I'd like to say how much we appreciate the opportunity to address the Standing Committee on Natural Resources. I think this study on the future of Canada's natural resources sectors is quite timely.
This is my first time presenting in front of a parliamentary committee, and I'm glad I get to present on a topic that has been so central to the chamber's advocacy for the last few years.
The overarching concern of the Canadian Chamber of Commerce can be summed up with one word—competitiveness. Representing businesses of every size from every economic sector, the Canadian chamber focuses on the policies and programs that will help Canadian businesses compete in the global economy. For that reason, improving access to markets for natural resources has been a priority for the chamber since 2013.
Through our resource champions initiative, which brings together over 100 chambers of commerce from across Canada, we've argued that Canada's unique advantage in the global economy is our dual strength as both a resource economy and a knowledge economy. Why are Canada's resource industries so essential to the national competitiveness? I will illustrate using oil and gas.
First, the process of taking hydrocarbons from the earth creates tremendous value added for the Canadian economy. Most people understand that transforming raw materials into manufactured goods, such as auto parts, adds value. When manufacturing an auto part, a firm takes a uniform commodity and transforms it into a unique process. The reverse is true for a natural resource project. Each individual project is unique in terms of the geological attributes of the resource. The value added comes from the design and construction to create a uniform product from very different resources.
According to a report by the University of Calgary, natural resources are the leading creator of value added in the Canadian economy. Oil and gas extraction creates $1.36 million in value added per job per year, which is 15 times more value added per job than the national average for all sectors.
Just as in the manufacturing sector, extensive supply chains are needed to support this process of transformation. These supply chains serve to transfer wealth from remote regions to cities, and even across provincial borders. Doug Porter, chief economist at the Bank of Montreal, states that oil and gas is tied to roughly 20% of Canada's manufacturing sector. This includes not just manufacturers, but also service firms like Maxxam Analytics, a Mississauga-based firm that offers specialized laboratory services. The firm has 500 clients in western Canada's oil and gas sector, which accounted for half of the company's revenues a couple of years ago.
Service chains are also about suppliers. There isn't a single mine, oil rig, or paper mill in Toronto, but the city is a global centre of finance and professional services for the resource industry. Last year more than half of global mining finance happened in Toronto. The TSX and the TSX Venture Exchange have more oil and gas listings than any stock exchange in the world.
One group of oil and gas suppliers that is receiving a lot of attention these days is clean tech firms. Cleantech Canada magazine recently surveyed 500 firms on where their main market is. The oil and gas sector was listed as second largest, just one percentage point behind the consumer and public market. One example from our membership is Titanium Corporation. This company extracts heavy metals like titanium and zirconium from oil sands mine tailings, preventing their release in the environment while creating a new revenue stream for the company.
Our energy resources are also an important calling card on the world stage. As we look to Asia, energy will be one of the key reasons that businesses and government leaders in these regions take our phone calls. We recently held an event in partnership with the Japan Chamber of Commerce and Industry in Vancouver. One of the key reasons business people from the world's third-largest economy and second-largest importer of fossil fuels made the trip was B.C.'s LNG industry.
Of course, it's also essential to recognize that oil and gas are fossil fuels. The chamber network has spoken out clearly on the need to act on climate change. The chamber has been calling for a price on carbon since 2011. We listed a lack of clear, substantive climate policies as one of Canada's top ten barriers to competitiveness in 2014, and again in 2016. However, as long as the world needs oil and gas to fuel our cars and power our plants, we need to support the competitiveness of Canada's industry. For our network, this means building export infrastructure, both pipelines and LNG facilities. Stopping pipelines in Canada does not speed up the development of alternatives to oil, and it doesn't slow growing oil demand in emerging economies, which is where most of the growth in energy demand will come from in the future. China and India need petroleum, but they don't much care if it comes from Canada or somewhere else. As investment in the oil sector moves away from Canada, greenhouse gas from oil production just moves with it, likely to jurisdictions with fewer environmental safeguards.
As this committee considers the future of the oil and gas sector, I would leave you with one key message, which is that getting pipelines and LNG facilities approved and built is a key concern not just for the future of the oil and gas industry, but for Canadian competitiveness as a whole.
Thank you very much. My name is Byng Giraud. I'm with Woodfibre LNG. We are a relatively small LNG facility to be built about seven kilometres south of Squamish in the Howe Sound region. For those of you unfamiliar with the area that's approximately 50 kilometres north of Vancouver. We call ourselves relatively small as we will be exporting 2.1 million tonnes per annum. By comparison that's about one-ninth, or one-tenth, of what might come out of LNG Canada, the Shell project in Kitimat, or Pacific NorthWest in Prince Rupert.
This equals about 36 to 40 ships per year, or one every 10 days. We ship through Howe Sound and then we enter the waters of the Port of Vancouver where we join in some 14,000 ship movements per year. We're owned by a company that's based in Singapore and Hong Kong, Pacific Oil & Gas. We're part of an international group also based out of Singapore called RGE. We're coming from downstream; as opposed to going upstream, assets are coming from downstream looking for products. Related to that is a key asset that we own, which is in partnership with PetroChina and the province in China, an import facility in Rudong near Shanghai.
Our LNG facility is somewhat different—and I think this relates to what this committee is trying to achieve in terms of innovation—from a lot of LNG facilities being built, and it's important to point out those differences. The fist is we have chosen to run this facility on electric drives. This is not an economic decision this is a social licence decision. By choosing electric drives as opposed to gas drives, something we are capable of doing because of the infrastructure in the area, we will be reducing GHGs by approximately 80%. This makes Woodfibre LNG possibly one of the cleanest LNG facilities in the world, and if you look in the presentation I provided there's a quote from Merran Smith of Clean Energy Canada, an NGO, from May 2014 that says that by doing this we may be the gold standard.
The other exception about Woodfibre LNG is our work with first nations. We entered voluntarily into an environmental assessment, possibly the first of its kind in Canada, conducted by, managed by, and with decisions made by the Squamish First Nation. It was a multi-year process. It was a process we entered voluntarily. It was a process that had risk for both parties, but ultimately resulted in a decision that resulted in an environmental certificate from Squamish Nation with conditions that will allow this project to proceed, again, should we meet those conditions. This is possibly the first of its kind in Canada.
There are a few other issues. Obviously we are a brownfield industrial site with existing infrastructure. I won't go through the details, but we have existing powerlines, existing pipelines, passing through site, and it's a historic deepwater port primarily making this a place where you can build a facility with less environmental impact.
I think what I really want to talk about today is our environmental reviews. Again, we have three environmental approvals. We have Squamish Nation's environmental approval certificate with conditions, which we received in early October of last year. We received the provincial government's environmental assessment certificate with its conditions also in October of last year, and with a little more of a delay, because there was an election I understand, we received a federal approval from the minister in March of this year.
I'm going to talk a little bit about Squamish Nation because I think that's what's relevant here in terms of innovation. We are located in the traditional territory of Squamish Nation on a former village site called Swiy'a'at and we voluntarily entered this new environmental assessment process. This process was new for Squamish Nation, was new for us, and probably incorporates a greater degree of decision-making by a first nation than most projects are perhaps even willing to contemplate. It was a closer view of our process and it resulted in the certificate I mentioned.
The next slide provides some of those conditions just to give you a flavour. It's recognizing some of the cultural elements of that site, providing access to Squamish Nation members, involving Squamish Nation in the co-management of many of our environmental plans, preventing certain activities that they objected to, no bulk fuelling in traditional territory. They have a direct say on some of our technology choices. We've created green zones around creeks that pass through the site, and we very much reached an economic agreement. These aren't just promises. We are contractually vowed to our agreement with Squamish Nation to fulfill these conditions, again making this something of a unique process.
This is related to the approach we've taken to first nations. I'm sure you can get a lot of legal experts and experts in this field to give you more detail on past court cases and why things need to be done this way, but we've just taken this philosophical approach. It's clear that first nations have rights above and beyond what's traditionally been applied to major projects. We all know first nations have the ability to help or hinder projects, and they are developing greater confidence in doing so. Business doesn't make the rules. The rules are set by regulators—federal governments, provincial governments, and in this case Squamish Nation, but we live in the environment that results from the consensus or conflicts that these rules make. By trying to reach consensus with the Squamish Nation, we think we've taken that additional step.
I won't really go through the next two slides. They simply summarize the provincial and federal approvals, and the conditions that have been placed upon us. All they do is reiterate that we have three different sets of environmental certificatesand a significant number of conditions, making this perhaps a unique project in terms of its oversight.
At the end, I've put the challenge of approval, and I think this is what we need to discuss. If we're talking about innovation, it's not simply innovation of technology. As somebody who has worked in the natural resource sector my entire life, in gas or mining or forestry, I believe what really needs to be innovated is the trust issue. We've adopted sort of a Jim Cooney approach to things. He's the creator of the term “social licence”. You need agreement with first nations. You need agreement with indigenous peoples. You need to do better at communication. You need to go above and beyond in your approach to regulatory processes. This does not necessarily mean having a referendum or getting consent. You can't simply meet regulatory requirements. Our choice of renewable electric, for example, is a clear example of that.
We live in a situation where we have incredibly detailed requirements when we build these massive complex projects—experts on bats, on herring, on different types of plant species. They spent their entire lives trying to understand these things. At the same time, we have a discourse that allows all citizens to participate and all citizens' voices to be heard equally. This is inherently going to create conflict among the scientists, the experts, the professionals, and the voices of the public, the community, and that's something we're going to have to address. Then, of course, an issue to those of us who build projects is the concern with economic cycles. If you take too long to do these things, then perhaps you lose the opportunity. There must be a process, and there must be a defined process.
I don't fundamentally believe that the environmental assessment processes run by the federal and provincial governments are broken. Perhaps they need some tweaking. There are things that can be improved, obviously. What is broken is trust. The issue of trust is not going to be solved simply by tweaking regulatory processes. We need to build processes that people trust. They will trust them only if decision-makers defend those processes and if the decision-makers advocate for those processes. Right now we have a situation of confrontation, in which companies may view environmental assessments simply as hurdles to overcome and may use people who are against those projects as tools to thwart them. Until there's more sincerity in that process, these things will never be overcome.
I would like to talk more about this, but I've probably exceeded my time. If we're going to get product to market, we need innovation in how we're going to improve processes and create the public trust to allow them to proceed in a timely fashion.
Essentially, for this project we're looking at customers in China. We have early stage agreements with customers in Guangdong province. We have an agreement with Beijing. They're looking at this from a purely green perspective.
If anybody's spent any real time in China, you will have seen what the smog levels are like. The WHO says that the standard for approximately one square metre should be 25 micrograms of particulate. You have cities in China where, on certain days, that can well exceed 100. This is causing deaths in that country, and it's a bit of a political issue.
The utilities we're working with in Beijing and Guizhou see this as a green initiative. They see it as an initiative to switch off coal power plants, to clean up their air, and to reduce their GHG emissions. I think this is critical when you're considering the life cycle of GHG emissions, which is something I know is a big discussion. If we're going to evaluate a life cycle, we need to calculate what's actually being reduced and where it's being burnt or consumed.
Certainly there are GHGs being created when we extract. There are some GHGs with our facility, even with our electric drives. But where's the real reduction? The only reason the Americans met their GHG targets for the Kyoto protocol, which they didn't intend to do, was that they switched from coal to gas.
In terms of quantifying reduced GHGs in China, it would depend on what they use it for. It would depend on which power plants use it and what is being replaced. But there's no denying that China wants to go this way, simply because, as they build up a greater middle class, people will just not tolerate that level of smog in their cities.
You are correct; we face those right now. The price is very competitive. There are many producers. This is not an easy thing to do.
We have some advantages in the economics right now. We're a small project. We own port facilities in China with PetroChina. We own gas-fired power plants that produce electricity in China, so we have more of an integrated structure. It's clear that renewables are growing, and as a gas producer we shouldn't be afraid of that, but even if China were to quadruple its renewables over the next decade or so, they are still probably going to need to triple the amount of gas consumption.
There are about 20 to 30 countries importing LNG now; you're going to see that increase to 50. Demand is going to grow. It doesn't mean the demand for renewables isn't going to grow, and there is probably some opportunity there.
I happened to read a recent article in Foreign Affairs the other day. The reality is the firmness required for renewables still requires something else and the lowest GHG power other than large-scale hydroelectric is gas. With the absence of large-scale hydroelectric, which many parts of the world just don't have, they're going to be looking to import gas to firm that power.
Frankly our facility, by choosing to go to electricity, will facilitate the expansion of renewables in British Columbia.
I don't think these things are necessarily in conflict. They couldn't run in parallel because we're seeing a growing middle class in China. Huge swaths of China are still developing. We're seeing a similar thing in India and other emerging nations: the Philippines, Indonesia, whose middle class is going to be looking to move to the next stage.
They're not going to wait. They're going to move to the product that's available, and hopefully that's gas and renewables, so they can move off coal.
Motivations...regardless of who's in government, I don't want to say things that are going to upset people. That's not our business. We don't make the rules. We just play by them.
Let me go back, I've been in mining and forestry and I've been in projects under environmental assessment for 14 years on and off.
Making change at the end is scary, even when you're a domestic company. I work for a company that's coming from overseas and British Columbia says to come and build an LNG facility. They're welcoming you. When you arrive, now you have to do this, now you have to do that, and you have to do this.
I kind of prepared my ownership for these things, because I'm a Canadian, a British Columbian, and I understand how it works, that there are changes. But when a foreign investor hears things at the last minute, or when new rules are imposed that they didn't anticipate, I tell you the phone call comes and they're concerned. They're making billions of dollars of investment at a great distance, so of course they're concerned.
I don't have a particular political stripe, because that's dangerous for a business to say, but let's be clear: whether it's the previous government or the previous government or the previous government before that, we keep changing the rules, we keep changing the method, and we create additional time frames that weren't anticipated at the beginning, and investors get scared.
We are in economic cycles. We are in the commodity business. In British Columbia, despite the growth in other sectors, we are in the commodity business; mining, forestry, agriculture, oil and gas, even tourism you could argue. We're in the commodity business. Things don't always last. In the past 12 years we saw a great super cycle for mining, but how many mines were actually built in British Columbia? You can count them on one hand.
I don't want to say I want certainty, as much as I do, because there is no certainty in a social environment. Things change. But if the government is considering reopening the idea that the Environmental Assessment Act needs to be improved, or we need to tweak it a bit, or it needs to be changed, realize that you're never going to satisfy everybody. Certain people will never be in favour of these projects. There will always be a debate on social licence. There will always be a debate that makes these fundamentally political decisions at the end, regardless of whether we listen to science, or traditional knowledge, or the public.
I danced around your question a little bit, but governments need to be aware, regardless of political stripe, that money can go elsewhere and, if it's too risky, it will.
My name is Chris Bloomer, and I am president and CEO of the Canadian Energy Pipeline Association. As you may know, the association represents 12 of the major transmission pipelines in Canada, We transport 97% of Canada's crude oil and natural gas production, and we operate about 119,000 kilometres of pipeline across Canada.
Reductions in greenhouse gas emissions and the related shift in energy systems have become a critical priority, however the need to sustainably develop Canada's rich natural resources and get those resources to the highest value market is also critical. This is evident in the growing demand for energy across the globe. The International Energy Agency projects that by 2040 the world will need 37% more energy than is produced today. All sources of energy, including renewables, natural gas, and crude oil are needed to meet these growing energy requirements. This statistic, combined with the vast oil and natural gas reserves found within our borders, means that we have an opportunity to not only ensure Canada's energy needs are met with Canadian oil and gas, but also tap into high-value markets that could benefit the entire country through employment opportunities, increased government revenues, and overall economic growth.
Transportation infrastructure is required to meet these growing energy needs, and pipelines remain the safest and most efficient and the lowest greenhouse gas-intensive way of moving energy over long distances.
Canada contributes less than 2% of the world's greenhouse gas emissions, and CEPA members who operate Canada's transmission pipelines are responsible for a negligible part of those emissions. Despite the limited impact our members have on global emissions, our industry is still committed to being even better, through improving on existing technology and advancing new ones.
With this in mind I'll be focusing my opening remarks on your study's focus on economic opportunities in innovation, as well as our industry's commitment to continuous improvement.
I'll begin with economic opportunities. Canada's pipelines deliver the energy that heats our homes, powers our industries, and fuels our vehicles. What is less visible is the impact the pipeline operations have on our economy every day. Existing pipeline operations in 2015 added $11.5 billion to Canada's gross domestic product, sustained an estimated 34,000 full-time-equivalent jobs, and generated about $2.9 billion in labour income. A conservative estimate of the total GDP contribution over the next 30 years from existing operations is $175 billion.
These numbers do not include additional economic benefits that could be achieved through more diverse and better market access.
CEPA members propose to invest $50 billion or thereabouts in pipeline projects in Canada over the next five years. If approved, these projects will provide access to global markets, as well as enhanced access to refining capacity in the U.S. and eastern Canada, resulting in billions of dollars of additional government revenues and employment income. Recent estimates have concluded that if all the proposed pipeline projects proceed, the gross netback improvement for the energy sector is estimated at $663 billion over 20 years of operation. That's $33 billion per year. The benefit of hard netback prices flows directly to crude oil producers, and indirectly to the overall Canadian economy in high royalties and taxes.
I'll focus my next comments on innovation and steps that our industry has taken to earn trust by demonstrating commitment to safety and environmental performance.
CEPA member companies invested more than $23 million in 2014 alone on innovative technology, and over $2.9 billion in monitoring and maintenance to ensure the safety of their pipelines.
Canada has a proud history of pipeline construction and operations dating back to 1853. Since that time pipeline networks have expanded to deliver energy across the continent. Ongoing advancements in technology and innovation have vastly improved the safety and performance of this infrastructure. This in turn helps to build public trust and continued right to operate.
Pipeline companies are undertaking a broad variety of initiatives to reduce their impact on the environment. This includes applying best practice, best design, and risk-based maintenance projects, directed inspection and maintenance programs to manage fugitive emissions and regular pipeline integrity analysis.
Pipeline companies also maintain call-in centres and run public awareness programs to avoid third-party damages, which is a very serious issues, and to promote demand-side management. You might recall that April was “Dig Safe Month”, and there was a big promotion on that. We take that kind of contact very seriously.
Technology and innovation continue to develop. Smart pigs, first developed in the 1960s, improved in the 1970s to include electromagnetic and ultrasonic detection technologies, enabling pipeline operators to more accurately detect wall thinning along a pipeline. Further advancements have led to the ability to detect anomalies such as fatigue cracks and dents, or other damage to the pipeline. The use of GPS positioning can now help pinpoint the location of a pipeline wall anomaly.
Pipeline monitoring technologies also continue to advance. Electronic supervisory control and data acquisition, which everybody knows as SCADA, systems have become prevalent and have now evolved to systems using Internet, cellphone, and satellite technologies able to provide two-way communications and implement complex control algorithms. This technology allows operators to know, with precision, what is happening throughout the pipeline, and enables a quick and efficient response to any issues that may arise, seven days a week, 24 hours a day.
CEPA is also actively addressing stress corrosion cracking, locating cracks that develop on the outside of a buried pipeline. Faced with this new phenomenon in the 1990s, CEPA brought together experts from member companies, industry experts, and researchers, and through this, recommendations around best practices were developed.
More recently, since 2013, CEPA members have conducted ground-breaking research in leak detection by using a state-of-the-art pipeline simulator known as external leak detection experimental research, or ELDER. This facility is located in Edmonton, and it allows researchers to evaluate external leak detection technologies. This technology was developed with the assistance of federal government funding. Pipeline operators also collaborated with the Alberta Ministry of Innovation and Advanced Education to fund research to test new leak-detection technologies such as vapour-sensing tubes, fibre optic distributed temperature-sensing systems, hydrocarbon-sensing cables, and fibre optic distributed acoustic-sensing systems. These are just a few of the examples of industry-wide advancements in technology and innovation that have led to safer operations and better environmental outcomes.
The importance of research and development cannot be overstated. It has been and will continue to be a significant contributor towards making transmission pipelines safer, and lessening the environmental impact of pipeline construction, operations, and eventual retirement. The government's focus on innovation agenda supports this important work and is welcomed.
My third comment will focus on our industry's commitment to collaboration and continuous improvement. Public expectations are higher than ever. Canadians need reassurance that we are doing everything necessary to remain an environmentally friendly and safe means of energy transportation. This is accomplished, in part, through sharing best practices and adopting industry standards. The alignment is evident through CEPA and its members' paths towards strengthening safety culture, through both individual and collective initiatives, some of which are already well rooted, and others that are works in progress but are progressing rapidly towards a goal of zero incidents.
An example of how we are addressing this commitment is CEPA's integrity first program, an industry-driven approach that enables CEPA members to strengthen performance, communication, and engagement by jointly developing and individually applying common practices. These collaborations are of significant benefit to Canada; however, we believe further collaboration among government, industry, and the research community would have an even greater impact. Pipeline companies are already supporting and investing in research projects at Canadian universities to uncover new approaches to pipeline safety and integrity. These include programs and councils at the universities of Waterloo, Calgary, and British Columbia.
Due to the diverse and vast landscape across Canada, our transmission pipeline industry is uniquely positioned to be a world leader in pipeline technology. In order to realize the full potential of this unique position, the most effective and efficient path forward is through strengthening an innovation agenda. To this end, we believe that a well-coordinated, collaborative approach to research and development in Canada is the best and most efficient way to advance the safety and reliability of pipelines.
To conclude, we acknowledge that energy mixes will change over time. However, currently, oil and gas are required by Canadians, and therefore pipelines are essential. As an industry, we have collaborated and will collaborate to develop, apply, and adapt new innovative technologies that protect and respect the environment, and at the same time deliver socio-economic benefits to the country as a whole.
We are committed to improving our record, and to a goal of zero incidents. Pipeline operators and various industry partners, including government and the research community, have shared the responsibility and the space. This will ultimately lead to more efficient and effective advancements in technology, science, and innovation in the pipeline industry. Ultimately, this is key to building public confidence.
With that fast run-through, I welcome your questions.
Thank you so much for having me speak to you today, even if I couldn't make it in person.
I'm an associate director of research at the C.D. Howe Institute. For those who are not aware, the C.D. Howe Institute is an independent, not-for-profit, research institute whose mission is to raise Canadian living standards by fostering economically sound public policies.
If I knew better than anyone else what the future of the oil and gas sector looked like, I'd currently be scuba diving off my own private yacht somewhere in the Caribbean. But here I am.
What I can point to is what the policy priorities for government should be to help foster an innovative and sustainable oil and gas sector in the future. I will be discussing a C.D. Howe Institute publication on the future of Canadian energy policy. It was published earlier this year. This paper, which you should receive from the clerk sometime soon, outlines the key priorities for Canadian governments of all levels for 2016 and beyond. It's blissfully short, and it's great bedtime reading, so I encourage you to take a look at it when you can.
There are four main themes that policy-makers should have in mind. First, the government should do more to improve the global competitiveness of Canada's energy sector. Second, governments need to earn social acceptance for Canadian energy to access global markets. Third, Canadian governments need to create collaborative governance institutions both at home and globally. And fourth, governments need to foster the innovation that Canada needs to realize the energy system of the future.
As I'm speaking to a federal committee, I'll focus my remarks mostly on matters within the power of the federal government. With the recent and sustained drop in oil and natural gas prices, energy producers are looking at how they can reduce their costs. Taxes are very high at the top of that list. In particular, municipal property taxes are becoming increasingly important costs for business.
At the federal level, the emerging competitiveness issue for the energy sector in 2016 and beyond is the potential fallout from the new government's campaign commitment to phase out what they term as “subsidies for the fossil fuel sector”. Its specific commitment was limited to making some exploration expenses deductible only in the case of unsuccessful exploration. This proposal has major implications for the competitiveness of the Canadian energy sector. Before making any changes, the federal government should take stock of the much bigger picture of what a good tax system should look like. I'd be happy to discuss this further during the question and answer period.
On the second theme, getting Canadian energy to world markets will remain a key priority for 2016 and well beyond. Having a robust regulatory approval system is critical for governments and the energy sector to ensure that Canada's energy products get to the world market safely and in an environmentally friendly, socially accepted way. But social acceptance entails more than the regulatory process. It requires that governments take the lead in areas outside the remit of regulators.
It's important that regulatory bodies are asked to adjudicate only on issues they have the power to address themselves. In the case of pipelines, such matters as greenhouse gas emissions should not be part of the regulatory approval process. A greenhouse gas policy led by governments would mean that a regulatory decision on building a pipeline would have no net effect on Canada's emissions.
But that's not what the federal government is doing. Instead, Canada's new federal government has pledged to revise the process the National Energy Board uses to approve pipelines to include upstream greenhouse gas emissions from energy production facilities that might serve a pipeline.
This new federal policy is a mistake for two reasons. First, requiring the National Energy Board to consider upstream emissions of greenhouse gases in its pipeline approval process could exceed the constitutional grounds for federal government reviews and intrude into provincial jurisdiction. Second, counting upstream greenhouse gases against an interprovincial pipeline would be economically costly without actually resulting in a reduction of emissions.
The federal government should put all means of getting oil to market on a level playing field. That means it should not rule against the pipeline because of its potential effects on upstream emissions.
Also, we can't forget the importance of rail, which has become increasingly important for crude oil exports because of the recent delays to pipeline approvals. Although the recent drop in oil prices has meant a drop in crude by rail shipments, we have to remember that shipping oil by rail has many inherent benefits of, say, flexibility and a lower set of costs beyond just reducing reliance on pipelines.
The question is how can Canada earn social acceptance for energy infrastructure to get built in this country. Governments themselves should demonstrate to the public that they will not interfere in regulatory decisions, and they should allow sound but timely regulatory reviews of projects without directives to decide one way or the other. Industry bodies and companies themselves should make better use of international benchmarks, certifications, and reporting requirements to demonstrate best-in-class regulatory adherence.
The key element isn't just that Canada have a best-in-class and independent regulatory system. We likely already have that. We must be seen to have a best-in-class and independent regulatory system. So what should governments do outside the regulatory process? Some form of carbon pricing, either by the federal or provincial governments, would be a more effective means of reducing emissions than blocking pipelines.
This brings me to my third point about collaborative governance. Carbon pricing likely will be the key collaborative governance issue in 2016 and beyond, and the new federal government will need to tackle a provincial policy patchwork on greenhouse gas policy. The four largest provinces have carbon prices in place or are planning to introduce them, and this decentralized approach has many merits. The best kind of carbon pricing policy in Alberta is likely very different from that in Ontario or B.C. or Quebec. With the provinces clearly demonstrating leadership in this area, the federal government should play a role limited to facilitating interprovincial linkages between carbon pricing regimes.
This brings me to my last point that Canada is going to need new technologies in order for us to reach our emissions reductions target. How are we going to foster the innovation that creates this new technology? We cannot just throw money at research and development subsidies in the hope that people will start using that technology. The research from around the world shows that a price on carbon alone without any research subsidies is about 95% as effective as a combined policy of carbon prices and research subsidies.
Carbon pricing is critical because it creates a demand for clean technologies in the broader economy and doesn't just push the supply of new technologies with subsidies. Rather than focus innovation and diversification policies on what is physically produced in Canada, governments should also think about fostering Canadian companies to become global leaders in the specific technologies they are best at applying.
In sum, Canadian governments need to think about how to improve their policies in four key areas: first, improve the global competitiveness of Canada's energy sector; second, help earn the social acceptance for access of Canadian energy to get to world markets; third, create collaborative governance institutions; and fourth, foster energy innovation.
With that, I'll be happy to take any questions
Thank you, and thank you to both organizations for your presentations.
I wanted to, first of all, ask a question to the Canadian Energy Pipeline Association.
I'm completely aware of the benefits of economic and resource development projects, the benefits they can bring into areas, including where I live in the Northwest Territories. I got my start working with a pipeline company many years ago, when they were building the Norman Wells pipeline. It created a lot of opportunity for me and it allowed for a lot of employment, a lot of business development, and a lot of people to make a good living for several years.
There's also the benefit that we see in the north with companies, such as mining companies, that are exploring alternate energy and successfully developing projects like windmills and solar. Some of these practices are being transferred into the communities, which is really good to see. We all know that infrastructure is something that communities can benefit from, and this is a real challenge for us in the north. There's actually a barrier because of the lack of infrastructure. We're in a remote area, we're in a high-cost area, we have undeveloped infrastructure, and we have a small population.
I'm just curious to see what kind of advocacy your organization does in terms of promoting roads, airports, that would help industry move forward. We just went through a six-year hearing process on the Mackenzie Valley pipeline. I think if we had a road to support it, it would have lowered the costs and made it viable. This is prior to the oil prices dropping, of course.
Can you maybe give us some comment on that?
Thank you both for being here and spending your time with us today.
I'd like to sort of leap off what my colleague has been talking about. I'd like to thank you, Chris, and actually an earlier presenter, for affirming Canada's long-standing track record of world-leading environmental standards and enforcement, which extends to exploration and production, of course, and our world-leading innovation that has allowed us in Canada to produce the most socially and environmentally responsible oil and gas in the world.
To review the principles that were announced, of course a couple of them that I'm mindful of are this application of views of the public and community consultation, which has already been done through rigorous regulatory processes for decades; more meaningful consultation with first nations, which has also been done for decades because of the crown's duty to consult; and through the regulatory process. I'm mindful of, as our representative from the C.D. Howe Institute mentioned, this application of direct and upstream greenhouse gas emissions being linked to the approval of projects under review, which has already been done provincially for years to those existing projects.
What I'm concerned about is that it seems we have a case that the government is not being specific about what gaps they're trying to address. They've announced principles that are either unclear, or duplicate what is already done and has been done for a long time in several different ways.
I wonder if your members have received clarification or specificity from the government about what will be required in these new measures, that we know have increased the timeline, which increases costs and deters investments and can cause job losses. But I'd like to get at whether or not there's actually something concrete for proponents around certainty and what is trying to be accomplished.
Also, maybe from either of you, do you have any comment on this notion that application of upstream greenhouse gas emissions to the approval of energy transportation infrastructure is actually a measure that's not applied to the approval of any other major transportation infrastructure projects in Canada or, indeed, to the import of foreign oil?
If you have any comment on those two items, I would be interested.