Good morning, Mr. Chairman, and members of the committee. Thanks for the opportunity to appear before you today.
My name is Bob Bleaney, and I'm the vice-president of Ottawa, and eastern and Atlantic Canada at CAPP, the Canadian Association of Petroleum Producers. With me today via video conference in Calgary is David Pryce, CAPP's vice-president of western Canada, and Greg Stringham, our vice president of oil sands.
Before I start I'd like to establish that as shippers we are not experts in rail. Therefore, we're bringing our broader expertise to bear and our views as a user of rail services.
Our industry produces and transports three million barrels per day of oil serving Canadian consumers and export markets. This year the oil and gas industry will generate over $100 billion in revenues. These revenues serve as capital investment, labour, purchased goods and services, and government revenues of royalties and taxes.
Every molecule of energy that generates this revenue and jobs for Canadians must be transported from its source to the end market. Thus, sufficient, safe, reliable, and timely transportation capacity is critical to our industry and to the Canadian economy. For our industry, this includes pipeline, rail, marine, and truck transportation.
Approximately 200,000 barrels a day of crude is being shipped by rail in Canada today. It's expected to grow by about another 100,000 barrels a day in 2014, and could grow to as much as 700,000 barrels a day by 2016, providing further impetus for enhancements to the safety and integrity of transportation by rail.
As per this committee's 2008 rail safety report recommendations, Transport Canada and the rail industry were asked to develop action plans and assessment tools to monitor progress of safety management systems. CAPP views safety culture as key to overall safety management and important in safety performance improvement.
The oil and gas industry has long recognized the role played by a positive safety culture in improving personnel safety and in the prevention of major incidents.
With respect to safety management systems, these are commonly coupled with environmental compliance requirements, and have long been used to implement policy and standards consistently across organizations in our industry. These are subject to ongoing adjustment as new hazards and challenges confront industry, new personnel join the workforce, and new regulations are introduced.
It's worth highlighting that regulatory requirements as to proof of compliance can contribute to management systems that become over-documented bureaucratic mechanisms that do little to improve overall safety. We would caution that the linkage between management systems, control of risk, and personnel attitudes to safety can suffer as a result.
Regulators are in a unique position to provide leadership, clarify expectations, and support industry as it strives to improve safety performance, and we view there is significant opportunity to examine existing regulations to identify their effect on operator safety performance.
As shippers, we rely on the transporter's expertise, and expect that they have the mechanisms in place to ensure the safe transportation of our products.
CAPP supports recent Transportation Safety Board recommendations that would advance safety enhancements for rail operations. These recommendations include setting stringent criteria for the operation of trains carrying dangerous goods, as well as requiring railway companies to conduct route planning and analysis, and perform periodic risk assessments to ensure that risk control measures work.
It is critical that railroads are running a safe system. That is our expectation and their job, and view that Transport Canada should continue working with rail towards improving safety performance in these operations.
With regard to the transportation of dangerous goods, it's CAPP's view that a number of initiatives already in progress will play a key role in this committee’s review of the current TDG regime. These initiatives cut across the following three pillars: prevention, preparedness and response, and liability.
Within the context of these three pillars, Transport Canada has initiated a review of regulatory and policy requirements that will examine adequacy of railcar design, emergency response, and third party liability and compensation.
CAPP and our colleagues from the Canadian Fuels Association have been working collaboratively on these files, as was referenced by Peter in his presentation, and we offer a shared perspective across these three pillars.
The first pillar is prevention. With respect to the means of containment, proposed tank car regulations will replace existing standards, and will require that new DOT-111 cars be built with thicker steel requirements as well as adding top fitting and head shield protection to tank cars.
Industry supports an open, transparent, and risk-based review of the appropriate means of containment for the transportation of crude by rail.
Some crude products are less volatile than others. Therefore, a risk-based approach will ensure that during the transition phase, the higher risk crude types will be shipped in the higher standard cars as the older legacy cars are transitioned out. This will enable an appropriate timeframe for the replacement and/or retrofitting of the legacy tank cars, and support logistical requirements during the transition period.
In terms of preparedness and response, industry strongly supports enhancements to emergency response for higher risk dangerous goods but cautions, as Peter observed, that to date, undue focus has been applied to the existing emergency response assistance program, or ERAP, as being the appropriate delivery mechanism.
CAPP is of the view that the current local and single shipper-importer type ERAP system must be modified to enable a more comprehensive national system that can be run by the rail carriers.
CAPP is currently advancing discussions with the Railway Association of Canada and the Canadian Fuels Association with a view to seeking alignment and presenting a common solution to the government that would see development of a single preparedness and response entity for rail incidents involving flammable hydrocarbons.
As an immediate and interim step, a mutual emergency assistance agreement, which specifies and streamlines access to available member companies' resources, will be established among CAPP, the Railway Association, and Canadian Fuels Association members.
For the third pillar, liability, industry supports the polluter pay principle. This is already embedded in many existing liability frameworks. However, gaps within these liability frameworks have recently emerged.
While industry is of the view that the current rail liability framework is fundamentally sound, there is a need for more rigorous oversight and better alignment of liabilities to insurance so that all rail companies have the financial and management capability to manage an incident.
As design considerations for the rail liability and compensation regime are contemplated, Transport Canada will need to be mindful of implications to carriers and ensure that a risk-based approach is applied to liability requirements. Industry encourages Transport Canada to explore the possibility of creating a hybrid liability model that would leverage attributes from both marine and pipeline models.
A hybrid approach would enable smaller, short-line railways to be represented collectively, or by a pooled approach, an attribute associated with the marine model, whereas the larger class I railways can choose a self-insurance approach, an attribute more in line with the pipeline model.
In closing, we suggest the committee focus on opportunities for enhancement in the following areas:
With regard to safety management systems and safety culture, we suggest leveraging of existing best practices and bodies of research.
Over the last 10 years, a number of oil and gas industry organizations, particularly the American Petroleum Institute, the Society of Petroleum Engineers, and the International Association of Oil and Gas Producers, have published a wealth of information, recommended practices, and guidance on safety management systems, safety culture, and leadership.
Regarding additional measures to strengthen the TDG regime, consideration should be given to the harmonization of the TDG regulations with those of the United States Department of Transportation, where possible. This would include timelines for phase-outs of legacy tank cars and standardization of sampling and testing procedures for crude classification.
Let me conclude with a just a few key points.
CAPP recognizes that the stakeholders and the public are demanding improvements to the safety of transportation of dangerous goods. We want to ensure safe transportation of our products by all means, by pipe, rail, and marine. The safe and responsible production and transport of crude oil is the foundation of our economic well-being, and its importance cannot be overstated.
We look forward to the committee's report to facilitate the drive toward performance improvement, so as to ensure that oil and gas can be safely moved to markets where it's needed.
Thank you. We look forward to your questions.