RNNR Committee Report

Official Opposition – New Democratic Party of Canada

Dissenting Report to the Study on Current and Future State of Oil and Gas Pipelines and Refining Capacity in Canada

New Democratic committee members are encouraged this study, sparked by our concern about Canada’s declining refining sector, draws attention to the need to better identify and understand a wide variety of energy challenges facing Canadians. However, we are disappointed Majority Report recommendations simply and uncritically repeat the government’s unbalanced approach to natural resources management in Canada―an approach that is destabilizing the balanced economy we've built up since the Second World War.

While the main report identifies a number of significant issues pertaining to refineries and pipelines in Canada, there are four main issues it does not adequately address: (1) the need for a made-for-Canada energy strategy that prioritizes the interests of Canadians; (2) the protection of quality, value-added jobs in the refining sector; (3) the need to ensure sustainable energy security in all parts of the country; and (4) the importance of responsible, sustainable resource development and a robust environmental assessment process.

Background on the Study

In November 2011, New Democratic committee members proposed the Standing Committee on Natural Resources study the Current and Future State of Oil and Gas Pipelines and Refinery Capacity in Canada. It was hoped such a report would contribute to our understanding of our rapidly developing oil and gas sector as well as provide an overall picture of energy provision in Canada. Four days of expert testimony reinforced our view of the pressing need for a comprehensive energy strategy and provided valuable insights into possible policy solutions.

Unfortunately, this testimony is largely ignored in the main body of the Majority Report. In addition to ignoring the need for a comprehensive energy strategy, the Majority Report recommendations outline an alarming vision for accelerated energy-related resource development without due regard for economic impacts, the enforcement of environmental regulations or the internalization of environmental costs.

This dissenting report reflects upon the Majority Report recommendations and presents an alternative vision of natural resource development that prioritizes the interests of the Canadian public.

The final recommendations generated in the Majority Report are engineered to justify the Conservative Government’s present approach to energy sector resource development. The Majority Report recommendations illustrate a one-dimensional approach to natural resource development that prioritizes oil industry profits. We feel Canadians instead expect both energy security and the sustainable development of our country's natural resources.

This Conservative approach comes at the exclusion of almost all other values. For example, the Conservative approach favours raw resource export over domestic value-added job creation and foreign sales over domestic resource security. It exposes Canada to the risks of unchecked foreign ownership of Canadian natural resources. It ignores potentially perilous international trade obligations―such as the proportionality clause of NAFTA― requiring Canada to export set amounts of natural resources once such exports have been initiated.

This development-at-all-costs approach sets up conflict between Canadians and hides the associated environmental costs to future generations. The Conservative approach encourages the extraction and export of raw natural resources with little domestic benefit, but considerable environmental and social costs that will be borne by Canadians.

An Energy Strategy for Canada

Canada needs a national energy strategy. This strategy must establish a plan for developing our vast natural resources to secure maximum economic benefit for Canadians, address a number of long-standing energy related challenges, but also ensure the environmental and social well-being of current and future generations. The Conservative Government refuses to develop such a strategy despite calls for action from provincial and territorial governments, industry and citizens.

The importance of energy to the lives of Canadians and to our economy, and the complexity of the considerations involved, highlight the need for a national energy strategy for Canada. Such a strategy requires policy development in areas including the domestic supply of renewable and non-renewable energy-related resources and non-renewable resource export. Policy development in these areas must consider how to balance potential benefits as well as economic, social and environmental impacts.

Under the Conservative government's policies, billions of dollars in direct and indirect subsidies to the oil and gas industry have led to an artificial rise in the value of the Canadian dollar. Evidence suggests the inflated Canadian dollar is now responsible for over 50 per cent of all job losses in our manufacturing sector—more than outsourcing or the recent recession. The government's unbalanced resource development policies impose a heavy toll on the Canadian economy.

New Democrats believe the federal government has a role to play in developing a comprehensive strategy for our country’s long-term energy security in a lower carbon future, in consultation and cooperation with provincial, territorial and Aboriginal governments, unions, energy providers, environmental organizations, and other stakeholders.

A successful Canadian energy strategy must respect the basic principles of economic, social and environmental sustainability, including enforcing existing environmental regulations internalizing environmental costs. It must reduce Canada’s non-renewable resource dependency by maximizing energy conservation and fostering renewable energy development. It must also ensure responsible resource export and maximize the economic benefits of resource development.

In contrast to this approach, the Conservative government has chosen to focus almost entirely on non-renewable energy resource export, with little if any consideration given to domestic supply of energy-related renewable or non-renewable resources. While the Conservative approach is driven by the corporate interests of major energy companies, it pays little or no attention to social or environmental impacts of government policy.

Recommendation: That the government should immediately begin working with provinces, territories, municipalities, Aboriginal groups, industry, NGOs and the academic community to develop a comprehensive national energy strategy that puts Canadians first.

The Decline of the Domestic Refinery Industry and Value-Added Job Losses

The emergence of the Western Canadian oil sands has transformed Canada. Crude oil reserves are estimated to be approximately 170 billion barrels, growing to 300 billion barrels due to extraction technology advances. In 2010, Canada produced 1.5 million barrels of bitumen per day. These reserves not only provide considerable raw-export potential, but also value-added opportunities in the upgrading and refining sector.

Unfortunately, Canada has failed to take advantage of the domestic opportunities to add value to these raw products. While Canadian refineries are comparatively clean and efficient, only 15 full-range refineries remain operational with only a handful equipped to refine bitumen based-crude oil. While Canada remains a net exporter of refined products, this status is under threat. Canada has lost approximately one refinery per year since production peaked in the 1980s. Where in the early 1980s Canadians refineries produced approximately 2.2 million barrels per day of refined products, this amount since has dropped by nearly 400,000 barrels per day. More provinces will lose all ability to refine oil products if Canada continues to lose refineries at the current rate.

The decline of the Canadian refining sector also represents a significant erosion of high-paying, long term jobs. The direct refinery labour force peaked at 27,400 workers in 1989, falling by nearly 10,000 workers to just 17,500 jobs by 2009. Testimony from the Communications, Energy and Paperworkers’ Union shows that “for every 400,000 barrels of raw bitumen exported out of the country for upgrading and refining, 18,000 jobs in Canada will be lost.” Currently, seven Albert-based upgraders process just 53 per cent of oil sands bitumen prior to export. This represents a significant lost opportunity for long term, value added jobs.

The proposed construction of high volume export pipelines such as Keystone XL and Enbridge Northern Gateway would greatly increase the export of raw bitumen. New Democrats are concerned the Conservative Government’s unreserved support of these pipelines ignores their significant negative impacts on potential long-term employment in Canada and on the value extracted from our natural resource endowment.

Recognizing that oil and gas will continue to play a prominent role in our energy mix in the medium term, a responsible energy strategy would discourage bulk exports of our unprocessed resources and encourage value-added, responsible upgrading, refining and petrochemical manufacturing here in Canada to maximize the economic benefits and jobs for Canadians.

Recommendation: In order to maximize the long term viability of Canada’s upgrading and refining sectors, the Government of Canada should continually monitor domestic refining output and work with the provinces and territories to protect quality, family-sustaining jobs in the upgrading and refining sectors.

Promoting Sustainable Energy Security in Every Region

A comprehensive approach to energy must also take into account the security of our energy supply both nationally and at a regional level. Committee testimony highlights the fact that while Canada is a net oil exporter, regional energy production and consumption significantly varies.

In particular, witnesses indicated that Eastern Canada’s reliance on imported oil and gas to meet many energy needs (including a higher reliance on fossil fuels for home heating) exposes the region to significant price volatility and occasional supply uncertainty. Testimony from Professor Larry Hughes of Dalhousie University highlights the importance of improving energy security in the region by conserving energy, developing renewable alternatives, and exploring ways to increase Eastern access to Western energy resources.

In spite of this evidence, the Conservative Government eliminated federal support for renewable power by ending of the ecoENERGY for Renewable Power Program. It also cancelled the highly popular ecoENERGY Retrofit - Homes Program which helped Canadians reduce energy consumption and improve the efficiency of their homes. The elimination of these and other measures have a negative effect on Canadian energy security.

New Democratic committee members  believe the best way to ensure long-term energy security for all Canadians is by reducing dependence on fossil fuels and fostering the development of renewable energy technologies which provide safe, environmentally friendly, and reliable energy to meet energy needs in all regions.

Responsible, sustainable resource development

Sustainability—social, economic and environmental—must be at the centre of our approach to the development of natural resources. New Democrats reject the false dichotomy between protecting our environment and ensuring long-term jobs for Canadians. Sustainability can, and must, become central to the way we do business in order to ensure that future generations can prosper. More specifically, cumulative environmental impact assessments, enforcing environmental regulations, robust consultation with First Nations, and implementing science-based monitoring are all essential to ensure responsible development.

Unfortunately, the Conservative government has failed to uphold these principles. In 2010, the Conservatives used the budget bill to transfer the authority for most environmental evaluation for major resource projects from the Canadian Environmental Assessment Agency to the National Energy Board and the Canadian Nuclear Safety Commission.  New Democratic committee members are concerned the Conservative government will repeat this move in 2012 in order to speed up environmental reviews for major resource projects.

While we agree that Canada’s environmental assessment laws could better serve the interests of the public, industry, First Nations and the environment, New Democratic committee members hold that rolling back environmental protections developed over the past two decades to speed projects to approval will not serve Canadians, especially if it is done in a way that inhibits open public debate on the changes and avoids proper scrutiny by a Parliamentary Committee.

Recommendation: That any changes to the regulatory process should not negatively impact the participation of Canadians in the review process by either reducing participant funding or time available for public comment, and should not curtail the duty to consult with Aboriginal groups. Furthermore, that any changes be proposed in stand-alone legislation so that it may be given full consideration by Parliamentarians.

Conclusion

Testimony to the Standing Committee on Natural Resources reinforces the need for a national energy strategy, confirms concerns over the loss of value-added refining in Canada, and underscores the need to address energy security while balancing the requirement for appropriate environmental protections.  Under the Conservative approach, the decline of the Canadian refining sector and expansion of raw export oil pipeline capacity suggests a future in which Canadians receive less value for our energy resources, while depleting these non-renewable resources at an increasingly rapid pace. Such a future presents a risk not only to our environment and communities, but to quality Canadian jobs and the long-term economic competitiveness of our energy sector in a world transitioning to cleaner energy sources.

New Democrats have a very different vision for Canada’s energy and resource future, one in which we maximize the benefits we receive from our resource development while at the same time minimizing negative social and environmental impacts. While we recognize this approach to managing resources will require greater collaboration with the provinces and territories and deeper engagement on a variety of policy proposals than those proposed by the Conservatives, studies such as this begin to show a way forward.