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Jul 15, 2011

Stephen J. Wuori, President, Liquids Pipelines, Enbridge Inc. spoke at a Calgary Economic Development luncheon on May 18, 2011. Below are his remarks. Please check against delivery.

Stephen J. Wuori
President, Liquids Pipelines, Enbridge Inc.
Keynote address
Calgary Economic Development’s Report to the Community Luncheon
May 18, 2011
Calgary

Thank you Rick and good afternoon everyone. It’s a pleasure to be here today to be among the first to hear the highlights of Calgary Economic Development’s 2011 report to the community.
 
I really value the work of Calgary Economic Development. Calgary is truly in the top tier of business and economic centres not just in Canada, but increasingly in the world. And that wouldn’t be the case without the work of organizations like CED.
 
Your work to facilitate business connections and growth, your research and your outreach - locally, nationally and internationally - is an important part of Calgary’s past, current and future success.
 
I know that just next week Calgary Economic Development is leading a trade mission to Beijing and Shanghai.
 
In fact, folks from Enbridge are participating in that trip. Like everyone else in this room, we understand the importance of connecting with the emerging economies and tremendous opportunities to be found in the Pacific Rim.
 
I think there are a lot of parallels between what Enbridge and Calgary Economic Development do: We both seek to build new market access, we both connect markets and opportunities, and we both build economic capacity that has an impact locally, regionally and nationally.
 
The stories of Enbridge and CED are the same: we are building momentum for the city, the province and the country.
 
Today I want to talk about three things:
 

• The importance of diverse markets – plural – and how the Northern Gateway Project will help to connect to new Pacific Rim markets for Canadian crude;
• The contributions the energy industry and Enbridge make to local communities and society in general;
• And I’ll ask for your help and issue a call to action.

 But first let me tell you a little more about Enbridge.
 
We are North America’s leading energy transportation and delivery company. We operate the longest and most complex crude oil pipeline system in the world, we have extensive natural gas gathering, transportation and distribution systems and we have interests in about 850 MW of green and renewable energy in Canada and the US.

We strive to operate as efficiently, reliably and safely as possible and, in fact, have spent about $2.3 billion on system integrity across our enterprise since 2002 to meet this goal.
 
We’re also a company that had a very humbling experience in 2010, when we experienced a pipeline break in Michigan that resulted in the most significant environmental incident in our company’s history. We saw hundreds of employees and more than 2,000 contractor workers come together to respond. We are applying all the learnings from that incident and have emerged as a stronger company as a result.
 
The part of the business I lead, Liquids Pipelines, has been the key conduit of Canada’s most important export commodity for more than 60 years. The Enbridge system delivers about 13 per cent of the United States’ crude oil imports every day.
 
Lately some industry opponents, and the news media too, have been treating proposed Canadian pipelines to the US as a novel development.
 
Not only has Enbridge been delivering oil to the United States for six decades, we continue to expand and extend the reach of Canada’s crude in the world’s largest and most important energy market.
 
For example our Project Monarch aims to build a 325,000-barrel-per-day pipeline to deliver light crude oil past the current bottleneck at Cushing, Oklahoma and move it south to Gulf Coast refineries.
 
But let me move on to the Northern Gateway Project and the compelling argument for this important initiative.
 
Canada’s crude oil is the country’s most valuable export, worth about $50 billion in 2010 alone, and effectively all of Canada’s petroleum exports – about 99 per cent – go to one customer, the United States.
 
Now before I say more about the Canada/US relationship, some proactive disclosure: I’ve lived (and paid taxes) in Canada for 17 years, I love Canada, and I remain a proud US citizen. The US and Canada are, in my mind, two of the very best countries in the world and each is blessed with an excellent neighbour in the other.
 
And both countries benefit tremendously from our energy trading relationship.
 
The US is a great customer for Canada’s oil. They’re a big market and we have a big supply, among the world’s largest reserves.
 
Our countries are right next door to each other, both are stable, productive democracies, and we share many similar values: human rights, the rule of law, protection of the environment and an open and transparent market system.
 
But the US has diverse supply options from around the world to meet its demand for crude – Canada being its single most important source.
 
However, the other side of the coin doesn’t look as good.
 
First of all, Canada doesn’t have a national energy strategy or vision for its most important strategic resource. How can the country play to its strengths if it doesn’t have a plan?
 
Then there’s the issue of Canada’s monolithic crude market. New pipelines from Canada extending the existing US market are important, but they don’t change the big picture: the US remains the single customer for Canadian crude exports.
 
Canada is a price-taker, suffering the double-whammy hit of the WTI discount, plus a discount off of that.
 
We also need to acknowledge the impact of the growing US crude oil production coming out of the Bakken region and Eagle Ford play as well as the massive new shale gas reserves unlocked over the past few years. Make no mistake; while the United States values Canada’s oil, America’s domestic production will compete for market share.
 
That’s just one of the factors that threatens to erode Canada’s US market for crude. Consider these facts:
 

• We see flat to dropping US demand;
• We’ve got rising US domestic production, and under law none of that production can be exported from the US. Ergo, a legislated direct competitor to Canadian barrels;
• We’ve got the US ethanol mandate and other biofuels, which replace crude oil at a rate of 2 barrels for 1. Another legislated competitor to Canada’s crude;
• On the industry side we see no further US refinery conversions announced to run Canadian heavy crude;
• The possible conversion of the US heavy truck fleet to natural gas (NGV).
• And growing opposition to “tar sands” crude in the US.

 Those are significant factors and they don’t work in Canada’s favour.
 
No one in their right mind would ever build a business, let alone base an economy, on only one customer, no matter how good that customer is.
 
To put it another way, when it comes to Canada’s crude oil, right now all our eggs are in one basket- the US market- that basket is not getting any bigger and some of the folks holding the basket are starting to complain about the chickens.
 
We need to diversify our petroleum markets. Northern Gateway will do just that, connecting this country’s world-class, ethically developed crude oil reserves to the growing markets on the Pacific Rim which are clamouring for energy.
 
The project, estimated to cost about $5.5 billion, consists of two parallel pipelines, about 1,200 miles long, extending from the Edmonton area to a new marine terminal at West Coast port of Kitimat BC.
 
The westbound pipeline will carry crude oil and have a designed capacity of 525,000 barrels per day, while the eastbound line, designed to transport 193,000 barrels per day, will carry diluent from the coast back to Edmonton area.
 
There is no doubt that the project is controversial. We have a great deal of work to do to get the facts about Northern Gateway out to stakeholders, decision-makers, media and the general public.
 
There is no doubt that before it is approved, Northern Gateway will face the most rigourous and world-class regulatory review to determine that it can be built and operated safely and is in Canada’s best interest.
 
But there can also be no doubt that Northern Gateway will be a game changer for Canada as a whole.
 
I’ll give you one last “no-doubt” observation about Northern Gateway. If Canada is to capture the opportunity presented by this project we can’t afford to dally. ARC Financial’s Peter Tertzakian recently noted that Canada’s window of opportunity for diversifying into the Pacific Rim energy markets is not going to stay open indefinitely.
 
Put simply, Canada, Alberta and Calgary need to act, and soon.
 
Calgary Economic Development is working to build this city’s reputation as an important economic and business hub, connecting diverse markets, decision makers and a wide range of opportunities. In the same way, Enbridge’s Northern Gateway will diversify Canada’s energy market options by connecting this country’s crude oil resources to important, emerging markets in Asia. The project is a tangible, smart and achievable step that Canada can and must take if the country wants to become an energy superpower on the global stage.
 
A few moments ago I gave you some of the budget and design numbers associated with the project – what we expect Northern Gateway will cost and what it will do – now I’ll give you a few numbers so you have a better idea of what it will contribute.
 

• $2 to $3-per-barrel increase for every barrel Canada produces.
• $270 Billion increase to Canada’s GDP over 30 years.
• 63,000 person-years of employment during construction.
• $4.3 billion in labour-related income.
• Approximately 1,150 long-term jobs once Northern Gateway is in operation.

 Those numbers are impressive, but even they don’t tell the whole story.
 
Northern Gateway will also move Canada into a position as a price-maker in the global marketplace rather than a land-locked, single-customer price-taker, as it is today.
 
At a stroke, Northern Gateway will provide a tremendous increase in productivity that will be felt not just in Alberta, BC and Western Canada, but across the entire country in nearly every sector for decades to come.
 
Northern Gateway will invest in new navigational aids, radar system improvements and enhanced emergency response that will significantly improve safety for all shipping on BC’s north coast.
 
It will link two of Canada’s most important competitive strengths: our tremendous petroleum reserves and our Pacific advantage - a coast that is close geographically, culturally and through existing business relationships – to the growing markets across the international dateline.
 
And it will demonstrate to Canadians and to the rest of the world that Canada is ready, willing and able to participate fully in the global marketplace, play to its strengths and strategic advantages, and to take its rightful place as an energy superpower.
 
Canada is a trading nation. In fact we are the most trade-dependent country in the G8.
 
If we’re a trading nation, then we’d better facilitate trade.
 
The argument for Northern Gateway is strong, it will make a huge contribution to Canada’s economy and Enbridge can build and operate it safely.
 
The energy industry, as a whole, makes an even more massive contribution to Canadian society and this country’s economy.
 
More than 500,000 Canadians are working in the sector with nearly half a million new jobs to come over the next 40 years.
 
Energy companies represent one quarter of the total value of the TSX.
 
The energy sector is the largest source of private investment in Canada.
 
The industry pays tens of billions of dollars in taxes and royalties each year.
 
And as the energy industry is doing that, it is also becoming safer and more efficient, and improving its environmental performance.
 
Of course, that’s on top of the impact our sector has on the productivity and capacity of every other part of the economy thanks to the energy we find, refine and deliver to market.
 
I also know the individual companies in our sector do much more. We give back to the community in a thousand different ways.
 
At Enbridge, I am proud of our positive impact in the community.
 
From 2000 to the end of this year our community investments total more than $50 million in Canada and the US.
 
In addition to that investment, a couple of the unique initiatives we’ve established at Enbridge are our Neutral Footprint program and our Energy4Everyone foundation.
 
And just next month, we have the Enbridge Ride to Conquer Cancer. We’re the national sponsor of this important initiative to raise funds for cancer research right across Canada.
 
I’m proud of what Enbridge does. And I never lose sight of the fact that our primary social responsibility is safely, reliably and efficiently delivering energy to the people who need it.
 
I think about all the positive impacts that Enbridge has. Then, I look out across this audience and multiply what we do by all the benefits your organizations create. That’s a message we need to share over and over again.
 
Which brings me to my final topic – my call to action.
 
Most of you had probably heard of Northern Gateway before now. Unfortunately, because of how public discussion often works today, I’m willing to bet that what you heard was alarmist, inaccurate and didn’t tell the whole story.
 
You’ve heard it said that there’s no free lunch. Well, here’s the price for listening to me today: I’m asking for your help to balance the discussion about energy and energy development.
 
If there’s one thing I’d like us all to do after we leave here today, it’s this: when we read a newspaper story that gives credence and airtime to unfounded anti-business, anti-development rhetoric, let’s call the reporter, write a letter to the editor;
 
When we see an activist using suspect facts, dubious figures, outrageous claims and old biases to draw a crowd or attract a donation; let’s speak out and correct the inaccuracies;
 
When we know the truth is in jeopardy and the public discussion needs at least a little balance, let’s put a hand up and defend ourselves and our industries from unfounded and uninformed attacks.
 
For example consider some of these one-sided or just plain wrong stories that have been getting air time:
 

• Oil sands crude can’t be safely transported in pipelines;
• Oil sands development destroys/devastates the land;
• Tanker ban on Canada’s west coast;

 I want to be clear here: There are obviously times when the energy industry doesn’t operate perfectly. There are also times when the critics are right. We should absolutely be held to account in those cases and always when it comes to our performance on issues important to the public, like the environment, safety, human rights, transparency and ethics.
 
But let’s insist on being held to account against facts, our performance and our impact, not against rumor, misinformation and myth.
 
Today it’s tougher than ever before to get energy projects approved and built. There are more opponents who are more connected, more powerful and more mobilized.
 
And it’s easier to mobilize against something than for it.
 
Those of us in the energy business meet this challenge every day. Our society exists because of abundant, inexpensive accessible energy. The very people who are most vocally opposed to energy development are among those who use and benefit from it. To return to an earlier analogy, it’s like loving eggs and protesting against the existence of chickens.
 
Of course, opposition to business and development is, itself, big business, with professional protestors plying their trade and raising hundreds of millions of dollars.
 
I’m going to wrap up now and leave you with the executive summary. If only three things stick with you from my comments today, I hope it’s these:
 
First, Canada desperately needs to diversify its crude oil customer base. Northern Gateway does exactly that and will deliver tremendous economic benefit to all of Canada;
 
Second, the energy industry has a tremendous positive impact on the economy, on society and on our communities. We need to do a better job of telling that story and connecting the dots in the public discussion.
 
And finally, as leaders we need to stand up, answer the tough questions, challenge misinformation and proudly defend the work we do.
 
Thanks very much for your time and attention today.
 
Congratulations to Calgary Economic Development on its 2011 Report to the Community and good luck to the members of the Calgary delegation heading to Beijing and Shanghai.