Natural Resources Committee on May 30th, 2016

[John Barlow, Conservative, Foothills, AB]

Perfect. One comment you made I'll ask you to expand on a little bit. You said greenhouse gas emissions are going to be reduced in years to come due to more production and use of LNG and natural gas as we start to move away from oil and coal. Can you explain the process and how you see that rolling out? Are there some numbers associated with that in terms of how much greenhouse gas emissions might be reduced?

I ask this because we are talking about implementing carbon taxes and starting to regulate upstream GHGs, but if these things are already happening organically, do we need to add further restrictions and bureaucracy and red tape on our energy sector when perhaps they're going to address some of these things on their own?

[Shelley Milutinovic]

Our analysis didn't look specifically at the GHG projection, but it had, in all of our cases, fossil fuel-use increases over the projection period, which implies an increase in GHGs in all of those scenarios whether low-priced, high-priced or otherwise.

What we do see over the forecast period is GHG per unit of economic activity decreasing by about 1% a year but economic activity increasing, so there will be continued growth.

[John Barlow, Conservative, Foothills, AB]

I think I have time to fit one last question in. I want to get back to that constrained case again, if you don't mind. You said there would still be growth in the industry of about 8%. What would be the potential growth in that industry and the Canadian economy if we had those pipelines in place, not in the constrained case, but if the Trans Mountain and Energy East pipelines were approved, for example?

[Shelley Milutinovic]

Production was about 8% less in the future years with it. By 2040, instead of producing 6.1 million barrels a day in the reference case, we'd be down to 5.6 million barrels a day.

I think the impact on the Canadian economy by 2040 would be around 3% to 4% lower because of that constraint.

[Jim Fox]

Just to clarify, the reference case actually doesn't put in a pipeline constraint. In our reference case, which has oil production growing to 6.1 million barrels per day, all the oil would find transportation to market.

[The Chair, Liberal, James Maloney]

Mr. Cannings, we will go over to you.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thanks again to Mr. Fox and Ms. Milutinovic for being here today, even from afar. It's good to see you again.

This morning the CBC released a draft report they received through access to information. It's a draft report from Policy Horizons Canada, a federal government think tank. The report states that “it is increasingly plausible to foresee a future in which cheap renewable electricity becomes the world's primary power source and fossil fuels are relegated to a minority status”. The report goes on to urge caution when it comes to long-term investments in pipelines and other oil and gas infrastructure, stating that such investments could be at high risk of becoming economically unviable as prices in renewable electricity further decline.

The story on this report quotes two experts in the field, Marty Reed, CEO of Evok Innovations in Vancouver, and Michal Moore of the University of Calgary, who we had as a witness to this committee earlier.

Mr. Reed is quoted as saying, “at a high level, I would say the vast, vast majority of what they wrote is not even controversial, it's very well accepted."

Mr. Moore is also quoted as saying that these are very realistic findings.

I have two questions. Would you agree with Mr. Moore's and Mr. Reed's statements that these findings are well accepted and realistic? Secondly, how does the NEB factor in the rate of growth of renewable energy sources on the demand for fossil fuels?

[Shelley Milutinovic]

First of all, I haven't read the report itself, so I can't comment on it. With respect to these forecasts and how that might differ from what's there, these forecasts were locked down last August, and since that time there's been a tremendous amount of activity in Canada with respect to climate change and responding to that.

We've had the commitments that came out of the COP21. We have a new energy policy in Quebec. We have Ontario and Manitoba joining Quebec and the Western Climate Initiative. We have Saskatchewan—let's move across the country—going to 50% renewables in power generation by 2030. We have the carbon tax, the cap on oil sands emissions, the methane reductions, and other things in Alberta. B.C. is committed to the methane reduction and looking at making some changes to its climate. A lot has changed since these numbers. When we rerun these numbers this year, we'll have policies that are closer and different than they were. We'll have to wait and see the outcome of that to see how that will affect things.

You asked about the analysis. We look at the provincial plans and look at plans utility by utility, and those plans will undoubtedly have changed given the policy changes that have been occurring in the last year. All that is to say that we'll see how it all sorts out when we do the next version of Energy Futures, which we're targeting for this fall.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

You don't have any speculation on how that might affect some of these very important graphs, figures, and numbers that we're looking at? They are germane to our study, I would say, and now you're saying they're not very useful.

[Shelley Milutinovic]

Well, it's hard to imagine that those trajectories for fossil fuel use aren't going to come down, but we'll see the extent of it when we see what the modelling results in.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Okay.

Earlier this year we had a report from the environment commissioner here in Ottawa who found that the NEB wasn't really—I'm just trying to find the quote here—keeping track of the restrictions placed on pipeline projects. It was putting restrictions on but wasn't following up to see if those conditions were met. I just wondered if there were policy changes or internal changes that have been done by the NEB to ensure that that has been fixed.

[Jim Fox]

Absolutely. We've been working since we went through the audit, and we would, of course, have seen the findings before they were made public, which is the general process. Once we recognized, through the Auditor General's work, the gaps that we had in some of our own record keeping, we immediately started to put in place changes as to how we keep the records.

We put in place new electronic systems to gather and maintain those records. We've now published on our website a list of all of the conditions that we put on pipelines and where they're at. Have they been complied with? Are they in progress? Are they still pending? We've made a number of internal changes that allow us to ensure that we are tracking the conditions that we put on projects, that we know what the situation is with those, and that our records can easily be found to show where we're at with a given condition and given requirement, and whether or not it's been complied with and whether or not follow-up action is necessary.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I have a quick question on process again. At some of the earlier hearings, the process was criticized, particularly by Kinder Morgan, for the amount of input that came from communities and the lack of the cross-examination in those hearings. Is that going to be changed in future hearings? Do you get directions from the minister on that, or is it an internal decision on your part?

[Jim Fox]

The NEB's hearing process can take a variety of forms, as it does in different projects. There was not oral cross-examination during the Trans Mountain expansion hearing. There is in some other hearings, but that doesn't mean that the evidence that was put on the record was not tested; it's just tested in writing. There was a great deal of evidence. We were put under a specific, set time constraint by the National Energy Board Act, and it was determined that the best approach was to do in a written way what would have been oral cross-examination possibly in other circumstances, which is a little bit faster.

[The Chair, Liberal, James Maloney]

Thank you. I'm going to have to stop you there.

Mr. McLeod, now it is definitely your turn.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair, and to presenters as well.

I have to admit that I'm a little surprised at some of the presentations, wherein you indicated that there really are no shortcomings anymore at the NEB, that you're well resourced, and that things are going fine, when the report of the Commissioner of the Environment and Sustainable Development pointed out that the information systems used by the board were “outdated and inefficient” and that “public access to information” on pipeline improvements could be improved. We've heard from a number of people over the last while, and we've also heard from the area I represent, the Northwest Territories, about how they do their reviews.

From what you've said, it seems that things are working well. You've incorporated all the reforms that are needed, you've addressed all the findings made by the commissioner, and you're working on rebuilding public confidence. I like what the Mackenzie Valley Environmental Impact Review Board is doing in the Northwest Territories. They have the confidence of the north, and the population is reflected in their board. Fifty per cent of the people on their board are aboriginal. They have people from the communities sitting on the regional boards and reviewing the process. We have the Mackenzie Valley Land and Water Board that's in place, issuing permits and also doing reviews.

Could you talk to these two different areas that I've raised? The first is that, yes, you've done all the reforms that were required, and everything is working well, as flagged in the commissioner's report, and second, that you are able to represent the north through having people on your board who are familiar with the north and who are aboriginal. Can you talk to those issues?

[Jim Fox]

Yes, absolutely. I may have misspoken, but I didn't intend to give the impression that we think everything is working well. We know that we have strides to make to gain the trust of Canadians and to be as transparent and as effective a regulator as Canadians deserve.

The question I was answering was whether or not we needed more resources to do that. The board got a significant increase in its resources in budget 2015, and we're working to implement those changes to our information systems, to modernize our processes, and to be the regulator that we think we can be. We're going there. We're maybe not there yet, but while systems are being built, we're doing what we can to fill in the gap, to be more transparent, and to demonstrate to Canadians that we are actually following up on the requirements we have, that we understand where they are, that we understand how companies are doing against those requirements, and that we're providing appropriate oversight.

On the things that are working well, I think what I'd rather say is that the board feels it has the appropriate resources to ensure that they will work very well for Canadians in the future. We're striving to get to that place.

On the membership of the board, the board is an organization, and the board members don't have any say in who gets named to the National Energy Board. That choice is made by the Governor in Council. We don't have an involvement in that process. Our members come from across the country, all the way from Labrador out to the west coast of Canada. We have a number of members who have significant experience in the north, but those choices are actually made by someone outside our organization.

[Michael McLeod, Liberal, Northwest Territories, NT]

My question was more to point to the fact that there really are no aboriginal members on your board, and you really don't have anybody from the Northwest Territories on your board either.

I know, Mr. Chairman, given my history with the energy board, that there is a lot of confidence-building that needs to be done in the north. Devolution has taken place and a lot of the responsibilities have evolved, but there are still areas where this board operates.

Are there ways you can point to where you're going to engage the aboriginal people and engage the traditional communities in the Northwest Territories?

[Jim Fox]

I will correct you there. The board's most recent appointee, Dr. Keith Chaulk, from Labrador, is an indigenous person. The board is trying a variety of different methods to appropriately engage with all the indigenous peoples and all Canadians who come and interact with either a board process or a facility that's regulated by the board.

Going out, we have a program for engaging indigenous peoples that is something a bit beyond my actual area of competence, but it's in place to meet the needs of indigenous communities wherever in Canada they happen to be and to adapt the board's methods to ensure that we can engage with the people and understand what the concerns might be, and to understand what information they may need from the board to appropriately build opinions and undertake the work they need to undertake around board-regulated facilities or in board processes.

[Michael McLeod, Liberal, Northwest Territories, NT]

I have one final question.

I'm glad to hear there is an aboriginal appointee. There hadn't been for some time, and this is something we have raised a number of times over the years.

Would you be able to provide us with an engagement strategy of how you plan to deal with aboriginal peoples in light of all the discussion and the government's commitment for nation-to-nation discussions on various issues?

[Jim Fox]

We can endeavour to provide you with some details on our aboriginal engagement strategy, in writing, after the meeting.

[The Chair, Liberal, James Maloney]

You have about four seconds.

[Michael McLeod, Liberal, Northwest Territories, NT]

I appreciate that. I look forward to seeing that information.

[The Chair, Liberal, James Maloney]

Thank you.

Ms. Bergen, over to you.

[Candice Bergen, Conservative, Portage—Lisgar, MB]

Thank you very much, Mr. Chair, and thank you to Mr. Fox, and Ms. Milutinovic, for being here with us today.

I'm from Manitoba, and for the record I do want to say that the National Energy Board worked very well when it came to approving the pipelines that have recently been built, that have gone through Manitoba and helped create jobs and moved our natural resources throughout Canada and down to the U.S. The first Keystone pipeline was approved during the last 10 years.

I have a sheet in front of me of all of the work that you folks have been doing. For oil pipelines, the table shows that 10 pipelines have gone through the National Energy Board process since 2006 and been approved. Four of those have been built. The others are in the process. There are also 12 gas pipelines. That's 23 in total, and of those 17 have been built. I would say that we should be proud as Canadian legislators of the good work you have done.

I find it disappointing that in the last six months we've had a government that has undermined so blatantly the work that you do. For the record, in Manitoba, we want to keep the jobs being created that these pipelines bring, so thank you very much for the work you have been doing and that you continue to do.

I do want to ask you a couple of questions in regard to the new process the government has put in place with the additional five steps. I think you were asked how it could build confidence, and you answered quite honestly in the same way that the rest of us are responding. We don't know how this will build more confidence, because much of it is redundant, and it's not measured in any way. Can you tell us what you are already doing in terms of consultation with first nations and communities, as well as the science-based evidence you look at in terms of GHGs? I know you haven't looked at the upstream, and we've heard a lot of testimony in recent weeks that upstream GHGs should not be accounted for or against a pipeline project. I know there are other things you look at in terms of the environment, so could you talk a little about the consultation you already do and the environmental assessments you already do?