Natural Resources Committee on May 2nd, 2016

[Katrina Marsh]

There's a conception, particularly with regard to the oil sands, that they're so high priced they're uncompetitive. But in 2014, if you look at the SAGD, the in situ production, the average costs were cheaper than they were in the U.S. They were cheaper than what they were in Norway and in Russia.

Half the industry is competitiveness. In this low-priced environment, just over the last year Canada's major companies required a $92 break-even price. That's fallen to $53 in the last year. It's more than a 40% tumble in cost—they have found efficiencies and inflationary pressures have been relieved.

Then there's the fact that innovation is happening. One of our members, Nsolv, has the next generation, the third generation of solvent-based technology, in the commercialization stage. It has a price of $50 for new builds. It's pretty cheap and it reduces GHG emissions by 80%. So the short answer is that innovation will keep Canada's sector competitiveness. We shouldn't assume Canada can't compete in a lower-price environment.

As for the carbon price, it would ideally be better if it was globally applied. There are things you can do, though, to reduce an economic impact. One of these is tax rebates. You take some of the money and make the program revenue-neutral. You're using what you're reducing on carbon, and you're playing with the tax system to help competitiveness, or you're investing in clean technologies that might have a competitive impact on the industry.

[Geng Tan, Liberal, Don Valley North, ON]

There's still a margin of profit available for the industry?

[Katrina Marsh]

It's hard to generalize, because it's project-based. You have some projects that are very competitive and some that aren't. It depends on how you built it and what kind of wiggle room you have.

[Geng Tan, Liberal, Don Valley North, ON]

Okay.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

In a recent op-ed, Mr. Beatty, your president and CEO, suggested that Canada's review process of energy infrastructure projects, namely pipeline projects, has been inefficient, unpredictable, uncertain, and over-politicized. Do the environmental assessment reforms increase efficiency and predictability, specifically in regard to pipelines and energy east? What else could government do to streamline that process and make it more robust for industry? What role can industry play in this?

[Katrina Marsh]

I'm not sure “streamlining” is the right word. I'm not sure what we're looking for in the way of streamlining. I'll repeat: we don't necessarily want it to be an easy process.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

That wasn't my intention either.

[Katrina Marsh]

We know the impact of changing in midstream; we know that makes people nervous. We don't know whether it's going to achieve the result we want in terms of getting a greater buy-in from communities, and we are a little bit skeptical that that's going to result. We're worried that the delay is going to make it a more politically difficult situation; it comes closer to an election, and whatnot.

Overall, it's a little bit of a wait-and-see in our membership. We've heard that the intent is to improve the acceptance of the system, but we're not sure that's going to be the result.

Does that answer your question?

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

I think so.

Within that context, what else can industry do to further that process?

[Katrina Marsh]

That's the million-dollar question.

I know there is a big project at the University of Ottawa run by Monica Gattinger. They're looking at that very question, at how these processes work and what actually works to convince people.

It's a question that's not just for oil and gas. If you look at what happens around wind farm approvals in Ontario, and even around getting a light rail system for Ottawa and the community impacts there, the question of the age is about how you build public trust.

We're not sure what the full answer is.

[The Chair, Liberal, James Maloney]

I'm going to have to cut you off.

[Katrina Marsh]

But I would say that making the case publicly by our politicians would be part of it.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

Thank you.

[The Chair, Liberal, James Maloney]

Thank you both very much.

I appreciate, Ms. Marsh, your coming in, and, sir, for making yourself available in that balmy climate in Victoria.

We have to move on to our next segment. We're going to suspend the meeting for five minutes, because I understand we have to do some technical transitioning to the next segment.

Thank you very much, both of you.

[The Chair, Liberal, James Maloney]

Okay, we're going to resume.

Just as a preliminary matter, we've been provided with some notes on behalf of the Canadian Energy Pipeline Association, but they're in English only. Pursuant to our procedure, we can't distribute them unless they've been translated. Does anybody want to distribute them and suspend our rules with respect to translation for the purpose of this witness? Or should we adhere to the rules and not distribute it?

[An hon. member]

Denis is okay with it.

[The Chair, Liberal, James Maloney]

Okay. We'll have the French translation later.

Thank you.

With an eye on the clock, this segment will take one hour, we have a few housekeeping matters we're going to have to deal with after that, which means we won't get out of here until a quarter to six. Does anybody have any...?

What time do you have to be out of here?

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

At 5:30. You could just shorten the whole round.

[The Chair, Liberal, James Maloney]

Okay, we'll have to shorten, so let's get moving then.

We're going to finish at 5:25 because we do have some procedural issues that we have to deal with.

I'll dispense with long introductions, gentlemen, my apologies. I just want to say thank you very much for coming.

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

On a point of order.

Chair, I don't think you can just arbitrarily extend the meeting, because there are members who can't be here past the set time. Maybe the clerk could tell us that, but I don't think you can just make the meeting go longer.

[The Chair, Liberal, James Maloney]

I wasn't, that's why I asked.

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

Okay, thank you.

[The Chair, Liberal, James Maloney]

With less time, Mr. Bloomer is the president and chief executive officer of the Canadian Energy Pipeline Association, and Benjamin Dachis is a senior policy analyst from the C.D. Howe Institute.

I will turn it over to Mr. Bloomer, who will speak first.

[Chris Bloomer, President and Chief Executive Officer, Canadian Energy Pipeline Association]

Thank you so much.

My name is Chris Bloomer, and I am president and CEO of the Canadian Energy Pipeline Association. As you may know, the association represents 12 of the major transmission pipelines in Canada, We transport 97% of Canada's crude oil and natural gas production, and we operate about 119,000 kilometres of pipeline across Canada.

Reductions in greenhouse gas emissions and the related shift in energy systems have become a critical priority, however the need to sustainably develop Canada's rich natural resources and get those resources to the highest value market is also critical. This is evident in the growing demand for energy across the globe. The International Energy Agency projects that by 2040 the world will need 37% more energy than is produced today. All sources of energy, including renewables, natural gas, and crude oil are needed to meet these growing energy requirements. This statistic, combined with the vast oil and natural gas reserves found within our borders, means that we have an opportunity to not only ensure Canada's energy needs are met with Canadian oil and gas, but also tap into high-value markets that could benefit the entire country through employment opportunities, increased government revenues, and overall economic growth.

Transportation infrastructure is required to meet these growing energy needs, and pipelines remain the safest and most efficient and the lowest greenhouse gas-intensive way of moving energy over long distances.

Canada contributes less than 2% of the world's greenhouse gas emissions, and CEPA members who operate Canada's transmission pipelines are responsible for a negligible part of those emissions. Despite the limited impact our members have on global emissions, our industry is still committed to being even better, through improving on existing technology and advancing new ones.

With this in mind I'll be focusing my opening remarks on your study's focus on economic opportunities in innovation, as well as our industry's commitment to continuous improvement.

I'll begin with economic opportunities. Canada's pipelines deliver the energy that heats our homes, powers our industries, and fuels our vehicles. What is less visible is the impact the pipeline operations have on our economy every day. Existing pipeline operations in 2015 added $11.5 billion to Canada's gross domestic product, sustained an estimated 34,000 full-time-equivalent jobs, and generated about $2.9 billion in labour income. A conservative estimate of the total GDP contribution over the next 30 years from existing operations is $175 billion.

These numbers do not include additional economic benefits that could be achieved through more diverse and better market access.

CEPA members propose to invest $50 billion or thereabouts in pipeline projects in Canada over the next five years. If approved, these projects will provide access to global markets, as well as enhanced access to refining capacity in the U.S. and eastern Canada, resulting in billions of dollars of additional government revenues and employment income. Recent estimates have concluded that if all the proposed pipeline projects proceed, the gross netback improvement for the energy sector is estimated at $663 billion over 20 years of operation. That's $33 billion per year. The benefit of hard netback prices flows directly to crude oil producers, and indirectly to the overall Canadian economy in high royalties and taxes.

I'll focus my next comments on innovation and steps that our industry has taken to earn trust by demonstrating commitment to safety and environmental performance.

CEPA member companies invested more than $23 million in 2014 alone on innovative technology, and over $2.9 billion in monitoring and maintenance to ensure the safety of their pipelines.

Canada has a proud history of pipeline construction and operations dating back to 1853. Since that time pipeline networks have expanded to deliver energy across the continent. Ongoing advancements in technology and innovation have vastly improved the safety and performance of this infrastructure. This in turn helps to build public trust and continued right to operate.

Pipeline companies are undertaking a broad variety of initiatives to reduce their impact on the environment. This includes applying best practice, best design, and risk-based maintenance projects, directed inspection and maintenance programs to manage fugitive emissions and regular pipeline integrity analysis.

Pipeline companies also maintain call-in centres and run public awareness programs to avoid third-party damages, which is a very serious issues, and to promote demand-side management. You might recall that April was “Dig Safe Month”, and there was a big promotion on that. We take that kind of contact very seriously.

Technology and innovation continue to develop. Smart pigs, first developed in the 1960s, improved in the 1970s to include electromagnetic and ultrasonic detection technologies, enabling pipeline operators to more accurately detect wall thinning along a pipeline. Further advancements have led to the ability to detect anomalies such as fatigue cracks and dents, or other damage to the pipeline. The use of GPS positioning can now help pinpoint the location of a pipeline wall anomaly.

Pipeline monitoring technologies also continue to advance. Electronic supervisory control and data acquisition, which everybody knows as SCADA, systems have become prevalent and have now evolved to systems using Internet, cellphone, and satellite technologies able to provide two-way communications and implement complex control algorithms. This technology allows operators to know, with precision, what is happening throughout the pipeline, and enables a quick and efficient response to any issues that may arise, seven days a week, 24 hours a day.

CEPA is also actively addressing stress corrosion cracking, locating cracks that develop on the outside of a buried pipeline. Faced with this new phenomenon in the 1990s, CEPA brought together experts from member companies, industry experts, and researchers, and through this, recommendations around best practices were developed.

More recently, since 2013, CEPA members have conducted ground-breaking research in leak detection by using a state-of-the-art pipeline simulator known as external leak detection experimental research, or ELDER. This facility is located in Edmonton, and it allows researchers to evaluate external leak detection technologies. This technology was developed with the assistance of federal government funding. Pipeline operators also collaborated with the Alberta Ministry of Innovation and Advanced Education to fund research to test new leak-detection technologies such as vapour-sensing tubes, fibre optic distributed temperature-sensing systems, hydrocarbon-sensing cables, and fibre optic distributed acoustic-sensing systems. These are just a few of the examples of industry-wide advancements in technology and innovation that have led to safer operations and better environmental outcomes.

The importance of research and development cannot be overstated. It has been and will continue to be a significant contributor towards making transmission pipelines safer, and lessening the environmental impact of pipeline construction, operations, and eventual retirement. The government's focus on innovation agenda supports this important work and is welcomed.

My third comment will focus on our industry's commitment to collaboration and continuous improvement. Public expectations are higher than ever. Canadians need reassurance that we are doing everything necessary to remain an environmentally friendly and safe means of energy transportation. This is accomplished, in part, through sharing best practices and adopting industry standards. The alignment is evident through CEPA and its members' paths towards strengthening safety culture, through both individual and collective initiatives, some of which are already well rooted, and others that are works in progress but are progressing rapidly towards a goal of zero incidents.

An example of how we are addressing this commitment is CEPA's integrity first program, an industry-driven approach that enables CEPA members to strengthen performance, communication, and engagement by jointly developing and individually applying common practices. These collaborations are of significant benefit to Canada; however, we believe further collaboration among government, industry, and the research community would have an even greater impact. Pipeline companies are already supporting and investing in research projects at Canadian universities to uncover new approaches to pipeline safety and integrity. These include programs and councils at the universities of Waterloo, Calgary, and British Columbia.

Due to the diverse and vast landscape across Canada, our transmission pipeline industry is uniquely positioned to be a world leader in pipeline technology. In order to realize the full potential of this unique position, the most effective and efficient path forward is through strengthening an innovation agenda. To this end, we believe that a well-coordinated, collaborative approach to research and development in Canada is the best and most efficient way to advance the safety and reliability of pipelines.

To conclude, we acknowledge that energy mixes will change over time. However, currently, oil and gas are required by Canadians, and therefore pipelines are essential. As an industry, we have collaborated and will collaborate to develop, apply, and adapt new innovative technologies that protect and respect the environment, and at the same time deliver socio-economic benefits to the country as a whole.

We are committed to improving our record, and to a goal of zero incidents. Pipeline operators and various industry partners, including government and the research community, have shared the responsibility and the space. This will ultimately lead to more efficient and effective advancements in technology, science, and innovation in the pipeline industry. Ultimately, this is key to building public confidence.

With that fast run-through, I welcome your questions.

[The Chair, Liberal, James Maloney]

Thank you very much, sir.

Mr. Dachis, over to you. Then we'll go to questions.