Transport Committee on Oct. 31st, 2017

[Robert Hage, Fellow, Canadian Global Affairs Institute, As an Individual]

Thank you very much, Madam Chair.

I should say that I've timed my remarks. They're five minutes and 30 seconds, so perhaps you would grant me the other 30 seconds.

During my 38 years in the Canadian Foreign Service, I have had the opportunity to work in the department's legal bureau, including a period as director general for legal affairs. I was also a representative for Canada at the UN Conference on the Law of the Sea.

I have written two articles relevant to the committee's work for the Macdonald-Laurier Institute. The first is the “Legal Aspects of an Oil Tanker Ban: Bill C-211”, which I wrote in 2012; and “Risk, Prevention, and Opportunity: Northern Gateway and the Marine Environment”, which I wrote in 2015.

Bill C-211 was the last of five Liberal or NDP private members' bills between 2007 and 2011 to legislate an oil tanker ban on B.C.'s west coast in an area north of Vancouver Island. I wrote that this “opens a Pandora's box of issues involving the United States, including Canada's historic claims to these waters, the Alaska Panhandle boundary, the passage of nuclear submarines, innocent passage, and fishing rights.”

All five bills ban tanker traffic in the Dixon Entrance, Hecate Strait, and Queen Charlotte Sound, an area under Canadian legislation known as fishing zone 3. The key issue is the nature of the Alaska boundary, called the A-B line, adjacent to Dixon Entrance. Canada claims that the 1903 British-American arbitration, which delimited this boundary, created both a land and maritime boundary. The U.S. position is that the A-B line is a land boundary only and does not demarcate an ocean boundary. It has claimed a territorial sea south of the line, thereby creating a disputed maritime area where each nation has arrested the fishing vessels of the other.

Since the 1890s, Canada has maintained that Dixon Entrance is part of the historic internal waters of Canada. Canada has made similar claims for Hecate Strait and Queen Charlotte Sound. While the previous bills banned tankers sailing within the defined waters of fishing zone 3, Bill C-48 prohibits tankers carrying crude oil from entering or leaving ports in the same area.

In focusing on the use of Canadian ports, the government has avoided a confrontation with the United States over the status of these waters. A May 12, 2017, media report quotes Minister Garneau's response to reporters' questions about why Bill C-48 does not ban tankers simply passing through Dixon Entrance, Hecate Strait, or Queen Charlotte Sound. Minister Garneau replied that “such passage is allowed by international law, but it is effectively stopped under a voluntary tanker exclusion zone that the U.S. and Canada agreed some 30 years ago.”

However, for years, Canada has claimed these waters to be internal waters of Canada, where passage is governed by Canadian law and not international law. The U.S. maintains that its rights indeed are governed by international law and has sent numerous diplomatic notes in that regard.

The rather odd result under the bill is that tankers carrying crude oil can still ply these waters as long as they do not enter or leave from a Canadian port. The legislation also does not apply to tankers transporting refined oil. It does not apply to B.C.'s southern waters, including the Strait of Juan de Fuca or the Port of Vancouver-Burnaby, the site of the Kinder Morgan tanker terminal.

Enbridge's Northern Gateway project was cancelled by the government, and the government always has the right to deny any future proposal for a terminal. This raises the question of why such legislation is required at all. The only pipeline and terminal project that the moratorium act affects is the proposed Eagle Spirit Energy corridor, which initially would build an oil pipeline across first nations traditional lands from Fort McMurray to a terminal on Lax Kw’alaams coastal lands, north of Prince Rupert.

In the 2015 article, I looked at Alaska's experience involving its native people and petroleum development. The United States government created 12 regional profit-making native corporations designed to give indigenous peoples the means to ensure their financial independence through their corporate ownership of large tracts of land and the opportunity to develop that land. The results have been very positive. One corporation on the north slope is the state's largest Alaskan-owned corporation, with over 10,000 employees. Another, on the Gulf of Alaska, designed, built, and operates the Trans-Alaska Pipeline, along with one of the world's largest spill preparedness and response organizations.

While Canada has not created similar native corporations, I believe the proposed Eagle Spirit Energy corridor on traditional first nations territory mirrors this partnership approach, with indigenous peoples very much in the driver's seat. It is paradoxical that this tanker legislation puts an end to a first nations project, which they see as an important move towards reconciliation.

I thank you for your attention, and I'm pleased to respond to any questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Next we have Mr. Leach, associate professor, Alberta School of Business, University of Alberta.

[Dr. Andrew Leach, Associate Professor, Alberta School of Business, University of Alberta, As an Individual]

Thank you, Madam Chair.

Thank you very much for inviting me to be here today.

In the remarks that follow, I'm focusing mostly on elements related to my areas of interest, which are crude markets and energy markets in general as well as the impact of the proposed ban on our ability to maximize value from our resources and from the processing of the resources.

Importantly, the ban before us today focuses on tankers carrying any combination of crude oil and heavy or refined products including synthetic crudes, anything heavier than diesel or jet fuel, in an amount greater than 12,500 metric tons, an amount that would make it a tradeable commodity, essentially. It takes out from the consideration of our crude marketers and refined product marketers the strategic deepwater ports of Kitimat, Kitsault, and Prince Rupert, and of course it provides important protection to the islands in and around Haida Gwaii.

Importantly, it wouldn't affect gasoline, diesel, or jet fuel imports or exports, nor would it affect LNG. The latter is, of course, of particular importance, because we have LNG terminals proposed and/or approved for each of those three deepwater ports in question.

However, I'd like to focus the committee's attention a little bit on our refined products market, where we have refined product production that's broadly expected to increase in Canada with the addition of the Redwater refinery in addition to two major proposals on the west coast, one for Kitimat and one for Prince Rupert. While it's easy to say that this ban does not affect refined products, that's not strictly true, because it does affect some of the products of production, primarily the heavier fuel oils, lubricants, and waxes that would be challenged were this ban to be implemented.

The rationale for that ban, on one hand, is simple. On the other hand, it's very hard to reconcile with our other marine protected areas and such zones.

Minister Garneau has referred to it as protecting a 400-kilometre stretch of coastal temperate rainforest, which is one of nature's truly spectacular sites. Both the Prime Minister and the minister have said something along the lines of the Great Bear region being no place for an oil pipeline, and it's no place for oil tankers either. I think the crux of my remarks is to remind you that such a statement is not without cost, first of all, but it's also not without a degree of inconsistency in the way we treat protected areas.

Today we have, as Mr. Hage presented, no proposed oil pipelines that would affect any of these ports. The remaining proposed oil pipelines would affect the Port of Vancouver or southern access via Keystone XL. However, neither of those pipelines is a sure thing.

I think we want to be very careful about eliminating the option value that exists with having additional ports on the west coast. I think it's also important that we don't ignore the role of rail in this discussion, in that CN currently moves significant quantities of oil and refined products through Prince Rupert and has estimated that, in the absence of other export capacity, it would be able to move significantly further volumes via their infrastructure at Prince Rupert, which would enable Canada to realize higher value for its crude oil.

I mentioned the refineries already. I won't go back into that again. Let me say finally, with respect to inconsistency, that I think it behooves the government to go beyond a one-off determination of areas of natural significance. I've had the opportunity to visit the area. It's indeed a spectacular area, a magnificent landscape, but it's far from the only such area in Canada.

I would call upon the government to consider that we do have oil tankers that ply a lot of waters that I personally hold dear, and I think many other Canadians do, such as the Newfoundland coast, the Fundy shore, the St. Lawrence River, etc. I think we need to consider not just a one-off in the creation of a special category of marine protected area but define well the characteristics that we think apply in a circumstance, and consider the areas to which such similar controls might well apply in other areas of the country.

It's not for me to decide whether this particular area merits special protection, but I think if we are going to merit that special protection, we should define the conditions under which it holds and examine the other areas of Canada that would merit such protection as well.

Thank you very much for inviting me to appear today.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Leach.

We go now to Mr. Lewis-Manning, president of the Chamber of Shipping via video conference.

Welcome, sir. We're glad you could join us today.

[Robert Lewis-Manning, President, Chamber of Shipping]

Good afternoon, Madam Chair and members of the committee. I appreciate the opportunity to offer a few observations and a recommendation on this important legislation.

My comments are provided from the perspective of commercial shipping, marine transportation and, more generally, international trade. The Chamber of Shipping represents interests of shipowners, their agents, and service providers responsible for over 60% of Canadian international trade by ship. Some of our members also move bulk liquids and products of all types, including petroleum and chemical products, on both the east and west coasts.

Marine transportation includes everything from people in ferries and cruise ships to bulk commodities such as grain that is exported to Asia, to larger container ships moving goods that Canadian companies sell globally, and manufacturing goods that Canadians use in their day-to-day lives. Needless to say, marine transportation and its many spinoffs benefit and touch Canadians in their day-to-day lives.

I've been involved personally with marine conservation initiatives on all three of Canada's coasts and on the Great Lakes, and I am a member of the national Species at Risk advisory committee. As a former senior officer in the Royal Canadian Navy, I was also responsible for monitoring and coordinating surveillance in support of coastal protection. The Great Bear Sea on the north coast of British Columbia is indeed one of the richest marine ecosystems in the world and has enormous cultural significance to the people who live there, and it contains important resources for British Columbia's economy. Protecting it should be a priority, and in that respect, I doubt that anyone would question that goal.

Protection of our coastal environment goes hand in hand with being able to build trust with both Canadians and our international shipping customers. Furthermore, the ability to protect our coastal environment responsibly will also ensure the continued competitiveness of our trading gateways at a time when competitive pressures, especially from the United States, are increasing. This region is also an important trading gateway for Canada. It includes the country's fastest growing port, the Port of Prince Rupert, in addition to a number of smaller ports that afford future opportunities.

Within this context, there are three aspects of the proposed legislation that I would suggest are worthy of consideration by the committee. The first is the process and study that supported the identification and the list of scheduled commodities. The schedule was somewhat of a surprise when it was announced in May of this year, and until only recently the study that supported the decision to limit the scheduled commodities was also unavailable.

The study appears to have lacked some consultation with shipowners and operators, who currently move some of the products included on the proposed schedule. If the dialogue would have happened, those leading the study would have learned that most shipowners do not ship small quantities of a single product in a single sailing but frequently have cargo left on board that is destined for other ports. In this manner, a shipowner leverages efficiencies through multiple orders of a single or similar product. Limiting the quantity of scheduled commodities to 12.5 metric tonnes could result in unintended consequences, such as increased freight charges or a complete disruption in the supply chain.

Secondly, careful consideration should be given to whether the legislation is inconsistent with Canada's commitment to the United Nations Convention on the Law of the Sea, or UNCLOS. The intent of article 9 of this convention is to ensure that all ships, unless operating in a manner prejudicial to peace, good order, and security of another country, shall be provided innocent passage.

Article 24 reinforces this requirement on a coastal state, demanding that it shall not impose requirements on foreign ships which have the practical effect of denying or impairing the right of innocent passage. Furthermore, articles 194 and 211 also empower a nation to protect its marine environment and to harmonize, as much as possible, such laws and regulations with neighbouring states and international regulations more generally.

Thirdly and perhaps most importantly, this legislation establishes a precedent in Canada for managing our national supply chain and is another layer of complexity in the already multi-faceted supply chain, thereby making Canada a more complex country in which to operate. While the bill intends to embody the precautionary principle, it has not provided and is not providing a constructive framework for properly reviewing the maritime transportation supply chain of B.C.'s north coast.

I would like to make one simple recommendation. The proposed amendments to another piece of government legislation, namely Bill C-55, an act to amend the Oceans Act and the Canada Petroleum Resources Act, also embodies the precautionary principle. In the way that Bill C-55 takes a precautionary approach and then demands analysis and an evidence base to support a longer-term management plan, we heartedly recommend that the oil moratorium act also contain language that would require a risk assessment to be conducted at minimum every five years, such that it could inform the regulatory process of scheduled products.

In this manner Bill C-48 would take a similar approach to that of Bill C-55, a harmonized approach. It would be grounded in an evidence-based analysis that would engage affected stakeholders collaboratively and would also provide a responsible legislative framework that could be sustained over the long term.

Thank you, again, for this opportunity, and I welcome any of your questions.

[The Chair, Liberal, Judy Sgro]

Good. That was perfect timing, Mr. Lewis-Manning.

We will move on to Misty MacDuffee.

Welcome.

[Misty MacDuffee, Biologist and Program Director, Wild Salmon Program, Raincoast Conservation Foundation]

Thank you, Madam Chair.

I'm going to be about five minutes and 30 seconds, but I might talk a little faster because I'm nervous.

Thank you, again, for this opportunity to speak in favour of the oil tanker moratorium act.

As you know, or may even have experienced, British Columbia's north and central coast, along with Haida Gwaii, comprise a unique environment that is increasingly uncommon not just in Canada but in the world. It is an archipelago where lush forests and granite buttresses greet the sea, where grizzlies dig for clams in sight of the open Pacific, where wolves swim to distant islands in pursuit of seals, where the ethereal calls of killer whales are used to pursue salmon migrating thousands of kilometres to freshwater rivers of a forest, and where the summer sun sets on the blows of feeding humpback whales that are surrounded by thousands of shearwaters, auklets, and gulls, all in pursuit of tiny fish that spawn on a sandy shore or on the giant kelps that buffer the fragile coast shoreline.

All this is to say that this assembly of iconic animals makes the B.C. coast qualitatively different from most other exceptional places in the world. Distinctively, these animals are tied to the sea within a food web that knows no boundary between terrestrial and marine. Raincoast's two decades of published science studying coastal species confirms the knowledge that first nations have held for millennia. The coastal environment is an indivisible blend of land and ocean. What befalls the ocean, befalls the species of the land. It is no place for oil tankers.

Three recent academic papers by Raincoast are directly pertinent to the bill before you. First is a paper derived from our 10,000 nautical miles of surveys through the waters that Bill C-48 addresses, a region we refer to as the Queen Charlotte Basin. The paper, “Quantifying marine mammal hotspots” is a response to the overwhelming evidence that humans are contributing to rapid declines in marine species, particularly in coastal areas. This reality dictates the urgent need to identify important places for marine species, places where ocean processes and high species abundance interact to create hotspots.

We found that southeastern Haida Gwaii, outer Queen Charlotte Sound, the Scott Islands, Caamaño Sound, Calvert Island, Aristazabal Island, Chatham Sound, and Dixon Entrance are all places of exceptionally high marine mammal abundance. These areas all lie within the waters identified in Bill C-48.

A second paper on spills and marine mammals evaluates the consequences of potential oil exposure on 21 species of B.C. marine mammals. All marine mammals are inherently vulnerable to oil spills because they live their lives at the air-water interface where oil contact, inhalation, or ingestion can all occur.

We found that British Columbia's killer whales, Steller's sea lions, and sea otters ranked very high in terms of vulnerability to oil spills. Their elevated risk above other marine mammals is due to their small populations, their slow reproductive rates, their specialized diets, and the tendency for large percentages of the population to group together in space and time.

Our third paper on marine birds and chronic oil pollution, along with the book, At Sea with Marine Birds, by Dr. Caroline Fox, identifies marine bird species considered to be at elevated risk of extinction and those with a pronounced vulnerability to oil spills. Marine birds in this region are vulnerable to oil spills in any volume, large or small. Bill C-48 reduces the threat of catastrophic oil spills to at-risk marine birds and their habitats.

Lastly, Bill C-48 addresses the rising problem of underwater shipping noise disrupting the communication and feeding of cetaceans, and the growing threat of ship strikes. As on the east coast, Pacific shipping is a growing concern for large baleen whales like fin, sei, humpback, and the handful of critically endangered North Pacific right whales that inhabit these waters.

Over the last decade, Raincoast has tried to express what this maritime commons means to the people of British Columbia. Simply, it is a coastal archipelago that is priceless and irreplaceable, immeasurable in monetary terms.

We've also articulated the unequivocal evidence of decadal-scale biological changes that marine systems and species are undergoing, the ecological debt, and the perils of hidden consequences. But we held hope that the proposed industrialization of British Columbia's Queen Charlotte Basin was a step too far. My presence here is proof that it was.

As we codify a moratorium on oil tanker traffic into law, whales hunted to near collapse a century ago are returning to their historic feeding grounds. Bill C-48 honours the ecological legacy of this coast and the first nations people who existed with this landscape since time before memory. We will continue our work to ensure that this priceless and irreplaceable coast continues its evolutionary journey, and we will mark Bill C-48 as an essential step in determining that future.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much. We'll move on to our questioners.

Mr. Chong, you have five minutes.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you, Madam Chair, and thank you to all our witnesses for appearing today and giving us your testimony.

I first want to ask Mr. Hage a couple of questions about the territorial issues around the area in question in Bill C-48.

My understanding is that the United States is not a member of the Convention on the Law of the Sea and so does not recognize our sovereignty—or any nation's sovereignty—beyond the 12-mile limit. We, however, are a party to that UN accord and we have a different position on that. Could you talk a bit about that issue in that area of Canada's coastal waters?

[Robert Hage]

The convention, which I have here, is largely now customary international law. Parts of it were already part of customary international law. This was the third attempt by the United Nations to get a worldwide convention, and they succeeded. It's quite remarkable.

The Americans certainly do support all the customary international law aspects of the Law of the Sea, and they are bound by the territorial sea, the economic zone, the right of innocent passage, and the right to navigation in the EEZ. All of those things they comply with, and they certainly expect Canada to comply with them as well. They don't cease to tell us that.

At the same time, there are certain aspects that you get from being a party of the convention, and one of them is dispute settlement. Another is the determination of the outer limits of the continental shelf, particularly in the Arctic. The Americans, we believe, cannot take advantage of that until they become a party, and the reason they haven't been is largely over seabed mining, which is another aspect that is not so consequential.

The Americans uphold all the aspects of the Law of the Sea that are relevant to what we're discussing here today. The dispute over the A-B line—the Alaska boundary and its nature—goes back to that arbitration, as I said, in 1903. Prior to that time, Canada had already said that Dixon Entrance was an internal water of Canada. Interestingly, the Americans didn't object to that until later.

It's important for us to maintain that position, which we've maintained for more than a hundred years now, that the waters in that area are internal to Canada and that we can exercise Canadian law in those waters. That's why the first attempts to legislate a moratorium focused on that area, fishing zone 3, where we could, under our interpretation, say “no traffic of tankers”.

I think the government switched that approach to avoid an argument with the United States. We have control over our ports: access to and from our ports. The Americans can't object to that, so I think that's the basis of the legislation.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

I have another quick question that concerns the 1987 or 1988 agreement between the Canadian Coast Guard and the United States Coast Guard regarding the voluntary exclusion zone. Could you tell us what tanker traffic is allowed under that agreement from 30 years ago?

[Robert Hage]

Yes. The Americans had the right to go down from Alaska, from the Port of Valdez to their refineries in Puget Sound, without our doing anything about it. If we had seen a threat of the Americans going through our EEZ we could have tried to make a case for that, but they had the right to freedom of navigation in our EEZ where the voluntary area is. Fortunately, we came to an understanding with them that the tanker traffic would take place a certain distance from the coast of Canada, and that is the way it has been for 30 years, as you've said.

It is voluntary. It's not—

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Does it include all tankers?

[Robert Hage]

Yes, that's all tankers that are going from Alaska to Puget Sound.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Okay.

[Robert Hage]

Once you get to the Strait of Juan de Fuca, you're in an international area. That is one boundary that we have defined with the Americans, going back to 1890 and something, and we have an agreement with them there as well, so that the shipping goes in on the American side, I believe, and comes out on the Canadian side.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you.

I have a question for Dr. Leach.

[The Chair, Liberal, Judy Sgro]

You have 10 seconds to get in a question and an answer back.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Here's a quick question, Dr. Leach. Maybe you could speak to pipeline capacity in terms of how much excess capacity we have today and when you would anticipate that we would run out of capacity to ship prairie oil to international markets.

[Dr. Andrew Leach]

We're at essentially full today. It depends, month to month, but for all intents and purposes, we're maxed out right now.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Fraser.

[Sean Fraser, Liberal, Central Nova, NS]

That was a perfect segue.

With respect to pipeline capacity, and our ability to export, although you mentioned they're not a sure thing, the projects that would see export capacity grow, both through Keystone to the south and through the southern portion of B.C., where would that bring our export capacity to in comparison to where CAPP is projecting that we're going to be? As we said, it's 5.1 million barrels a day for 2030, if we use their projections. If these two projects go ahead, would additional capacity be needed to pretty much meet our export number?

[Dr. Andrew Leach]

Based on CAPP's most recent forecast, if you build in Keystone XL, the Trans Mountain expansion, and then the smaller incremental expansions, Line 67 and Line 3, then for the remainder of that CAPP forecast horizon, we have sufficient pipeline capacity. You don't need any incremental pipeline capacity. If you go back to their 2014 or 2015 numbers, then there's incremental demand for one million to two million more barrels per day of export capacity.

[Sean Fraser, Liberal, Central Nova, NS]

In the presence of a moratorium on the northern portion of B.C., we're not going to be hampering our export capacity if we assume that the Keystone and Trans Mountain projects are completed by the 2030 date. Is that essentially where that leaves us?

[Dr. Andrew Leach]

If you assume that we're not hampering our total export capacity for crudes, I would be careful about export capacity for other refined products. I'd also be careful about the concept I opened with, which is the maximum value of our resources. Even though you may have pipeline capacity, some of that pipeline capacity goes into what has been and remains a discounted market in the U.S. mid-continent, so having that ability to move some products west might remain a strategically important asset even if it weren't a logistically crucial asset.