Transport Committee on Oct. 26th, 2017

[Janet Drysdale]

We haven't engaged yet in terms of business councils. Certainly our focus has been on the R and D side. Ross can speak to some of the partners we've been engaging with in our fate-in-the-environment study and greenhouse gas life-cycle study. Our engagement on the commercial side has really been with interested producers at this point. We've shared some of our economic assumptions with them. They've built up some of their own models. They've looked at the analysis. Those are the discussions really, from a pure business development point of view, that are most promising.

[Vance Badawey, Liberal, Niagara Centre, ON]

I would encourage not just you at CN but also the business council to have those discussions with the federal government and with the BDC or EDC with respect to how we can move those agendas forward. It could be a whole new market for all of us.

Well done. Good job.

[Janet Drysdale]

Thank you.

[The Chair, Liberal, Judy Sgro]

Mr. Lobb.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Thank you very much.

Just out of curiosity, I don't have the numbers in front of me here, but for CN's projected capacity for the rail lines you have in Prince Rupert and Kitimat, what kind of volume would be an equivalent in barrels per day?

[Janet Drysdale]

Off the top of my head, I don't have that number, but certainly in terms of capacity constraints, the network that goes to Prince Rupert, for example, is high-quality rail. There is capacity on it. Certainly with the appropriate lead time, we have the ability to add incremental capacity to our network. To the extent that this moves in large volumes, it would move potentially in unit train service, open gondola railcars, very similar to the way that we would move coal today. Even at the port, the port handling would be very similar to the way that coal is shipped off the coast as we speak.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Okay, and quite likely there would be enough capacity if new refineries were built in either port area, enough volume to meet the requirements they would have.

[Janet Drysdale]

Yes. With enough lead time, we could bring the capacity required.

[Ben Lobb, Conservative, Huron—Bruce, ON]

I know it's your position that you would be outside the schedule and therefore exempt from Bill C-48, so maybe you don't want to say this right now, but inside the bill, is there any issue with how you would actually prove that you shouldn't be put in the schedule?

I know the minister made comments back in February when you made this announcement, that they were still working on the criteria regarding how that would be done. Has there been any discussion since February on how you would be able to prove out this product so you wouldn't find yourself on the schedule?

[Janet Drysdale]

Yes. We have done some work. In the product context, I don't think we necessarily have more information in the context of the bill itself. The key parameter of the bill that makes us outside the bill is really that the product would move in bulk freighters. It would not move in a tanker.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Madam Chair, that might be something on which, as we come to concluding our study, we could have the department officials come back to give us a better idea about the governor in council on this, and the regulations they plan to build into this on that. We'll have the legislation, but the department is going to build in the regulations on how this done.

For a corporation such as yours, if you do find you're on the schedule, you're going to want to be able to have a clear way to find yourself off the schedule, not in 10 years but in a timely fashion.

[The Chair, Liberal, Judy Sgro]

I'll make sure we take care of that.

Mr. Fraser.

[Sean Fraser, Liberal, Central Nova, NS]

Thanks very much.

I've been unusually silent this meeting. I have two quick questions and only a couple of minutes to get them answered.

First, assuming that with your partners you can produce the CanaPux at volume and in a commercially responsible way, can you get them to an export market on the west coast of Canada at a price that can compete with the current cost of getting Canadian petroleum products to export facilities that exist today?

[Janet Drysdale]

Every indication is that we can. The producers we've worked with so far, who have put the numbers in their own model, feel the same way.

The key thing is that it's comparable to the crude oil that's moving in a pipeline in which the diluent can be 30% to 40% of the product shipment. We have polymer instead of diluent. Polymer is much cheaper than the diluent. We can even use recycled polymer. It takes up much less space.

[Sean Fraser, Liberal, Central Nova, NS]

Are you looking at somewhere in the range of $4.50 for a barrel, or less, potentially?

[Janet Drysdale]

We think we're competitive, definitely.

[Sean Fraser, Liberal, Central Nova, NS]

Just to change gears, Mr. D'Avignon, I agree that we have to take advantage of ways in which we can get our resources to market, of course, in an environmentally responsible way. I spent some time working in the energy sector in western Canada. One thing that hasn't entered into this discussion to date is really our ability to produce versus our ability to export. If I look at CAPP's projections to 2030, I see that they're suggesting we're going to be just north of 5.1 million barrels a day.

When I look at our present export capacity and I factor in the Keystone—and it looks as though it's going to be going ahead, and the Trans Mountain project has been approved—I see our combined export capacity as somewhere in the range of 4.9 million barrels a day and our domestic consumption would easily make up the balance, I'd suggest. If there is a moratorium here, are we really limiting our export capacity or am I missing something? It seems as through it's spoken for with projects that are already in the pipeline, so to speak.

[Greg D'Avignon]

I think you asked one of the fundamental questions in front of government and the committee itself. Canada is resource rich. We have 172% more energy than we need to satisfy domestic demand. In the case of fossil fuels, we have one customer, which is the United States. Their exports to Canada have increased 10% in fossil fuel alone in the last decade. They built the equivalent of seven Keystone XL pipelines in the U.S. under the Obama administration and are net exporters, as of 36 months ago, to global markets.

The consequence is that there's a global competition for energy supply. Canada isn't playing because of the lack of access to markets and particularly with long-standing trading customers in Asia and South Asia that have relied on Canada and Canadian products for decades.

To your point, Mr. Fraser, I think the ability of this legislation to deal with diluted bitumen, which is a concern off the north coast.... I recognize that, particularly for first nations. The schedule actually precludes a variety of other products that have persistence levels much lower than those of diluted bitumen, which are being caught up in the legislation, and those include light tight oil as I referred to earlier.

The export capacity of another million barrels a day of that light tight oil—which has very low persistence but also very low refining requirements—means that could serve a market in Asia and South Asia that would be happy to take on that product with lower carbon content at a competitive price. It would mean economic benefits and also the ability for Canada, frankly, to continue to brand itself globally as a climate leader that is contributing to a lower GHG impact on energy consumption.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you.

I think there's one minute left. Mr. Graham, I think, had a quick question if he can squeeze it in.

Sorry, David.

[The Chair, Liberal, Judy Sgro]

There's about 45 seconds left.

[David Graham, Liberal, Laurentides—Labelle, QC]

I'm known for brevity, so that shouldn't be too much of a problem.

In the last hour, the Canadian Energy Pipeline Association said that they move about 1.2 billion barrels of oil per year with a success rate of 99.9% by volume, which I figure gives us a loss rate of about 120,000 barrels of oil. If we consider that's an awful lot of oil that could just go missing, your product of CanaPux is quite interesting. I find it fascinating. I know I have only about 10 seconds left. In practical terms, how easy is it to transport it? You just passed that around. It looks as though if you put a bit of pressure on it, it would pop and spray everywhere.

[Janet Drysdale]

No, actually the way it's packaged, there is actually air inside here and that helps with the compression in terms of the transportation. I could cut this open and there'd be no leaching. I could cut it into 20 pieces, and every individual piece would still float and wouldn't leach.

[David Graham, Liberal, Laurentides—Labelle, QC]

How long would that last? If you left a couple of container loads of this in the ocean for a few years, sitting there in bad weather, what would happen to that?

[Janet Drysdale]

Let me turn it over to Ross. That's one of the studies we're looking at.

[Ross Chow]

Absolutely. That's part of the phase of the environmental study that we're conducting right now. Unfortunately, we've not completed it yet but that is actually one of the key pieces we're looking at, its fate in the environment. In the next phase, we're actually going to reach out to the federal labs and look at the fate in marine environments.