Trade Diversification for Canada

Export market access increasingly needed: report

Wed, 03 Apr 2013 14:51:08 -0600

Video: Enbridge CEO discusses the changing markets for Canada's energy industry

The CIBC is one of three of Canada’s big banks calling for new export oil pipelines to tap into the energy-hungry markets in Asia. TD and Scotiabank have also previously weighed in on this critical Canadian issue.

In a report released April 3, CIBC urges a re-calibration of Canada’s energy infrastructure to add export focus to markets beyond the U.S. The banks have weighed in on a major issue facing not just the energy industry, but all of Canada.

“The US shale supply revolution and an inexorable tilt in demand towards Asia are just two of several forces transforming the world oil industry,” says a new report from economists at the Canadian Imperial Bank of Commerce.

Changing global realities will have important implications for governments, industry and other stakeholders in Canada—we are the world’s fifth-largest producer of oil.

In a press release highlighting the key findings from its most recent CIBC World Markets Report, CIBC explained that Canada’s long-held trading advantage—its neighbor status to the United States, the largest importer of oil in the world—isn’t expected to last. China is expected to lead demand for oil beginning this year, 2013. The report calls this shift “seismic.”

“The world will still need Canada's crude, given still ample demand growth ahead for Asia,” said Avery Shenfeld, CIBC Chief Economist. “But it’s increasingly important that Canada move on one or more of the alternative pipelines to get our product headed Asia’s way.”

In February 2012, a study from the University of Calgary’s School of Public Policy suggested that Canada only has a short window—two to five years—to get its oil to Asian markets before economic opportunities narrow.

The Northern Gateway Project is the best opportunity to advance Canadian energy exports to Asian markets:

Once constructed, the marine facility would be one of the closest North American oil exporting terminals to key Asian markets like Japan, South Korea and China.
With almost 10 years into planning and engineering, and over 2 years into the most comprehensive environmental assessment for a pipeline project ever held in Canada, the project could be into construction before rival projects complete their regulatory processes.

CIBC’s report found lack of market access for our oil meant Canada lost out on nearly $25 billion in oil revenues last year. The report expects losses to compound in 2013 by another $20 billion and then at around $15 billion annually until new pipeline infrastructure is built, assuming the oil price differentials return to historic norms.

The Governor of the Bank of Canada said in the summer of 2012 that the oil price discount Canada suffers from is a key threat to the Canadian economy.

New studies say Canada must act fast to access markets

Thu, 07 Feb 2013 11:51:45 -0700

A new study, released February 6, 2013, by the University of Calgary’s School of Public Policy says Canada has a short window—two to five years—to get its oil to Asian markets before economic opportunities narrow.

The UofC report echoes statements made late in 2012 by the chief economist of the International Energy Agency, Fatih Birol, who said, “The global energy foundations are shifting and there are countries that are going to win from that, and there are countries that are going to lose from that. But there are some countries who have the potential to win but if they do not take the necessary steps, they can be losers. And I believe Canada is one of them.”

Author of the UofC study, energy economist Michal Moore, told the Calgary Herald, “If we can get our products into the market in that stream we're going to be competitive.”

The Canadian economy, at current oil prices, is missing out on around $70 million dollars each day according to another study published this week by the Canada West Foundation, due to the deeply discounted oil prices we’re receiving as a result of our lack of tidewater access to global markets.

Other economists have projected the annual cost to the Canadian economy at over $18 billion. The Canadian Energy Research Institute said last year, that over a two-decade timeframe, the cost to the Canadian economy would be as high as $1.3 trillion, with lost government revenues nearing $276 billion.

"There's a lot of that oil out there in the market,” Moore also told the Calgary Herald. “There's plenty of capacity in the Pacific Rim/Asian markets for heavy oil like ours, but it's not infinite and it's certainly competitive."

Arab nations and Mexico also produce crudes with similar characteristics to Canada’s.

The Governor of the Bank of Canada said in the summer of 2012 that the oil price discount Canada suffers from is a key threat to the Canadian economy.

In a speech last week, Enbridge CEO Al Monaco said “There is no more critical issue facing Canada today. Failure to develop a consensus around energy development will have serious consequences, for this generation and generations to come.”

Changing Markets – Evolving Expectations

Wed, 30 Jan 2013 11:12:13 -0700

Changing Markets – Evolving Expectations… that was the theme of a speech given by Enbridge CEO Al Monaco to a packed room at the Westin Hotel in Edmonton, Alberta today, January 30, 2013.

Central to the presentation, Al highlighted the considerable challenges of capturing full value for Canada’s most important economic resource – crude oil.

“We’re facing a perfect storm of change and challenge,” Al explained. “The good news is that rapid technological advancements have revolutionized the energy industry across North America, creating not only a massive surge in oil and gas production but also excellent progress on environmental protection; The bad news is that lack of access to markets for that production means that Canada is hemorrhaging billions of dollars a year – a result of the huge gap between world prices and what we receive for our oil and gas; And at the same time we’re seeing unprecedented opposition to all forms of energy development and transportation.”

Crude oil represents 15 per cent of Canada’s exports annually, contributing more than $50 billion to the Canadian economy and providing taxes and other revenues used to fund the social programs all Canadians value, like healthcare, education and retirement funds.

You may be surprised to learn that Canadian oil exports are hampered by a lack of pipeline infrastructure in the US; it should come as no surprise that not being able to access the fast-growing Asian markets is already hurting our economy.

“In my view, there is no more critical issue facing Canada today,” Al stated emphatically before outlining two thoughts to solve the problem. “We must build the infrastructure to connect our production with the best North American refining centers. And we need to come to grips with the fact that tomorrow’s energy growth lies with the economies of Asia – requiring export capacity to the West Coast.”

Northern Gateway is designed to be a world-class project in every respect – from safety, to community consultation, to environmental protection – and will play a key role in reversing the harmful oil price gap.

Recognizing the considerable challenges ahead for the Gateway project, Al spoke of the importance of listening to and engaging with all stakeholders in the project.

“All stakeholders – regulators, employees, shareholders, political leaders and the public – expect more of energy companies… As an industry, this is our new reality – and in my view a positive evolution, and we’re all the better for it.” Al explained. “We should welcome the active participation of First Nations and environmental groups in this discussion. The reality is that we need all forms of energy development to support our economy and growth. We can use their help to make projects better.”

The Northern Gateway project team has been consulting with right-of-way communities for much of the past decade. In the past two years, the Gateway conversation has expanded to include all Canadians – rightly so given the critical need for Canada to get its most valuable resource to the best international markets. It’s a conversation that Enbridge and Northern Gateway believe is vital; failure to develop a consensus around energy development will have serious consequences for this generation of Canadians, and generations to come.

“With so much at stake, this is no time to be standing on the sidelines,” said Al. “By working together we can get full value for the energy resources we’ve been blessed with – not simply for the energy industry, but for all Canadians. And, just as important, that we do that in an environmentally sustainable way.”

You can read the full text of Al’s speech here.

Lack of market diversity to cost Canada $1.3 Trillion: study

Mon, 07 Jan 2013 15:29:05 -0700

In a report released November 2012, CERI (Canadian Energy Research Institute) calculated the cost to Canada’s GDP at as much as $1.3 trillion if major pipeline expansion projects don't get built.

That means the loss of $276 billion in tax revenues over the next two decades.

No wonder that Canadians are taking notice: the Governor of the Bank of Canada, key ministers in the federal and provincial governments, economists and other leading thinkers on the Canadian economy have all warned on this critical issue.

At the core of the problem is a lack of market access. Without new pipelines to Canada's west coast, this problem will continue and may even worsen.

The Canadian Natural Resources Minister told the Calgary Herald: "The situation is screaming out for us to diversify, and we need pipelines to do that. This whole area is incredibly important to the economy of the country and it is so dynamic and changing - not only in Canada, but globally - that I expect it will be top of mind as an issue through (2013)..."

The Canadian Senate has also been studying this issue. Senator Daniel Lang wrote to the National Post on January 4, 2013, stating:

"The energy sector plays a vital role in keeping Canada strong, free and prosperous. It employs over half-a-million Canadians and contributed a staggering $94-billion to our country’s exports in 2010. It also contributed $35-billion in taxes and royalties in 2008 to various levels of government. With oil production set to double by 2030, these contributions to our tax base and our living standards will prove crucial to all Canadians. I stress all Canadians. Even provinces without abundant oil resources will share in the wealth through transfer payments.... Canada must seek out and embrace new opportunities and new markets or risk a reduction in our living standard."

It's not just Canadians who are taking notice either. The chief economist of the Paris, France-based International Energy Agency also weighed in late last year:

"The global energy foundations are shifting and there are countries that are going to win from that, and there are countries that are going to lose from that. But there are some countries who have the potential to win but if they do not take the necessary steps, they can be losers. And I believe Canada is one of them."

Pipeline expansion is a national priority

Mon, 17 Dec 2012 15:42:43 -0700

Pictured above: the Port at Kitimat near the proposed Gateway marine terminal

When Canada’s top economic thinkers speak their mind—we should all listen.

New reports out on December 17, 2012, from some of Canada’s top economists say new pipeline capacity is critical for Canada’s economic health and should be a “national priority.”

Oil is Canada’s most lucrative export. And Canadian oil trades at a significant discount to global prices because of our reliance on a single market—a situation that the Bank of Canada warned earlier this year was a considerable threat to the health of the Canadian economy.

Both TD Economics and CIBC World Markets issued warnings that if new pipeline capacity isn’t built … and soon … impacts will be felt not only with energy producers but the country as a whole.

The TD Economics Special Report notes: “Canada’s oil sector can be a major contributor to Canadian economic growth over coming decades. The realization of its potential is particularly positive for oil-rich provinces; but, it can also provide enormous benefits more broadly across the country. Investment and growth in the sector can create jobs, fuel industrial production, boost income growth and generate tax revenues to help fund many social priorities.”

I agree wholeheartedly. While Northern Gateway is often viewed through the ‘heated debate lens,’ this issue is far bigger than just one pipeline project proposal. If the Canadian economy is to withstand the economic challenges gripping many developed nations, it must take advantage of the fast growing markets in Asia. It makes perfect sense that Canada’s most lucrative export, crude oil, leads that push—we can lead with energy.

TD Economics recognizes this economic reality; their Special Report also notes: “In order to access rapidly growing overseas markets, Canada needs access to a port where oil can be shipped by supertanker. It is surprising just how economic it is to ship around the world once loaded on today’s largest tankers.”

They point out that western ports are the “natural location” for this marine terminal to be built.

The CIBC also put out a paper, warning new pipeline projects in the near term will not be enough to move all the crude being produced out of Western Canada in the years ahead.

Their news release notes “Pipeline capacity out of Western Canada is adequate for the short term, but substantial progress must be made on this front in 2013. Progress, or lack thereof, will have a big impact on sentiment towards Canadian oil producers.”

TD, CIBC and the Bank of Canada aren’t the only economic leaders calling for increased market access. Scotiabank economist Patricia Mohr told news outlets in October of this year that West Coast access is critical if Canada is to tap the faster-growing markets of the Pacific Rim. And recently, the chief economist for the global think tank International Energy Agency said Canada should pursue Asia as its next major market for growing supplies of oil sands crudes.

Building the energy infrastructure necessary to promote fair-market value for our most lucrative commodity is in everyone’s best interests. It creates jobs, boosts economic development and government revenues which are essential to supporting the services we rely on such as education, health care and infrastructure.

Related video

TANKER SAFETY
Northern Gateway will implement a world-class marine safety program to protect the environment and people who call the north BC coast home—watch the video to learn more.

Canadian oil export pipelines full

Thu, 22 Nov 2012 09:46:24 -0700

At a recent event, an Enbridge Vice President, Vern Yu, told oil industry watchers “All of the crude oil export pipelines are pretty much full, running at maximum capacity. And we’re not likely to see any meaningful capacity added to these networks until the end of next year.”

For Canada’s energy industry—providing almost $100 billion in export value each year—limited access to export markets is already causing significant consequences.

In a Globe and Mail article, journalist Nathan Vanderklippe, using data from CEPA, outlines the considerable cost to the Canadian economy:

“Canadian light oil is now selling for some $30 (U.S.) a barrel below comparable international crude; heavy oil faces a roughly $28 discount. If the pipes stand full for a year, the pain is likely to be significant. According to the Canadian Energy Pipeline Association, a $15-a-barrel discount decreases energy company revenues by $16.4-billion a year, and a $2.46-billion loss to governments. Today, the discounts are double that.”

Current calculations peg the lost revenue to Canadian governments at $4.92 billion per year. That’s a massive number. To help put it into perspective, consider this…

Capturing lost revenue due to this price differential—something that would be addressed significantly by accessing world oil markets—would provide governments with additional funds for the social programs and infrastructure we depend on. For example, according to the Journal of Commerce, BC’s Children’s and Women’s hospital building costs are expected to come in at around $700 million... $4.92 billion is enough to fund about seven similarly costed projects.

To address this issue, Canadian producers need to create additional market access outside of the USA primary market—keep in mind the US market is seeing exponential growth in supply that is projected to continue while demand remains flat or declining. The lost revenues to producers, totaling nearly $32 billion annually, means less revenue for re-investment and lower payouts to shareholders, many of whom are hardworking Canadians trying to save for their retirements either directly, through investment funds or through pooled pension funds like the Canada Pension Plan and others.

This issue is truly pan-Canadian—it directly affects all of us whether we choose to recognize it or not.

Opening new markets ‘critical’

Wed, 31 Oct 2012 08:54:27 -0600

Two recent reports from leading Canadian thinkers highlight the critical need to open new export markets for Canada’s oil resources.

Patricia Mohr, a commodities expert with the Bank of Nova Scotia, gave prominence to the issue in her recent research report published on behalf of her employer:

“Changing oil market dynamics highlight the increasing ‘commercial risk’ for Western Canada’s ‘oil patch’ of relying largely on one major export market — the United States — and the critical need to build additional pipeline & rail capacity to the B.C. Coast to tap the faster-growing markets of the Pacific Rim. Greater export optionality would allow producers from time-to-time to divert supplies from weaker to stronger markets.”

Right now, Canada, sells almost all of its oil resources into a single market: the United States. Canadian oil currently trades at a discount, nearing 20 per cent, to the global market price—meaning Canadians don’t receive full value for their oil—laregly due to the single-market dynamics of our oil exports.

Mohr’s analysis follows on the heels of another report issued by the MacDonald Laurier Institute, which describes itself as “rigorously independent and non-partisan.”

In their new study released in October 2012, the Institute says “Canada must take action today to be positioned for competitiveness tomorrow” amongst other highlights, including:

Canada is a net energy exporter
Pipelines are the most efficient means of shipping crude oil and natural gas
Canadian producers need access to tide water to reach Asian markets
China and India are increasing their capacity to refine bitumen
The first step towards creating a competitive Canadian energy sector is developing distribution channels

At nearly $70 billion last year, oil was Canada’s single biggest export in 2011. Little wonder then that researchers are focusing on this vital Canadian economic health issue.

In a press release on their website, MLI wrote:

“Canada must be able to get its oil and gas and other energy products to new markets quickly and efficiently… Our ability to raise the standard of living for people across the country depends on it. Finding environmentally responsible and efficient ways to transport energy products is a lynchpin in our future success as a global energy leader.”

Recent related posts:

Gateway opens new markets

Thu, 27 Sep 2012 10:19:47 -0600

The Alberta Federation of Labour (AFL), and their friend Robyn Allan, have both suggested the Northern Gateway project will restrict domestic access to Canadian crude oil. Ms. Allan, in her evidence submitted to the Joint Review Panel, argues:

“The proponent maintains that the purpose of Northern Gateway is to restrict crude oil supply to Canadian and US markets, thus raising the price of Canadian crude oil.”

This statement is false—which is perhaps why legal counsel for the AFL did not ask Northern Gateway’s panel of economic experts to confirm this when they cross-examined them just two weeks ago during the ongoing technical hearings in Edmonton.

Enbridge Northern Gateway isn’t the only party to the JRP process that took exception to this claim. This week, as registered intervenors had the opportunity to cross-examine each other at the technical hearings, legal counsel for MEG Energy asked Ms. Allan: “Could you point me to a reference on the record where the proponent states that to be the purpose of the project?”

After attempting to explain away her allegation, Ms. Allan finally conceded: “I cannot point you to a reference where the proponent says that.”

Gateway is about opening new markets for Canadian energy products. The project will not restrict domestic supply, which is forecast to grow exponentially while domestic demand remains relatively stable.

Once tidewater access is created, Canadian producers of oil will be able to sell some of their products on the global market at higher prices than they currently capture. These higher netbacks are shared with Canadian investors and Canadian governments through dividends, resource royalties and income taxes.

Deanna Zumwalt, representing Canadian energy company Nexen, told the JRP panel at the technical hearings in Edmonton this week:

“The key for us, if we can get access to tidewater, is now we’ve got choice. So not only do we have market diversity, we’ve got choice in the market that we can take it to at a given time to try and maximize our value. So it’s a key reason we want access to tidewater….

I don’t think any market’s going to go short barrels in North America. I think there’s very little threat of that happening or occurring.”

Suncor, which is one of the largest oil sands producers, also operates upgrading and refining facilities in Alberta, Ontario and Quebec. When asked by representatives of the AFL whether Suncor anticipates any supply shortages in Canada, Suncor’s representative told the JRP:

“…we’ve got refining assets in Eastern Canada. We’re looking to also get supplies out of Western Canada. We don’t see our participation in Gateway… is going to impact that…

So I would say, no… I think supply to Canadian refineries is going to be quite healthy both from Canadian and potentially our own eastern offshore production as well.”

Robyn Allan’s flawed analysis misrepresents Gateway economic benefits case

Mon, 24 Sep 2012 15:25:02 -0600

Robyn Allan is an independent economist from B.C. She is the former head of the province-owned Insurance Corporation of B.C. and was appointed to that position in the 1990s by the then NDP government.

Ms. Allan wrote an analysis of thePublic Interest Benefit Evaluation of the Enbridge Northern Gateway Pipeline Project. Ms. Allan’s analysis was submitted to the Joint Review Panel as evidence by the Alberta Federation of Labour and was subject to cross examination at the hearings in Edmonton today.

Since writing her report, Ms. Allan has been giving media interviews, writing opinion pieces for newspapers and giving talks to various groups in an effort to influence the public. Unfortunately for those listening to her and reading her opinion pieces, her analysis contains several errors and flawed assumptions that she incorrectly attributes to Enbridge Northern Gateway’s economic reports.

At a talk she gave to Simon Fraser University’s Carbon Talks Forum earlier this year, Ms. Allan said:

“…the economics only work if the price of oil goes up by 2 to 3 dollars per barrel, in Canada, on every barrel produced, every year for 30 years…”

Let’s be absolutely clear, Northern Gateway’s economic case outlines a one-time uplift in price for oil produced in western Canada.

One-time uplift… not every year… and not compounded over 30 years.

This incorrect assumption, wrongly attributed to Northern Gateway by Ms. Allan in various media on multiple occasions, was concerning enough to Wright Mansell Research, who prepared the detailed economic analysis in support of Northern Gateway’s application, that they responded directly to Ms. Allan’s suggestions in an update to their report submitted to the JRP in July 2012:

“Contrary to Ms. Allan’s allegation, a one-time price increase does not cause higher rates of inflation in every future year thereafter.”

In the same SFU talk, Ms. Allan also claimed: “…my research has shown that these price increases apply to every barrel produced, every barrel produced, including that sold in Canada, and that these price increases will be passed on to Canadian consumers and Canadian businesses…. Enbridge confirmed that this indeed what’s behind their case.”

This claim may surprise you as much as it did us. Again, Wright Mansell Research felt compelled to clear the record and stated:

“Contrary to Ms. Allan’s assumption, the Northern Gateway project cannot affect the world price of oil and therefore cannot affect the prices paid for crude oil by Eastern refiners serving approximately one half of the Canadian markets for refined products.”

This gets to the heart of Ms. Allan’s argument: that Northern Gateway is an inflationary risk to Canada and will mean you’ll pay more at the pumps for gasoline (more on that issue here). Her arguments, wrongly attributed to Enbridge Northern Gateway’s application, are flawed.

When asked by a JRP panel member at the end of questioning whether or not Ms. Allan had done any of her own economic modeling, Ms. Allan confirmed that she had not.

Foreign investment helps grow Canada’s economy

Thu, 13 Sep 2012 13:21:57 -0600

Canada's oil and gas industry is a massive wealth generator for the Canadian economy.

In 2010 alone, Canada exported nearly $50 billion worth of oil. The oil and gas industry is also a capital intensive industry that requires significant investments to develop new resources and production facilities, and to build upgrading, refining and pipeline infrastructure.

Simply put, without foreign investment in Canada's oil and gas industry, it's very likely our resources wouldn't contribute to the Canadian economy at the same levels they do today.

All aspects of Canada's oil and gas industry are regulated by Canadians.

Regardless of the activity, be it production, transportation or refining of our oil resources, industry is subject to oversight by a wide variety of actors including federal and provincial governments who establish policies and legislation, and regulatory bodies who provide oversight and enforcement to protect people and the environment. Regulators also oversee financial markets and establish rules on investment, pricing, royalties, taxation and tolling.

Canada's pipeline industry is part of this regulatory environment. Every aspect of pipeline construction and operation is subject to oversight and control from federal and provincial bodies. The toll amount charged to shippers who want to use pipelines to move their products, and even the nomination process to determine shipper schedules, are subject to regulation by the National Energy Board at the federal level and various provincial utilities commissions and energy boards.

At the Joint Review Panel technical hearings in Edmonton on September 8, 2012, the lawyer representing Forest Ethics Advocacy, a political activist group with an environmental agenda, asked questions suggesting Enbridge is considering selling the Northern Gateway pipeline to Chinese government controlled interests.

In reply to this line of questioning, Paul Fisher, Enbridge Vice-President Western Access, stated "Absolutely not."

Suggesting eventual Chinese control of the Northern Gateway project is fear mongering. By constructing a red herring argument, opponents of the project hope to create a misleading issue meant to distract Canadians from the significant benefits the Northern Gateway project will bring to the Canadian economy.

Sinopec, which has self-identified as one of Northern Gateway’s funding partners, along with companies like Suncor, Cenovus and the French oil company Total, is a publicly traded company with shares listed on the New York and London stock exchanges as well as Hong Kong and ShangHai markets, and as such is subject to financial regulations, including disclosure and transparency requirements.

Roland Priddle, the former Chairperson of the National Energy Board and an expert witness on Northern Gateway’s economic and national benefits panel, provided the following responses to earlier questions at the Edmonton hearings:

“…the managements of those companies have an enormous vested interest in openness -- well, they're subject to SEC disclosure rules…

…if you check their annual reports -- and I did so in the last few weeks -- it's, for me, striking how much information you can find about the companies.

In fact, I thought to myself, looking at Sinopec, there's perhaps more information than you would find in the annual report of some western companies.

And I also noticed that, particularly Sinopec… were openly critical of the Chinese government’s control of oil products prices…

The control by the Chinese government is on the selling price of oil products within the country... They can't do anything about the import price of crude oil.

So it's a little bit of an over-simplification to say that they're controlled by the Chinese State.”

An independent study recently found that state-owned Chinese enterprises behave in a manner that isn’t all that different from corporations in free-market economies around the world.

The Canadian Chamber of Commerce identified restrictions on international investment as one of their Top Ten Barriers to Competitiveness.

Chambers state support for Gateway

Wed, 05 Sep 2012 16:27:36 -0600

In Letters of Comment to the JRP, the Edmonton Chamber of Commerce and World Trade Centre Edmonton indicated their support for Gateway:

“We view this project as an exercise in nation-building, as was the St. Lawrence Seaway project which successfully opened the entire country to international trade routes and markets,” writes Ken Barry, volunteer chair of the Edmonton Chamber’s board of directors. “It is imperative to expand access to crude oil markets beyond just one customer. This expansion is crucial in order to sustain economic growth in Canada and avoid a land-locked glut of Canadian crude oil.”

With the support of nearly 3,000 members, the Edmonton Chamber of Commerce is Canada’s largest chamber.

Northern Gateway’s economic case demonstrates the profound positive impacts the project will bring to the Canadian economy—a 2012 update to the study found:

almost $312 billion added to Canadian GDP, or an average annual gain of $9.2 billion;
an increase of $70 billion in Canadian labour income, or an average annual increase of $2.1 billion; and
a gain of $98 billion in government revenues, or an average annual increase of $2.9 billion.

This presents a staggering positive impact for the Canadian economy that also translates into significant benefits for right-of-way communities and other local economies that also benefit from Canada’s immense oil resources.

The World Trade Centre Edmonton, which is the international arm of the chamber, has a membership of over 9,000 businesses belonging to chambers of commerce from northern Alberta (including Edmonton and Red Deer), northern British Columbia, Yukon, Northwest Territories, and Nunavut. They write:

“Canada has a small window of opportunity to take advantage of its position of having the largest, secure source of oil reserves. If we aren’t able to get those reserves to market in a timely fashion, the Canadian economy will lose out to other nations who are more nimble.”

In a separate Letter of Comment to the JRP, the British Columbia Chamber of Commerce also announced their support for the Gateway project:

“Northern BC is in desperate need of new investments and new opportunities for its residents to earn a living. Northern Gateway will help bring economic security and hope to the region. BC alone seeks to benefit from about 3000 jobs during construction and about 560 long term jobs. Projected BC tax revenue from the Project is $1.2 billion which can go to support education, health care and training. In terms of local goods and services alone, the BC Coast would benefit from about $318 million in local goods and services, the central coast would benefit from $400 million and North East BC would benefit from about $112 million, all this in the absence of a collaborative agreement with Alberta.”

Established in 1951, the BC Chamber now represents over 32,000 businesses over every size, sector and regions in the province.

Al Monaco speaks to Toronto Board of Trade

Mon, 18 Jun 2012 14:44:16 -0600

The following speech was delivered to the Toronto Board of Trade by Enbridge President, Al Monaco, June 18, 2012.

Thanks Tony…and thank you everyone for attending this afternoon.

When the opportunity arose to speak today, I jumped at the chance for a couple of reasons….one was that I have a lot of time for Accenture and the Board of Trade.

Also as I’m normally speaking at this venue to investors and analysts, it gives me an opportunity to talk about another topic – a topic of national importance.

My remarks will focus on a critical energy issue facing Canada. Now, there is a bunch of energy issues being discussed by industry, policy makers, pundits, and so on.

They’re talking about gasoline prices; oil sands development; fracking and even pipelines seem to garner daily headlines. It used to be that nobody cared too much about pipelines.

Another important topic being discussed is the environmental consequences of energy.

And more recently, the impact of resource development on the Canadian economy – which is being framed as “Dutch Disease”.

These are important issues; however the one subject that is the most consequential of all is the rapid and dramatic shift taking place right now in world energy markets.

Despite a recent slow-down, global energy demand and economic growth will be driven by emerging markets like Asia, not North America and not Europe…. as has been the case for decades.

In terms of the supply side of the energy equation, North America will become the fastest growing oil and gas supply region in the world. This is 180 degrees from where we were a short time ago.

The wide swings in consumption and supply represent the most significant development in the global energy picture in recent times.

These new realities drive what I believe is a strategic imperative for Canada – which is the need to diversify its energy markets.

Diversifying our markets will require new energy infrastructure - at a time when there seems to be opposition to any and all energy projects.

Oil and natural gas are our largest single export and yet we’re selling those resources at a deep discount because we don’t yet have the infrastructure to reach new markets.

That discount equates to billions in lost revenues. As Canadians we should be concerned about that because energy is a critical component of growth and stability in Canada.

At the personal level it hits all of us through jobs, our standard of living and building on the social safety net we want in this country.

If we don’t move quickly to access new markets, Canada risks missing a golden opportunity to forge greater economic development. If we don’t move quickly, others will fill the gap!

Although I’m a westerner, I’m speaking today as a Canadian...
…to discuss the dramatic change in the world energy picture, what it means for Canada and how best to capitalize on the opportunity we have in front of us.

And what better place to be discussing the key issue of maximizing the value of Canadian exports than the Toronto Board of Trade?

Let me first briefly outline why our Company has a view on energy issues.

Enbridge is a large energy infrastructure player in North America.

Our job is to connect oil and gas supply with demand …we do that through a network of pipelines and facilities to eastern Canada, and to the U.S. Midwest, Midcontinent and Gulf Coast.

We deliver over 2 million barrels of oil every day to these markets, which represents 60% of U.S.-bound oil from Canada.

And Canada is the largest supplier of oil to the U.S. accounting for 13% of oil imports.

By now, you’ve probably guessed that oil represents Canada’s number one export and is a key contributor to our GDP.

We also operate a host of natural gas pipelines and processing facilities throughout North America. We’re the largest natural gas distributor in Canada with 2 million customers in Toronto and Ottawa.

And we own a growing portfolio of renewable electricity generation facilities.

These positions give us a unique outlook on the North American energy picture.

Here’s how energy fundamentals have changed.

The key driver of global energy and economic growth in the future is China and Southeast Asia, with GDP growth rates 2-4 times that of North America and Europe.

At the same time, U.S. oil consumption will likely be flat at best; due to slower growth, fuel efficiency, and demographic changes that are leading to fewer vehicles and miles driven.

On energy supply, the global shale gas revolution is now well understood.

Natural gas is no longer viewed as simply a medium term transition fuel to hold us over until renewables kick in… it’s now critical to meeting long term global energy demand.

Gas will be a key fuel source for the future: it’s abundant, responsive to demand, relatively low in emissions and it’s cost effective to site in that it can be positioned near load centres.

But the real game changer is growing North American oil production. In fact, at the forecast pace of growth, NA will be able to substantially reduce overseas oil imports.

This is quite a sea change in that just a couple of years ago North America was facing reduced supply, a fear of peak oil and the need for ever-growing imports…imports that come with significant geo-political risks.

There are many contributing factors to the sea change, but it really boils down to one thing: the application of new technology to energy development.

It may seem odd to be talking about new technology for an industry better known for the brute force of extracting hydrocarbons from thousands of feet below the surface.

But the fact is that technology has unlocked massive unconventional oil and gas reserves across North America.

We’ve always known that these large unconventional reserves existed.

But the key to unlocking that potential is the combination of horizontal drilling, reservoir stimulation methods and economies of scale.

The result: today’s energy business is more akin to a manufacturing process than it is about wildcat drilling.

We’re seeing explosive growth in energy production across the continent, in Alberta’s oil sands; in the Bakken region of Saskatchewan and North Dakota; in Texas and in large unconventional natural gas resource plays.

Canada has massive energy resources. We have the world’s third-largest oil reserves at 175 billion barrels with ultimate potential of some 300 billion barrels.

A recent forecast shows that Canadian oil production will double to about 6 million bpd by 2030. This would put Canada in the top three or four world oil producing nations.

This is a strategic advantage in that almost 80% of the world’s oil reserves are controlled by national oil companies. So Canada holds about half of the remaining “free-market” oil reserves.

Canada is also the world’s third largest producer of natural gas and it’s estimated we have anywhere from 700 to 1,300 TCF of reserves.

Energy accounts for about one quarter of Canada’s exports with oil leading the way at about $70 billion in 2011…with natural gas at $14 billion and other energy products at $30 billion.

Which brings me to the Canada-U.S. dynamic….

Virtually 100 % of our crude oil exports are sold to the United States, and therein lies the problem.

Because Canada’s resources are landlocked with access to only one market, our oil and gas exports are being heavily discounted relative to world prices.

We’re isolated from the world market, and that makes us a captive supplier. Effectively, Canada is a price taker.

And the double whammy is that our single market – the United States - has access to multiple sources of oil supply from around the world.

To drive this issue home, have a look at this slide, which illustrates the price dislocation for Canadian natural resources.

Canadian light oil is selling for $20 to $30 off world prices. If you do the math, that translates to lost value of some $60 million a day. A massive loss of value for Canadians.

You don’t have to be an economist to know that dependence on a single market is bad for our economy, whether we’re exporting commodities (like wheat, coal, natural gas, forestry product), technology, services or widgets.

It’s the same story for Canadian natural gas; once again, you see the price dislocation that results from a lack of connectivity for our gas supply to world markets.

Asian markets are clamoring for natural gas, including Japan, whose nuclear power plants are currently shut down for assessment.

While the United States will continue to be the primary market for Canadian oil and gas, it’s clear that Canada needs to diversify its energy markets.

Every day that goes by without access to tidewater and world markets for our oil and natural gas is another day of lost opportunity for Canada.

In response to this imperative, I believe we need to focus on three things:

First, we need to build infrastructure so we can connect growing supply to existing and new markets.

Second, and clearly linked to that, we need to ensure we develop our resources in a sustainable way.

And third, looking to the future, we need to invest in all forms of energy to meet future energy demand growth.

Looking at each of these in turn…

On building new infrastructure, we need to first connect growing supply to existing Canadian and U.S. demand centres.

And then, we need to establish a gateway to that global economic engine for the future - Asia.

I’ll illustrate this by highlighting 3 key market access initiatives under way at Enbridge, which together total some $14 billion of investment.

First, we are establishing a path for Canadian crude to access eastern Canada.

In reversing the flow of one of our existing lines—Line 9 – Ontario and Quebec refineries will have access to lower-cost Canadian feedstock. These refiners are now fed by foreign imports.

We’re proud of this project as it delivers Canadian oil to Canadian refineries. And that means Canadian oil security.

That’s significant in that Ontario and Quebec currently derive 18% and 90% of their crude from offshore sources, respectively.

It’s a solution that protects Canadian jobs and increases tax revenue in the range of some $90 million/year for Quebec – that can go to education, healthcare and other programs.

Importantly, this project requires no new pipeline construction, so it’s a benign and economical way to address the changing needs of the market—a solution that makes sense for producers and eastern Canadian refineries.

Even so, it’s important that we talk to communities about their concerns…so far, we’ve reached out to nearly 4,000 stakeholders along the right-of-way.

Our Gulf Coast access program connects Canadian oil supply to the mammoth U.S. refining centre, which has some 8 million bpd of processing capacity and is already configured to run Canadian oil.

A couple of things to note:

Reliable Canadian supply reduces U.S. dependence on foreign oil.

And this new market access strategy utilizes existing energy corridors so we will minimize disruption to the environment and the industry’s energy footprint, and…

This multi-billion-dollar project creates thousands of jobs and generates millions in new tax revenue.

To make the connection between growing Canadian supply with robust Asian demand, we’re proposing to build Northern Gateway.

The Gateway project achieves the goal of diversifying our energy markets, thereby maximizing the value of our resources.

Economically, Gateway will contribute some $270 billion to Canada’s GDP over 30 years, 63,000 person-years of employment during construction and some 1,200 long-term jobs.

$270 billion translates into jobs and economic opportunity for Canada. Clearly Gateway is not only important in terms of our country’s economic future—it is critical to helping Canadians protect our national interests at a time when a number of G8 countries and world markets are threatened by the European financial crisis.

Gateway and the benefits it will generate is, in effect, an insurance policy on Canada’s economic wellbeing.

Gateway will be a world-class project in every respect—from environmental protection…to safety…to community consultation.

That includes consultation with local communities including First Nations and Metis.

To date we’ve held 2,500 public meetings, 120 open houses, 150 presentations, and 65 economic development workshops.

Through that outreach, we’ve met directly with more than 17,000 people.

In fact on Friday I participated in a meeting of five regional Community Advisory Boards in Vancouver. Each of these boards brings together a diverse range of community stakeholders to share their views about the project. It is a unique and effective way to gather valuable input from all the communities along the right-of-way.

The advice and input obtained through this process has resulted in many enhancements to the Northern Gateway project, from environmental improvements to route changes.

And on the regulatory side, Gateway is undergoing the most rigorous assessment that any energy project has ever had.

The project will bring significant benefits to Aboriginal groups. In fact, we’ll be co-owners of the project with First Nations and Metis.

And aboriginals will also benefit from procurement opportunities and skills training that will be transferrable to other industries.

Let me summarize the importance and significance of Gateway this way.

Gateway capitalizes on several of Canada’s inherent strategic advantages. We have massive energy resources; We have the technology and skills to develop those resources effectively; And we have the Pacific coast advantage that gives Canada access to ½ of the World’s population; In my view, Gateway is a project that is clearly in Canada’s national interest. If Gateway isn’t good for Canada, then I don’t know what is.

Having said that, we have a regulatory process that will make the assessment in an independent and thorough manner.

The second leg supporting Canada’s strategic imperative is sustainable resource development.

Canadian resource developers are making progress on this front.

Oil sands emissions declined 26% per barrel from 1990 to 2010; water and energy use is declining and good progress is being made on reclamation.

Earlier this year, in a landmark collaborative effort, oil sands producers agreed to share their research and development in the areas of water use, land, greenhouse gases and tailings.

This is a big and progressive step forward for an industry that is highly competitive and not used to sharing information, much less research into new technology.

This progress is being driven in part as a response to public concerns.

But, it demonstrates that industry understands that the economic benefits argument alone is not enough to make the case for oil sands development.

For our part, Enbridge is fully committed to conducting our business in an environmentally sustainable way.

Even though we are not a major CO2 emitter, we set targets to lower our greenhouse gas emissions.

In 2010, we had reduced our Canadian direct GHG emissions by more than 20% below 1990 levels, through upgrading facilities and equipment.

We achieved these reductions at the same time as increasing pipeline throughput by nearly 50%.

We’ve also committed to stabilizing our environmental footprint through our Neutral Footprint initiative.

As of 2009, we’re counteracting our environmental impacts by planting a tree for every tree we remove; conserving an acre of natural habitat for every acre we permanently impact and generating a kilowatt of renewable energy for every kilowatt of power our operations consume.

This is a groundbreaking initiative that we think differentiates Enbridge as a company to invest in, partner with, work for, and welcome as a neighbor in communities.

The 3rd element supporting Canada’s strategic imperative is to develop all forms of energy, including renewables.

While fossil fuels will be with us for a long time, we need to look to the future and develop all sources of energy to meet demand.

We don’t have the luxury—not yet, at least—of picking and choosing.

Yes, renewables are partially subsidized but we don’t expect to need subsidies forever; in fact, the cost of renewables has declined considerably, given improvements in technology.

We ourselves have invested $2.5 billion primarily in wind and solar projects, which generate nearly 1,000 megawatts of emissions-free energy.

These are solid projects that will position us for the future.

Before concluding, let me touch on two subjects regarding opposition to energy development.

First, let me emphasize that there is agreement from all corners that we need to be responsive to concerns about the environment ….and we need to continue to improve our track record….there’s no doubt about that.

But, as I alluded to at the outset, various groups are opposing any and every kind of energy project, whether it’s nuclear, oil, natural gas and even renewable projects.

If we simply say “no” to every project, then we need to ask those who oppose those projects what their solution is.

Let’s think about what our life would be like if we eliminated traditional sources of energy right now.

We’d all agree that’s not practical…. so we need to develop all our energy resources to meet energy demand in a sustainable way.

We need to focus more effort on figuring out how to make energy projects better rather than on polarized positions.

In short, we need a more of a balanced dialogue about our energy future.

Second, there’s been discussion lately about “Dutch Disease” and the impact of oil sands development on the rest of Canada.

Yes, energy exports are one thing that can contribute to a strong currency…. and in countries with less diversified economies, that could make manufacturing less competitive.

A number of studies have concluded that this is not a significant issue in Canada.

For one thing, there are many factors that drive our dollar, including the fact that we attract investment to Canada because of our economic outlook and strong financial system.

Energy is also exported from regions across Canada, including Quebec, and other sectors like mining and electricity; and yes, our manufacturing sector also generates exports.

And relative productivity can also affect manufacturing competitiveness.

On the other side of the Loonie, there are significant benefits generated by a strong Canadian resource sector.

These include tax revenues, long-term jobs across Canada, broad economic growth, and technology development, all of which support our way of life and in particular our social safety net.

In fact, cash generated in the oil and gas industry is reinvested into Canada’s economy at a rate of $1 billion a week.

My point is that whether it's the strength of western Canada's resource sector, Ontario's manufacturing sector, Quebec's wealth of hydro power, or oil and gas resources in Atlantic Canada…we should think about regional success as Canada's success! Those regional successes generate a strong and stable Canada.

To sum up… global energy fundamentals have changed dramatically.

North American oil production is growing rapidly and Canada is poised to become an even bigger player in the global energy picture.

Today, as Canadians, we are leaving billions of dollars on the table because we’re not realizing full value for our resources.

That’s driving an imperative for Canada to diversify our energy exports to new markets.

We need to focus on building new infrastructure to connect supply to new markets; developing our resources sustainably….and working to develop all forms of energy.

I may be somewhat biased, but I think we can look at Enbridge as a good example of where our energy economy needs to head.

We’re responding to changes in the North American and global energy market by investing in the infrastructure necessary to meet demand.

We’re listening to stakeholder concerns about the environment and doing something about it.

And we’re investing in new forms of energy for the future.

Energy and resource development play a critical role in our economy. So, let’s have an open dialogue about how energy generates wealth for all Canadians.

We also need to listen to all perspectives so that we can improve these projects.

Canada has successfully addressed significant energy challenges in the past, and I’m confident we can respond to the ones we’re facing today.

As a country, we know from experience the tremendous benefits that infrastructure can bring to our economy and our nation.

We’ve proven it time and time again - building transcontinental railways, nation-building pipelines and the St. Lawrence Seaway.

And we can do it again with new energy infrastructure to reach growing markets.

If we achieve this, Canada will become a global energy leader to the benefit of all Canadians.

Let me close by re-iterating a point I made a few moments ago.

Whether it’s oil sands development in Alberta; the forestry or natural gas industries in B.C.; Saskatchewan’s potash; manufacturing and mining in Ontario or resource development in Atlantic Canada—collectively it’s all about a stronger nation as a whole…where the sum is greater than its parts.

I encourage everyone to think of regional success as a win for all of Canada.

Thank you.

Northern Gateway and energy infrastructure in the 21st Century

Mon, 14 May 2012 07:56:24 -0600

Janet Holder, Enbridge Executive Vice President, Western Access, recently gave a speech at the Canadian Club in Toronto, Ontario, Canada. Outlined below are Janet's speaking notes from this event.

Thank you Jaime and good afternoon everyone. I'm happy to be back in Toronto, particularly at this beautiful time of year. I lived here during my tenure as President of Enbridge Gas Distribution. I recognize more than a few faces in the audience and I'm grateful for the opportunity to address the Canadian Club today. Of course now I'm back in my hometown of Prince George, BC, where I'm heading up Enbridge's Western Access program.

It is my pleasure to talk with you about what I believe is the most important energy infrastructure project for our nation in the 21st Century: Northern Gateway Pipelines.

In fact, let me remove a qualifier. Forget energy. I think Northern Gateway is Canada's most important infrastructure project today, period.

120 years ago, when the Canadian Club was founded, Canada had just completed another project vital to the well-being of our country, the Canadian Pacific Railway.

Like Northern Gateway, the CPR looked west and created an important transportation corridor to connect markets and resources. In doing so it helped to build and strengthen a fledgling nation.

Had the Canadian Club had been founded just a few years earlier, I am confident that the leaders of the day would have stood at this podium and talked about the importance of that thin band of steel extending to the West Coast and helping to bind and protect confederation.

Likewise, I'm sure the creation of the St. Lawrence Seaway, a little more than 50 years ago, attracted the attention of the Canadian Club. The Seaway proved to be an economic engine for Canada in the mid-20th century. Since 1959 it has seen the transit of nearly $400 billion worth of cargo, connecting the interior of North America to the markets of the world. ⁱ

Northern Gateway is as important to Canada as the CPR and the St. Lawrence Seaway. Its impact on our economy will be of similar magnitude and its benefits will reach down through several generations.

Today I'll discuss why we need to move forward with this project as a nation. I'll talk about why Torontonians should care about a pipeline whose closest point would lie nearly 3,000 km west of here. And I'll talk about how we can build it safely, respectfully and sustainably.

Northern Gateway will fundamentally change the energy industry in Canada. It will catapult our world-class energy resources onto the global energy market and will immediately diversify our customer base, a critical step towards a stronger economy in uncertain times.

But this will only happen if, as a nation, we have the courage and conviction to step out on the world energy stage.

Canada has a choice to make. We can wistfully gaze across the Pacific at the growing Asian economies and wish there was some way for us to fuel their growth with our abundant energy resources.

Or we can act. We can create a Northern Gateway.

Background

Let me provide a little background on Enbridge and on the project itself. Then I will give you the rationale for this ambitious undertaking.

First of all, Enbridge is a Canadian company. For example, we've been here in Toronto for more than 160 years and we employ about 2,100 people in the GTA region alone.

We operate the longest and most complex crude oil pipeline system in the world, safely and reliably delivering nearly 2.2 million barrels of oil every day to markets in Canada and the US. In fact, when you fill up your car here in Toronto, you are likely pumping fuel refined from crude oil Enbridge transported.

We are also the largest natural gas distributor in Canada, heating over 2 million homes. Our natural gas gathering, processing and transmission systems extend from Northern BC to the Gulf of Mexico and transport energy to consumers in nearly forty states and two provinces.

We own and operate a growing portfolio of renewable energy projects with a combined generating capacity of nearly 1,000 MW.

Every action we take adheres to our core values of Safety, Integrity and Respect and all of our relationships are based on that. Across North America, we deliver the energy people count on to live, work and prosper.

Northern Gateway is an extension of that commitment, built on the same core values that have made Enbridge a trusted company for decades.

It's a dual pipeline extending about 1,200 km from northeast of Edmonton, AB to the established deep-water port at Kitimat, BC. The westbound pipeline will carry 525,000 bbl/day of petroleum from the Alberta oil sands to Canada's west coast and the eastbound pipeline will carry 193,000 bbl/day of condensate back to Alberta where it will be used to dilute bitumen so that it can flow through the pipeline.

At Kitimat we will build a world-class marine terminal with two mooring berths for tankers and a total of 14 storage tanks.

I cannot overstate the importance of this maritime access. Today, Canada's proven oil reserves – the third largest in the world – are landlocked. With Northern Gateway and the port of Kitimat, this resource can be sold virtually anywhere in the world.

The Case for Gateway

Canada is a trading nation. In fact, of all the G8 nations, Canada is the one whose economy is most dependent on trade.

And our energy trade is the cornerstone of Canada's economy. In 2011 Canada's single largest export was crude oil; we exported $67 billion worth of it.

However, nearly all of Canada's crude oil exports, about 99 per cent, go to only one customer: the United States. US demand is dropping, in fact according to a TD Economics special report released earlier this month there has been a 30% net drop in their imports of oil and petroleum products since 2005 ⁱⁱ . Their domestic supply is growing and they do have a desire to be self-sufficient. Us finding another customer won't hurt their feelings.

Our most valuable export commodity, and only one market. Does anyone want to defend that business model?

At the same time, the US has a wide range of oil suppliers to choose from – 65 countries in fact ⁱⁱⁱ . The list includes such major petroleum exporters as Saudi Arabia, Venezuela, Mexico, Nigeria and Russia.

That's a dangerous imbalance for Canada.

And we're feeling the impact of our landlocked crude oil every day.

Every day that we're not able to access tidewater is a day of lost opportunity on the world energy market.

When you hear that world oil is trading at a little over $100 per barrel, I want you to remember that's not the price that Canada gets for its oil. Canada's oil, because it is stuck in North America with no outlet to other markets, sells at a discount, up to $36 (as recently as March ^iv ). This discount is not only due to lack of market diversification but also as well as the bottlenecks in Oklahoma.

That's tens of millions of dollars a day and billions of dollars a year in foregone revenue for all of Canada.

What Gateway Delivers.

Northern Gateway will change that. At a single stroke, it will diversify Canada's energy markets and significantly boost the power of our nation's most important economic engine.

Here's what Northern Gateway will deliver:

Very conservatively, an immediate $2 to $3 uptick in the value of every barrel coming out of Western Canada. Some are suggesting now that number could be more like $8 to $10 for every barrel.
A diversified market for our most valuable export, with access to the energy-hungry economies of the Pacific Rim.
A $270 billion contribution to Canada's GDP over 30 years. If we just do the straight arithmetic, this will be a $9 billion contribution per year for three decades. Just to give you a sense of scale, based on 2011 GDP numbers this is slightly more than the entire contribution of the Canada's mining sector to our GDP ($8.6 billion in 2011) and nearly double what forestry and logging contribute. ($5.2 billion) ^v
Close to $1 billion in contracts, training, employment and equity for Aboriginal communities and businesses. (Including a 10 % equity stake in the project)
$2.6 billion in local, provincial and federal government tax revenues.
$4.3 billion in labour-related income.
Approximately 1,150 long-term jobs throughout the Canadian economy and thousands of jobs during construction.

That's a look at the impact across Canada. Now let's look at the potential impact here in Ontario.

We'll be buying our pipe in Canada, so there will be a tremendous impact on Ontario's steel mills and manufacturing centres.

It's a $5.5 billion project, so the Toronto–based financial and banking sector will be involved.

Northern Gateway, as I will mention later, has opposition due to its relationship with the oil sands. Here's what the oil sands deliver to Ontario:

Over the next 25 years, the oil sands industry is expected to purchase $63 billion worth of goods and services from companies in Ontario.^vi

Thousands of jobs. More than half of the employment related to the oil sands outside of Alberta is in Ontario and by 2035 seven per cent of all oil sands related jobs will be in this province. ^vii

According to the Canadian Energy Research Institute, Ontario has the most to gain of any province other than Alberta.^viii In fact, CERI paints a remarkable picture of the impact Northern Gateway will have on the economy of Ontario:

It will create more than 16,000 person years of employment in the province. ^ix
It will generate more than $390 million in provincial tax receipts. ^x
It will generate $686 million in pay for Ontario workers ^xi
And it will boost Ontario's GDP by $1.2 billion. ^xii

And where are those jobs? From services to manufacturing, the oil sands bring benefits and jobs to Ontario. Northern Gateway is good for Canada and it's good for Ontario.

The controversy

Despite all these local, provincial and national benefits, the Northern Gateway project is subject to considerable controversy. I know you have seen the headlines and concerns in print. (Protests just last week)

Much of the controversy arises from that fact that this energy megaproject will occur in a region where oil pipelines have not existed for decades, which naturally gives rise to concerns among local residents about local environment. We welcome the opportunity to engage in the community.

We also know that the project is a lightning rod for opposition because of its connection to Canada's oil sands. Opponents in Canada and primarily abroad see stopping the pipeline as a way to stop oil sands development. The majority of opponents to the oil sands are not Canadian. And we have seen different types of opposition including, as media reports have suggested, millions and millions of dollars crossing the border to stop major Canadian development. As a country, we need to give serious thought to what is an appropriate balance – how do we increase transparency and fairness around processes that impact our country's future?

But in all of this, we are eager to listen and engage on those with a direct interest in the Project. There are concerns from First Nations and Métis communities – some near the proposed right-of-way and others from different regions in Canada.

For Enbridge, the controversy may be a challenge, but it is certainly no surprise. As one of the world's leading energy delivery companies, we know from long experience that it is not easy to build consensus around energy projects. When I was here in Toronto I experienced firsthand the controversial power generation project in Oakville. And, of course, Gateway has attracted its fair share of celebrity opposition. We've got everyone from Robert Redford to Kevin Bacon. It's amazing that people seem to believe that celebrities have more knowledge about the issue than the general public.

It is not easy whether we're talking about a new gas-fired electricity generating station, a 2 km upgrade to an existing natural gas pipeline in a populated area, or a new 1,200 km oil pipeline that will stretch across provinces. That is simply the reality of today's world and the reality of our operating environment.

Given the importance of energy infrastructure to Canada's current and future prosperity, we believe that citizens across the country should get involved in the discussion on Northern Gateway. They need to weigh the pros and cons, and assess Enbridge's approach to doing business, creating shared value in the community and being a good neighbour. The key, of course, is that the discussion needs to be based in fact.

And the facts about the project appear to be capturing the public's attention. Support is growing. But those in favour of the project need to speak up. An Ipsos poll of 1000 BC residents released earlier this year shows that nearly 50 per cent of British Columbians are in favour of the project, about 32 per cent are opposed and about 20 per cent are still undecided.

The percentage of those in favour jumps to 55 per cent in Northern BC, where pipeline is proposed to run.

This is a far cry from the majority opposition that activists claim in BC. It shows that most British Columbians are open-minded and willing to listen.

Most importantly, the poll demonstrates the validity of a time-honoured rule known as the "ABC" of communications: awareness leads to buy-in, and buy-in leads to commitment. The poll shows that the more people know the facts around Northern Gateway, the more likely they are to support it.

We're also seeing that the public's understanding of the importance of energy infrastructure development in Canada is growing. Earlier this month the Canadian Chamber of Commerce released the results of a poll conducted by Ipsos.

The results showed that, contrary to how the issue may be represented by opponents of energy projects, the Canadian public has a high level of support for energy infrastructure development.

For example, two-thirds of Canadians think it's possible to protect the environment while increasing oil and gas production.

Nearly twice as many Canadians (57 % agree to 29 % disagree) that the benefits of oil sands developments outweigh the negatives.

And most importantly for Northern Gateway, 75 per cent of Canadians think it's important that Canada does what is required to diversify our oil and gas markets away from our reliance on the United States.

Clearly, support for the project and for diversifying our oil markets is gaining traction across Canada.

Our approach

There are two reasons why support is growing. One is that the business case for the project is compelling. As the global economy continues to struggle, diversifying our crude oil market with Northern Gateway helps Canada insulate itself from the worst of the economic headwinds.

The second reason behind growing support is Enbridge's approach to the project and to its stakeholders, whether they are in favour or opposed. I am convinced this will be a decisive factor in the ultimate success of the initiative.

We work hard to be a good neighbour and to prove the quality of our character as a company each and every day.

We have been consulting with stakeholders, communities and First Nations along the proposed right of way for the past 10 years. We've held 2,500 public meetings, 123 open houses, 150 presentation and we've met with more than 17,000 people over that time frame. We have taken consultation to a whole new level.

Our approach is transparent and inclusive. We will talk to any stakeholder and respond to every concern. It's not enough for us to answer the regulator's questions. We must work to gain support in the community halls and schools, meeting rooms and kitchen tables all along the proposed route.

And we're working to do just that. We know we need to earn the trust and confidence of our stakeholders and we will do that the same way we have for more than 60 years, by being approachable, open and responsive, the way a good neighbour should be.

We're also going to great lengths to keep the pipeline and marine operations safe.

Here are a few examples among many:

Only pre-screened, double-hulled tankers will be allowed in the Douglas Channel, and they will be tethered to custom super-tugboats and navigated by certified, experienced BC pilots.
We will be adding navigational aids, radar and first response capacity to enhance the safety of the entire northwest coast.
We continue to review and test new technology as it relates to pipeline integrity, earlier detection of pipeline faults, and for emergency response.
We have also adjusted the proposed routing and waterway crossings along the pipeline right-of-way in response to community and stakeholder input.

The more people learn about Gateway and Enbridge, the more trust they will have in our commitment and ability to build and operate this vital link in Canada's energy supply chain in a safe, reliable and sustainable way.

And don't forget that pipelines have been shown to be the safest, most efficient way to transport oil, and oil tankers currently safely travel the Great Lakes and Canada's east and west coasts.

The regulatory process

Currently we are in the midst of a regulatory review by the Joint Review Panel, which operates under the auspices of the National Energy Board and the Canadian Environmental Assessment Agency.

We submitted our regulatory application two years ago.

We're now into our fifth month of community hearings, which are expected to continue until the end of the summer.

Formal hearings should begin in September and be completed by year-end. We hope to have a decision on Northern Gateway by the end of 2013. As you can tell, this is a long process.

The federal government has recently announced that it is working to streamline the regulatory process. We welcome all initiatives that provide certainty to the review process of projects like Northern Gateway.

But the bottom line for us is our commitment for consultation for those with an interest in the Project.

Aboriginal consultation

First Nations along the proposed right-of-way have a profound interest in the project and are a key focus of the consultation process.

Just as I am proud of the technological and engineering expertise that we bring to the project I am also proud of the innovative and collaborative approach that we are bringing to our interactions with these First Nations.

Working closely with Aboriginal communities along the right-of-way, sharing the benefits of pipeline construction and finding opportunities for them to participate in the project over the long term is not only responsible and respectful, it just makes sense.

The relationships that we are forging with these communities are critical to our success. We know that First Nations are more than stakeholders. We work hard to engage with them, understand their interests and concerns and find out where we can work together for mutual benefit.

Our 10 per cent equity offering in the project to Aboriginal communities along the proposed route is just one example of this approach. We are also assisting with the financing of these equity stakes so that these communities can reap the long-term benefits from Northern Gateway.

That's over and above the training and labour opportunities and the sourcing of goods and services before, during and after construction.

Wrapping up

Before I wrap up today, let me leave you with a few thoughts.

First, the case for Northern Gateway is very strong. It's hard to argue against the logic – the necessity – of diversifying the market for Canada's most important export. Gateway is the link between the world's third-largest petroleum reserves and the world's fastest-growing markets for energy. It will have a transformative impact on Canada's economy. Northern Gateway will bring thousands of jobs to Alberta, BC and the rest of Canada and help secure our future as an energy superpower.

Second, Enbridge is uniquely positioned to deliver on the promise of Northern Gateway. Our long-term success is based not only on our ability to safely build and operate energy infrastructure, but also on our ability to build respectful, stable and strong relationships with landowners, stakeholders and First Nations.

Third, the project faces significant opposition, but frankly the level of that opposition is often overstated by activists who use old public opinion data that is not even about the project. The number of people who support Northern Gateway is growing. The voices arguing against it will get louder over the next several months, but we will stay the course and invite Canadians to join in a civil and fact-based discussion of the pros and cons of the project.

Finally, Canada is well-equipped to make a prudent, thoughtful and balanced decision about Northern Gateway and about all our energy infrastructure development. Gateway is just one example of the smart, sustainable and strategic projects Canada can and should undertake to ensure that we get the best value for our natural resources in a competitive world market.

I hope my comments here today have helped build support for this game-changing project. At the very least, I hope I've encouraged you to join the conversation. And you'll find a lively discussion on our website at www.northerngateway.ca

Canada is ready to enter the global energy market, and Northern Gateway is the key that unlocks the door. But it is all Canadians – and that includes everyone in this room today – who hold the key in their hands.

Thank you very much for your time today.

ⁱ http://www.greatlakes-seaway.com/en/seaway/facts/index.html
ⁱⁱ TD Economics; http://www.td.com/document/PDF/economics/special/lp0512_energy_independence.pdf
ⁱⁱⁱ EIA. http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_epc0_im0_mbblpd_a.htm
^iv Bloomberg, http://www.bloomberg.com/quote/USCSWCAS:IND
^v Statistics Canada; http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/prim03-eng.htm
^vi CAPP, The Oil Sands: Growing Ontario’s Economy, http://www.capp.ca/getdoc.aspx?DocId=176826&DT=NTV
^vii CAPP, The Oil Sands: Growing Ontario’s Economy, http://www.capp.ca/getdoc.aspx?DocId=176826&DT=NTV
^viii CERI, A Decade of Staged Oil Sands Growth (2010 – 2020) page xiii
^ix CERI, A Decade of Staged Oil Sands Growth (2010 – 2020) Table 1.13 – 1.8
^x CERI, A Decade of Staged Oil Sands Growth (2010 – 2020) Table 1.14 – 1.9
^xi CERI, A Decade of Staged Oil Sands Growth (2010 – 2020) Table 1.12-1.7
^xii CERI, A Decade of Staged Oil Sands Growth (2010 – 2020) Table 1.12-1.7

New poll confirms support for Gateway goals

Thu, 03 May 2012 13:52:18 -0600

Leading public opinion research firm Ipsos Reid, on behalf of the Canadian Chamber of Commerce, has released a poll about Canadians' views on the oil and gas industry and the environment.

Among the highlights, the poll confirms the results that another polling firm, Nanos, found back in early February 2012: 75 per cent of Canadians believe we need to open new markets for our oil and gas products--a goal Northern Gateway will meet, should we win approval to operate.

In 2010, Canada exported $50 billion worth of oil, with almost all of that going to the mid-west market of the USA. Currently this market has a large volume of supply, and a lack of infrastructure to move oil to other places. This situation has resulted in a deeply discounted price for Canadian oil compared to the global market price--a problem that the Bank of Canada has suggested could weigh on the entire Canadian economy.

The poll results demonstrate Canadians are aware of this problem and want it solved.

Amongst the findings of the Ipsos Reid poll released today:

Two-thirds (65%) of Canadians agree that “it is possible to increase oil and gas production while protecting the environment at the same time,” including one-quarter (26%) who ‘agree strongly’. One-quarter (25%) of Canadians disagree with this idea (9% ‘disagree strongly’)
Canadians say development of the oil sands is more positive than negative. Nearly twice as many Canadians agree (57%, including 21% who ‘agree strongly’) as disagree (29%, including 12% who ‘disagree strongly’) with the statement that "I think that overall the benefits of development of the oil sands in Canada outweigh the negatives.”
Three-quarters (75%, including 35% who ‘agree strongly’) of residents agree with the statement that "it is important that Canada does what it takes to access new markets for oil and gas exports in order to reduce the reliance on exports to the United States” (15% disagree, including 4% who ‘disagree strongly’)

Energy exports: who decides the national interest?

Mon, 30 Apr 2012 14:47:12 -0600

In a recent editorial article published in the Vancouver Sun on April 28, 2012, Paul Stanway, a veteran journalist and Enbridge communications consultant, asks: “who decides the national interest when it comes to our energy exports?”

There’s a robust debate occurring in Canada right now about energy exports. We at Enbridge believe this is a good thing. It’s the Canadian way: we achieve consensus through open discussion and conversation—a free-wheeling debate. It’s how we decide on major projects in Canada.

Northern Gateway expects to ship upgraded oil

Some Canadians don’t like the idea of shipping bitumen from the oil sands without upgrading it first. Others note that Alberta upgraders and refineries are currently operating at peak capacity and it could be some time before new upgrading capacity is built. Still others note there is a shortage of skilled workers already in the oil and gas industry, and while creating new jobs is certainly important, there are plenty of opportunities for qualified job seekers at this time.

Regardless of your position on the upgrading issue, that debate is peripheral to Northern Gateway—we expect to ship upgraded oil. Like most of Canada’s economic resources, from natural resources to human services, market demands play a large role in determining what is sold, where and when.

Crude oil was Canada’s most valuable export in 2010, amounting to $50 billion in exports. If we include all of Canada’s energy exports—a market worth $94 billion in 2010—nearly 25 per cent of all exports from Canada were energy products.

Canada isn’t getting full market value for its oil exports

Canadian producers currently sell almost all exported oil into the American mid-west market, an area experiencing an oil production boom of its own with supply outmatching demand. Our oil is priced at a discount to an already discounted US Mid-West price compared to the global market price for oil. This situation means Canadians aren’t capturing millions of dollars a day, adding up to billions of dollars per year, in royalties and taxes. That’s a lot of money that could be put towards the things all Canadians value, like education, healthcare and other universal services.

Demand for oil in the United States is also declining while demand is rising in the emerging economies of the Asia Pacific region. The International Energy Agency, a Paris-based independent think-tank says that by 2035, non-OECD economies will lead demand for energy and expects oil to be 29 per cent of the global energy mix.

As Stanway’s op-ed notes: “You don’t have to be an economist to understand that dependence on a single customer for our most valuable export cannot be in the national interest.”

Northern Gateway will contribute to the Canadian effort to fix the single-market situation—an economic problem that is of national concern as recently noted by the Bank of Canada.

It’s estimated that Northern Gateway will add $270 billion to the Canadian GDP over the first 30 years of its operation. Direct benefits include $2.6 billion in local, provincial and federal tax revenues, $4.3 billion in job-related income with $400 million worth of contracts and employment opportunities for First Nations people.

Is blocking pipeline construction in the national interest?

There’s been lots of talk in the media lately about a coordinated strategy to block Canadian oil sands exports. Some groups see the oil sands as an environmental issue that can only be solved by ending development altogether. Renowned climate science academics have noted the apocalyptic climate claims of those environmental activists aren’t supported by the science. Unfortunately the facts haven’t prevented a coordinated campaign to obstruct pipeline construction as a way to stop further oil sands development.

Canadians are faced with a choice: we can risk having our resource revenues choked off and continue to lose opportunities to capture billions in additional benefits from our single biggest export or we can ensure that new markets are opened safely while keeping environmental and human safety our top priority.

A February 2012 poll found that 75 per cent of Canadians believe Canada should diversify its energy export markets beyond the USA. We strongly urge you to stand up for your national interest, please join the conversation and make your views known.

Alberta mayors throw support behind Northern Gateway

Thu, 08 Mar 2012 17:05:31 -0700

Calling it a “regional action for a global opportunity”, mayors along the proposed Alberta corridor of Northern Gateway officially threw their support behind the project that promises to bring benefits not just to their region but to B.C. and the entire country.

Representing a million people, mayors of the greater Edmonton area – the Capital Region Board – virtually unanimously decided to pen a letter to the Joint Review Panel now assessing the regulatory application by Northern Gateway.

“The (Capital Region Board) is supportive of the proposed Enbridge Northern Gateway project, and we urge you to approve the project,” reads the letter to be sent to the JRP.

“I’m going to call it a regional action for a global opportunity,” the Calgary Herald quoted Spruce Grove Mayor Stuart Houston, who spearheaded the Capital Region Board effort.

“We want to let our voice be heard in the region for a global opportunity. And that global opportunity is the ability to increase and improve Canada’s export of our national oil and national gas resources.”

The $5.5 billion Northern Gateway promises to bring substantial benefits to Alberta and B.C., where the pipeline crosses, as well as drive gross domestic product growth across Canada by $270 billion during the first 30 years of operation.

Northern Gateway will bring significant, lasting benefits to the economy including:

$400 million in employment and contracts for Aboriginal communities and businesses;
$4.3 billion of labour-related income across Canada during construction;
$2.6 billion in local, provincial and federal government tax revenues; and
1,150 long-term jobs throughout the Canadian economy.

And that’s just economic boost related to the project.

According to thinktank Canadian Energy Research Institute, jobs as a result of oil sands investments are expected to grow from 75,000 in 2010 to 905,000 in 2035. The oil sands are also expected to purchase some $117 billion in supplies and services from Canadian provinces outside Alberta over the next 25 years.

Currently, nearly all Canadian export crude goes to just one market – the U.S – where oil demand is flat or falling, where pipeline bottlenecks constrict transport, and where domestic supply is rising sharply.

This has brought into focus the need for Northern Gateway, which would give Canadian producers access to markets in Asia, where rapid economic expansion is fuelling demand.

The so-called ‘Dutch Disease’

Mon, 05 Mar 2012 10:25:50 -0700

The economic case for Northern Gateway is very strong. Canadians understand the need to diversify markets for our energy products—without this diversification, we don’t get full value for our exports.

Opponents of the oil sands and the Northern Gateway project are challenging the economic case with a claim that oil sands exports have led to an increase in the value of the Canadian currency. For many Canadians, an increased dollar value is typically viewed as a good thing; after all, our dollar trading higher on the currency market means the things we buy outside of Canada like vacations and cross border shopping trips cost less.

But there are a few Canadians, like some politicians and advocacy groups, who claim that the increased dollar value hurts our economy because it means our manufacturing exports are more expensive for non-Canadians. These folks point to the oil sands and say they’ve led Canada down the path towards Dutch Disease. Few economic experts agree with these claims, however.

Stephen Gordon, who is a professor of economics at l'Université Laval in Quebec City, is a regular writer on the Economy Lab blog at the Globe and Mail. Today he takes the Dutch Disease claims head on. In a nutshell, Gordon sums up the logic of those making the claims with a great quote from Yogi Berra: “’Nobody goes there anymore,’ he once said of a St. Louis restaurant, ‘it’s too crowded.’”

Gordon’s lessons for us non-economists are these:

What matters for Canadian economic welfare is consumption by Canadians, not manufacturing exports
The resource boom of 2002-2008 led to the lowest unemployment levels since 1976
Real median wages grew significantly between 2002-2008
Increases in labour demand in one sector increases wages for all

The next time you hear someone suggest that Canada has a case of Dutch Disease, ask them why they think lower unemployment, higher wages and more purchasing power is a disease?

State-owned companies behave like other companies: study

Wed, 22 Feb 2012 14:45:06 -0700

The Prime Minister’s trade mission to China was criticized by some who see this pursuit as a compromise of Canadian economic sovereignty.

Other critics have asserted that investments by foreign state-owned firms into resource development in Canada will somehow weaken Canadian control and oversight over these resources.

The author of a recent study commissioned by the Canadian Council of Chief Executives attempts to calm fears Chinese state-owned firms are mere puppets of their central government.

Margaret Cornish, a Beijing-based ex-Canadian diplomat, argues that state-owned Chinese enterprises behave in a manner that isn’t all that different from that of corporations in free-market economies around the world.

Cornish’s observations of firms such as Sinopec and PetroChina, that have invested heavily into Canada’s energy sector in recent years, is that they are far more intent on the pursuit of their corporate goals and performance measures than on the political whims of their government.

Behaving in a manner that runs counter to a state-owned company’s financial goals and performance measures would be “putting at risk its corporate and financial integrity by undermining the good name and relationships that take decades to establish,” says Cornish’s paper quoted by Postmedia.

In her paper, Cornish calls on Canadian government “ to avoid politicization of the (foreign investment approval) process to the extent possible."

Oil squeeze a big concern

Thu, 09 Feb 2012 17:23:56 -0700

I’ve said it before and I’ll say it again … I think Northern Gateway is one of, if not THE most important proposed infrastructure projects in Canada today.

That belief was bolstered again when I read in the Globe and Mail about something that serves to underscore what I’ve been saying for some time – Canadian oil producers need another outlet for their oil.

Oil prices for Canadian producers are getting “squeezed” and that’s not a good thing.

It’s not good for energy producers, for the thousands who work in the industry, for communities, for provinces and for the federal government. All of us rely to varying degrees on the viability of our energy sector.

Whether or not the current squeeze is temporary is a matter of debate, but it does underline something very worrisome.

What’s happening? Canada produces a lot of oil. We are also a net-exporter of oil valued at about $50 billion a year.

It has become our most valuable resource and a pillar of our national economy – but there is one catch, virtually all of the oil we export goes to just one market, the U.S.

America is a mature market and demand there isn’t what it once was. Combine that with soaring U.S. oil production, and you get the picture. It’s a potentially dangerous imbalance for Canada.

“On a logistical basis, it points to the vulnerability of having all our eggs in one basket as a nation. It makes more sense to diversify your customer base for crude oil,” Frank King, an analyst with First Energy Capital, says in the Globe.

This imbalance could also see us leave a lot of money on the table. By one estimate, it will cost the energy industry $8 billion a year if Northern Gateway isn’t built. It is already depriving governments of millions in lost royalties and tax revenues every single day.

Northern Gateway would give our energy industry other crucial trade outlets. Booming economies in Asia promise to give Canadians more competitive returns for our resource and shelter us from the vagaries of having a single oil export market.

An Enbridge-commissioned report (which was required of us as part of our regulatory application for Northern Gateway) estimates that this one project would boost Canadian GDP by $270 billion in the first 30 years of operation.

That’s tremendous wealth that would flow through our economy, create jobs and result in higher tax revenues that pay for hospitals, roads, schools – all the things that help make Canada the country it is.

I’m a proud British Columbian and a patriotic Canadian.

And the situation described in the Globe concerns me greatly.

Northern Gateway bad for economy? Not so say Economists

Tue, 07 Feb 2012 11:15:50 -0700

In a recent report, Robyn Allan argues against Enbridge’s assertions that Northern Gateway would be net-positive for the Canadian economy.

Allan, who was appointed CEO of ICBC in the early 1990s by the then BC NDP government, took a look at Enbridge’s regulatory filing from an economic perspective.

The filing includes commissioned economic studies demonstrating the economic effects of export market diversification—studies that must stand up to the scrutiny of the quasi-judicial Joint Review Panel (Appendixes A & B here).

Allan’s report, submitted to the JRP by the Alberta Federation of Labour, claims higher oil prices would fuel higher gasoline prices across Canada, causing a dampening effect to the entire economy.

University of Alberta economist Andrew Leach, an oft-quoted media source on energy and environmental economics, decided to test some of Allan’s claims against the realities of gas market economics.

On his blog, Leach debunks Allan’s claims that a $2-$3 per barrel increase for our resource will cause gasoline prices to jump across Canada. He points out that Canadian retail gas prices are already reflective of world oil prices, not the deflated WTI benchmark prices that most of Alberta’s oil sands production is sold at.

As Leach says “Think about this before you decide that blocking export pipelines and stranding crude in Canada, which will lead to a discounted Canadian crude oil price, will translate to savings at the pump in Canada.”

Leach also reminds us of some of the benefits of higher oil export prices in the form of higher royalties and government tax revenues to pay for universal programs like health care and education.

Other recently published independent studies also support the obvious need for diversifying markets for Canadian energy.

This University of Calgary study says “With better access and new pipeline capacity, oil producers will see more efficient access to international markets which can add up to $131 billion to Canada's GDP between 2016 and 2030.”

Another independent study suggests the cost to the Canadian economy would reach into the billions if Northern Gateway is not built.