Emergency Debate on Canadian Oil and Gas Sector


Video Link:  https://youtu.be/6OLBFKzBHzQ

Richard Cannings (South Okanagan—West Kootenay)

Emergency Debate on Canadian Oil and Gas Sector

 Madam Speaker, I am proud to be sharing my time with my wonderful colleague from Edmonton Strathcona.

I am happy to rise tonight to speak in this emergency debate on Canada's energy sector. 

As the member for Lakeland pointed out in her intervention seeking this debate, Alberta suffered significant job losses when world oil prices collapsed four years ago, going from over $100 a barrel in mid-2014, to less than $30 a barrel in early 2016. Until recently, prices were steadily rebounding and world oil prices had recovered to over $70 a barrel by the spring of 2018, only six months ago. 

Some Canadian oil exports are sold at a discount to the world price because they are in the form of bitumen, which is more expensive to refine, and which only certain refineries are designed to handle. That discount is usually around $17 or so, but it varies as certain situations affect the ability of Canadian producers to get their product to refineries. Recently, with temporary closures of refineries in the United States for maintenance that differential has increased dramatically as bitumen supplies build up in Alberta waiting for export. Today, the price of Western Canada Select is about $50 less than that of West Texas Intermediate. 

I want to mention here, as my colleague from Saanich—Gulf Islands just pointed out, that a high percentage of Canadian production of oil is not subject to this differential at all or it is not subject to the variability because the largest producers in Canada, such as Suncor, Husky and Imperial Oil, have their own refining and upgrading facilities, producing synthetic crude that sells more or less at world price. I spoke to a Suncor representative in my office just last week. She reported that her company was doing just fine and getting a very fair price for their product. 

Some estimates put the proportion of the Canadian production exposed to this differential at as little as 10%. In other words, the majority of our production is being sold at or near world price. However, the proportion exposed to this huge price differential is growing as new Canadian production comes on line and that increased production is competing for a constrained refinery in pipeline space. 

There is a pipeline expansion project under way right now, Line 3, which would take Alberta oil to Wisconsin. I had the pipeline industry representatives in my office a couple of weeks ago and they confirmed that Line 3 would be fully functional by next fall and would fix that differential price problem. 

The Conservatives of course are blaming the Liberals for all the other pipelines that have not been built. We heard about them tonight: northern gateway, energy east, Trans Mountain. At the same time, the Liberals are blaming the Conservatives. Well, as I have said before in this place, they are both right. 

Why did these other pipelines not get built? They did not get built because the Conservatives rushed the process through. They gutted environmental protections at the direction of oil producers. My colleague from Edmonton Strathcona used a better word, “eviscerate”, but gutted means the same thing. They gutted the environmental impact assessment process, the Fisheries Act and the Navigable Waters Protection Act. 

Then they doubled down and called all persons concerned about the environment enemies of the state or foreign-funded radicals. I still hear that rhetoric here in this place. That made a whole generation of Canadians sit up and take notice and take sides. The debate has now become completely polarized. 

In the last election, both the Liberals and the NDP ran on a platform to fix the NEB assessment process and repeal the damaging changes done to those environmental protections. Unfortunately, the Liberals were elected and immediately went back on that election promise. 

The northern gateway pipeline approvals were quashed by the courts because of the flawed consultation process and the Liberals wisely chose not to try to fix that deeply compromised project. Instead, they concocted a quick fix of a ministerial panel that toured the route of the Kinder Morgan Trans Mountain pipeline, a tour done on very short notice to communities. 

Bureaucrats were sent out to consult with indigenous governments but, as we found out later, only took notes of the concerns that the communities had and made no attempt at all to accommodate those concerns. In fact, they apparently thought they had no power to change the decision of the NEB with regard to Trans Mountain. Considering that the decision to go ahead with Trans Mountain had already been made before those consultations took place, it is not surprising that the bureaucrats thought they had no power or reason to change things. 

The Liberals went on to approve the Trans Mountain expansion and they liked it so much they bought it, or at least they bought the 65-year-old pipeline for $4.5 billion. The expansion will cost us $10 billion on top of that of course. 

Just as the sale was finalized, in fact only minutes later, the Federal Court of Appeal quashed the approvals of the Trans Mountain pipeline for exactly the same reasons that the approvals for northern gateway were quashed. 

Again, the Conservatives blamed the Liberals for not getting the project going, but to be fair to the Liberals, they were only doing exactly what the Conservatives did before them. They were rushing a process that could not and should not be rushed. 

Here we are three years after the election back at square one with no pipelines built. As more and more oil sands projects are built in Alberta the volume of bitumen needing to be shipped rises. When refineries are temporarily shut down for maintenance or when pipelines are turned off to fix leaks, the surplus of oil in Alberta tank farms grows and the price drops. 

What can be done to boost the price for the increasing volumes of Canadian bitumen? In the short term the Government of Alberta could tell the producers to cut back on production, and I hear Jason Kenny is suggesting that. The irony of such a champion of the free market pleading for direct government intervention in the market is quite stark. There are concerns I have heard that such an intervention would raise questions of meddling in international trade. Maybe the U.S. would label Canada as a non-market country. 

The Alberta government is looking at buying more oil cars for trains to American refineries. That might help out in the mid-term after a few months but it would not provide immediate relief. By the time extra railcars were available, refinery capacity will likely be restored and the price discount will disappear. 

As I mentioned before, the Line 3 expansion will come on line next year and solve the problem then. We could build more refineries and upgraders. That not only would produce oil that we could sell at world prices but it would reduce the amount of volume we would need in those pipelines because it takes much less volume to ship upgraded or refined oil than bitumen which has to be diluted.

The real solutions are long-term ones. For one thing, we would have to restore public confidence in the energy regulation process and the environmental impact assessment process in Canada.

Pollster Nick Nanos found that only 2% of Canadians had high confidence in those processes after years of cutbacks and gutting of regulations. The way forward, he found, is through giving more voice to communities and indigenous peoples. 

We should also step back and look at the world situation. Last June, I went to Argentina with the then minister of natural resources to the G20 energy meetings. The theme of the meetings was the grand transition to low carbon. 

China's minister talked about huge investments in renewable energy infrastructure. He made bold predictions about the future of electric vehicles around the globe, vehicles that China is manufacturing in rapidly increasing numbers. He talked about shifting from coal directly to renewables, bypassing natural gas as an intermediate source of electricity. The U.K. minister talked about creating hundreds of thousands of jobs in the clean energy sector, “having your cake and eating it too”, as he said. Canada's minister talked about buying an old pipeline. 

If we want to create good, stable jobs in the Canadian energy sector, we can do that. We can do that through investments in the clean energy sector. A new study on the opportunities in energy efficiency, opportunities that include deep retrofits of large buildings across the country, shows that the energy efficiency economy alone is worth $54 billion every year in Canada. That is 3% of our GDP. 

If we provide the right incentives and the right investments, we could create tens of thousands of jobs in Canada, good jobs in every community of this country, and that is just in energy efficiency. We could create just as many jobs in renewable energy; jobs for electricians, welders, construction workers and more; jobs that would last without a boom and a bust; jobs that would create a clean future for our children. 

Let us learn from this emergency, this crisis. Let us take the long view and take the sure path to prosperity.