for five minutes, followed by Ms. Crockatt.

[Megan Leslie, NDP, Halifax, NS]

Thank you, Mr. Chair.

Mr. Miron, I have some questions for you. I appreciate the concept you put forward of “polluter might pay”. That resonated with me. You talked about the fact that once we're over a billion dollars, the cost falls to Canadians for cleanup and compensation.

For me, all of this is with the backdrop of a couple of different things.

The first backdrop for me is the environment commissioner's 2011 report. The environment commissioner looked at the transportation of dangerous goods via pipelines and found little evidence that the National Energy Board was making sure that companies actually followed through on correcting their deficiencies in the practices they had, and also, alarmingly, that the NEB wasn't monitoring companies as to whether or not they had prepared emergency procedures manuals. That makes me think, then, about Enbridge and Kalamazoo and how the U.S. regulators likened the response to the Kalamazoo spill to the the Keystone Kops.

I think about the two overlaid. If we don't actually have an emergency procedure manual, what the heck is going on and how do we deal with it? The longer we're struggling to have a response, the more environmental damage there is and the higher the cost for cleanup and potentially for compensation.

My questions to you are around Bill C-46 and drawing on the experience of spills that we know about. How much did they cost? How much did they cost to clean up? What kinds of damages were there? What was the proportion of what the companies were on the hook for versus citizens paying through government? How much compensation actually went unsatisfied and wasn't paid out? Can you help us situate Bill C-46 within the context of what we know about spills?

[Ian Miron]

As I mentioned earlier, we know that Kalamazoo is over a billion dollars now and still going. A recent study out of Simon Fraser University estimated the potential cost of a worst-case scenario for the Kinder Morgan Trans Mountain expansion at over $5 billion and, for a bad case, but not the worst case, at a minimum of $1 billion.

[Megan Leslie, NDP, Halifax, NS]

Is that cleanup costs?

[Ian Miron]

I would have to confirm that, but I think that is cleanup, and not compensation. I could be wrong, though. I would have to confirm that.

[Megan Leslie, NDP, Halifax, NS]

Do you know anything about the costs of spills that we've seen, real spills, and how much companies paid versus citizens or governments?

[Ian Miron]

I actually do not have those numbers off the top of my head. I'm sorry.

[Megan Leslie, NDP, Halifax, NS]

Okay. That's fair.

I'm thinking about companies that actually have not been able to fulfill their obligation for compensation, companies that don't actually have those kinds of assets. Are you able to shed any light on that?

[Ian Miron]

I think that in some ways it's fortuitous that it was such a large company that had that spill in Kalamazoo, because they do have the financial wherewithal. Similarly, in the offshore context, in the Gulf of Mexico, we've seen that BP has the financial wherewithal, although now there's some question of whether their U.S. subsidiary is adequately resourced. I think there could be concern in the event of a major spill.

[Megan Leslie, NDP, Halifax, NS]

Keeping on with the polluter-might-pay idea, you've talked about how—I'm looking for the language you used—“there are no details on how to go about getting compensation”. Mr. Blakely points out that his analysis of the bill says that we probably haven't eliminated “the common-law right to sue”.

That brings me to your comment that the legislation isn't quite clear about what are the next steps. Can you expand a little more on that?

[Ian Miron]

Yes, I agree with Mr. Blakely that it not only preserves but also codifies the common-law right to sue in cases of fault or negligence. What this means is that it could take us 20 years to see any payment come out, as we saw in the Exxon Valdez situation, where the company was able to lawyer up to contest fault, to contest negligence, and to drag out the process through the courts.

Do you know what happened in that case as a result? Some of the victims died before any money was paid out. They didn't die from the effects of the spill. They died of old age.

I don't think it's appropriate to fall back on the common law, because we have these examples where it hasn't been effective in helping people recover compensation.

[The Vice-Chair, NDP, Guy Caron]

Thank you very much, Mr. Miron.

Ms. Leslie, your five minutes are up.

We'll move to Ms. Crockatt for five minutes.