Natural Resources Committee on March 31st, 2015

[Ian Miron]

That's right.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

I put this question to the government when they testified and I think maybe even to the National Energy Board. Do you think there should be public reporting on the processes the government uses to assess non-use losses and how much they will seek to recover, and what the outcomes are of seeking that recovery?

[Ian Miron]

I think this goes back to the need for more clarity around how those damages actually work. There's not even a power to make regulations regarding those damages right now. I think you could probably fit that into such a regulation.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Perhaps someone else wants to comment on that. Maybe Mr. Donihee might have some interest in that since there is potential for the government to seek recovery, but there isn't really any clarity when and how much they will pursue.

[Jim Donihee]

My understanding of the bill at this point in time is that in fact it is unlimited liability where the pipeline would be deemed to be at fault for the release that has occurred.

You do, in effect, have the opportunity to seek recovery to whatever amount would be necessary. In the event that you have some aspect of third-party damage, it does indicate the potential for a cap at $1 billion, but clearly still permits the discretion to recover such costs as the tribunal or the board deem to be necessary.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Mr. Donihee, I have a second question for you, and I put this question to the government and National Energy Board as well.

The current legislative regime—and I think some of the amendments go to this issue—allows for a system of government inspection, but also a great deal of self-inspection by the pipeline owners and operators. In many cases, they also allow the company to hire a consultant to do that inspection.

I'm advised by the government that these reports done by private inspectors are not publicly available. Do you think that could be a factor in lessening public confidence in the fact that the pipelines are being properly inspected?

[Jim Donihee]

The bill does provide for increased monitoring, and I think the industry is wide open to that. There's certainly a desire on our part, as I indicated during my own remarks, to enhance the transparency of operations because it's key to gaining and sustaining the trust of Canadians.

To the extent that monitoring and those inspections are currently done by the NEB, they're part of a public process. To the extent that they're contracted by third parties and done within the operations of the companies, at this point in time, the content remains that of the companies.

I think ultimately, in terms of earning the trust of Canadians, there would be little objection to ensuring that we make it fully known that we show the nature of the operations. As we further the development of the integrity first program, which I spoke to, you are going to see much more public reporting at an industry level—and also giving consideration, eventually, to reporting at an individual company level.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thanks.

Am I hearing you correctly? You're saying that there may be more openness by the pipeline owners and operators to making these privately prepared pipeline inspection reports public.

[The Vice-Chair, NDP, Guy Caron]

You have about 10 to 15 seconds, Mr. Donihee.

[Jim Donihee]

Yes, I think that's absolutely worthy of consideration. I'd like to understand the nature of the concern and then gladly take it up with the member companies of CEPA.

[The Vice-Chair, NDP, Guy Caron]

Thank you very much, Mr. Donihee and Ms. Duncan.

We now move to Mr. Regan, for seven minutes.

[Geoff Regan, Liberal, Halifax West, NS]

Mr. Donihee, how should we decide what the absolute liability limit ought to be? What should be the criteria for calculating at what level you ought to set the absolute liability limit?

[Jim Donihee]

I think the limit, to this extent, has been set largely by some worst-case considerations that we have seen. I think one of the other panellists spoke to the total costs related to...call it a “worst-case situation” that transpired with one of our member companies. I think it has exceeded the billion dollar mark at this point.

As I indicated in my own comments, I think there is a cost to be borne by these companies in ensuring access to these funds. In no way, as I have indicated, is there any desire to limit their response requirements.

However, I think it's incumbent upon good government to ensure the costs that are induced by a risk-based approach to this, as I said earlier with respect to likelihood versus consequence, are considered as you seek to determine what the proper numbers should be.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much.

It may be that other witnesses, as I ask them other questions, may want to add to or respond to that.

Mr. Olszynski, I think you were saying that instead of using the phrase “non-use damages”, we should be using the phrase “environmental damages”. Is that defined elsewhere in legislation?

I'm trying to get my head around this. Is it possible that “non-use damages” could be a broader phrase than “environmental damages”.

[Martin Olszynski]

To the first question, yes, that's what I am proposing, that in proposed paragraph 48.12(1)(c) the reference be changed to “environmental damages”.

As I tried to set out in my remarks, environmental damages could be seen as the biggest envelope. Within that you have your two categories of “use value” and “non-use value”. That's the universe of environmental damages.

As to why I referred to the sentencing provisions, exactly; there are in fact ten pieces of federal environmental legislation that refer to damage to the environment and then define that very simply as the loss of use value and non-use value. In fact now the NEB Act, as amended by this bill, would have that definition, but it only operates in the context of the sentencing provisions.

I think the reason it's been written this way, in the context of the civil liability provisions, is due to this idea that perhaps use values were dealt with sufficiently under proposed paragraph 48.12(1)(a), which refers to “actual loss or damage”. I want to make it clear that some of those damages, probably some use values, probably would fall within that category, but certainly not all of them. So this is to ensure that it's comprehensive.

Again, bear in mind the restriction that was referred to earlier. The proposed paragraph 48.12(1)(c) damages—this reference that I'm suggesting to environmental damages—is only available to governments. That's consistent with similar legislation in other countries. It would essentially ensure that those damages would cover the full suite of environmental damages, but at the same time wouldn't result in double counting or anything like that.

[Geoff Regan, Liberal, Halifax West, NS]

Who should be able to sue for environmental damages?

[Martin Olszynski]

I'll answer the question more of who “does” right now. The “should” is maybe a bit trickier.

In other jurisdictions, such as the United States, this is a power generally confined to governments, the federal government in the U.S. and state governments. It is a bit broader in the U.S. in that state tribes are also authorized to sue. The reference under the American legislation, under CERCLA and OPA, is to trustees, that being the federal government, state governments, and state tribes.

I have in the past, blogging about Bill C-22, or ESSA, suggested that there might be scope here to broaden the category to recognize aboriginal governments, Indian bands and such, to claim for such damages within their territory. You could expand it to include municipalities. With the disaster that happened at Lac-Mégantic, amongst the tragic loss of life was also a massive environmental catastrophe. It seems to me that the municipality there should be empowered as well, frankly, as a representative of the people.

I guess my bottom line, to try to keep it simple, is that governments, various levels of governments, generally are accepted as being the right parties to sue for such damages.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you.

Mr. Miron, I'm wondering if you could talk about the interaction between this bill and subsection 42(1) of the Fisheries Act, which provides for unlimited absolute liability for government response costs under that act.

[Ian Miron]

Certainly.

If a pipeline spill got into waters containing fish and caused a deleterious effect on those fish, subsection 42(1) of the Fisheries Act could have come into play to make companies absolutely liable for an unlimited amount of spill response costs. Bill C-46 basically closes that option off. Those are no longer recoverable under Bill C-46.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you.

Mr. Blakely, you said, I think, that the NEB needs to have the ability for creative solutions. You talked about the nature of both discretion and capacity in the NEB.

Are you able to give us some examples of how that would work, and what you've seen that might work?

[Robert Blakely]

Let's say someone is suggesting that they're going to build a pipeline through difficult terrain. Give the NEB the ability to go out and find the right people to give it expert opinion. Have people within its ranks who can give advice to the board. Have the ability to be able to....

When the submissions in support of a pipeline go in, we're not talking about a nice, neat package of 12 pages of material that anybody can parse. It is millions of pages of material. It can't be just poundage; it has to be absorbed by someone who's saying “There's a hole here, there's a hole here, and there's a hole here”. That's what I want to see the National Energy Board be able to do. Better solutions come from being better equipped to understand what is actually being asked.

[The Vice-Chair, NDP, Guy Caron]

Thank you very much, Mr. Blakely and Mr. Regan.

We now move to a five-minute round of questions and answers.

We'll start with Ms. Block, followed by Mr. Trost.

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

Thank you very much, Mr. Chair.

I know I made a comment last week in camera that I thought you did an excellent job of chairing our committee, and I want to put that on the record today. I think you're doing a fine job today as well.

I want to thank our witnesses for being here. This has been very interesting testimony. I appreciate the recommendations that have been made here today.

I'm going to focus my questions on Mr. Blakely and Mr. Donihee.

I appreciated it when you said, “A pipeline is an infrastructure link”, Mr. Blakely, and that a failure to build a pipeline has a restraining effect on the industries that depend on it.

I would like to give you an opportunity to elaborate or describe for me the kinds of jobs that are created from building and maintaining a pipeline, and potentially how many jobs we may be looking at when you consider some of the proposals that are in front of us right now.

[Robert Blakely]

The pipeline itself is done by four principal crafts: the pipefitters, who do the welding and fitting the pipe up, and work on the pumping stations and the facilities; the operating engineers, the guys on the sidebooms, the cranes, and the backhoes who operate the heavy equipment; the teamsters who operate the big trucks that string the pipe; and the labourers who do the skid hustling and who are really the maids-of-all-work, doing everything from the guy they call the “band-aid”, who's the first aid man, through to the straw boss, through to the whatever. There's another group of people who come in and X-ray, or it's now called integrated phased array...whatever. It's become much more complicated than it was in my day.

To do a fair sized pipeline of 300 kilometres, there will probably be two or three spreads for two seasons, probably employing upwards of 6,000 people. If it is an oil pipeline, it means we will have thousands of people in a variety of trades, including plumbers, boilermakers, millwrights, iron workers, sheet metalworkers, insulators, labourers, scaffolders, carpenters, and the occasional elevator constructor. I should have a list of all my affiliates are, shouldn't I? About 60 trades are involved.

The pipeline that has 1 million barrels through it, like Energy East, needs an infrastructure that costs, let's call it, $10 billion to build. Roughly translated, $10 billion in infrastructure takes 65 million work hours to construct. If we assume for the moment that it took 6,000 people to build it, which is not a bad estimate, those 65 million hours will result in a hundred full-time jobs. Of those hundred full-time jobs, 40% will be trades jobs to keep the place running.

Twice a year or perhaps once a year, depending on the place, roughly 3,500 people will descend on that facility for 42 days, basically rebuild it, and then disappear.

For us, these jobs are not petty. These are big-time, shoot-a-dime, work opportunities. They are the opportunities in which we get to train the next group of tradespeople. Where Canada sits right now, the construction workforce is basically a baby boom workforce. No one thought the baby boomers were ever going to retire. We're going to fool them. We're all going somewhere around June 16, 2016. We're looking at replacing, call it 350,000 people, and 40% of all of our managers and supervisors in the next seven years. We need ongoing work in order to train the next group that's coming.

I'm getting preachy now because this is near and dear to my heart. When you look at it, the jobs that are on the pipeline are only a pale reflection of the jobs that are created on both ends of that line.

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

Okay.

Am I done?