The Northern Gateway Pipelines Project: Delivering Sustainable Economic and Social Benefits for Canada. Patrick D. Daniel, Enbridge President and CEO

Transcription

1 Eric Geddes Breakfast Speaker Series The Northern Gateway Pipelines Project: Delivering Sustainable Economic and Social Benefits for Canada Patrick D. Daniel, Enbridge President and CEO Nov. 30, 2010 Calgary Chamber of Commerce, Calgary Check Against Delivery

2 It s a real pleasure to join you today and to have the chance to talk to you about a project, Northern Gateway, that has the potential to provide a fundamental and longlasting boost to the economies of Canada, and of course the economies of B.C. and Alberta. There s a lot of interest in our proposed pipeline, as is clear from the number of people here today. And that s as it should be. It s a project of national strategic importance and significance. It has the potential to significantly diversify and boost Canada s economy and to have a positive social and economic impact on the country. It s also a project that is attracting the scrutiny of people and groups who are concerned about environmental impacts of energy development in general, and pipeline development specifically, and land ownership issues. So I appreciate the chance to talk about why we re proposing it, and how we plan to do it safely. And in terms of the why, I ll focus on the strategic benefit to Canada. But first let me tell you a little bit about Enbridge, to set the stage for the discussion. I will keep the commercial brief. We are an energy transportation company. Put simply, our role is to move energy from where it is discovered or generated, to the markets where it is needed and where it is used by industrial, commercial and retail consumers. We operate the longest crude oil pipeline system in the world, about 15,000 kilometres of pipe extending from Canada s Northwest Territories and Northern Alberta to the American Midwest and as far east as Montreal, and as far south as Cushing, Oklahoma. We deliver about 2.5 million barrels of crude oil per day. This is very relevant later on when we talk about the Northern Gateway project. We also gather and transport natural gas, and that part of our business extends from Northern BC to the American Midwest, and throughout the southern US including the Gulf of Mexico. Our long-haul gas transmission pipes, Alliance and Vector, move 1.6 and 1.3 billion cubic feet of gas per day, respectively. We own and operate Enbridge Gas Distribution, which, with about 2 million customers primarily in metropolitan Toronto and Ottawa, is the largest natural gas utility in Canada and includes retail, commercial and industrial natural gas distribution in Ontario, Quebec, New Brunswick and New York State. This is the oldest part of our business, with our roots extending back more than 160 years, originally as Consumers Gas and now as Enbridge Gas Distribution. And as you re no doubt aware, we ve been in the crude oil pipeline business for more than 60 years.

3 And we also have an extensive and growing portfolio of renewable and green energy generation facilities in Canada and the United States. This includes wind energy, solar, including the world s largest photovoltaic energy facility in Sarnia, waste heat recovery, small fuel cells, which is an operation we re intending to expand, and, most recently, geothermal energy. Our renewable and green energy business is our fastest growing business at Enbridge. The energy that we deliver is essential to survival. It heats and powers homes, hospitals, businesses and industry. It transports food to your plate and clean water to your kitchen tap. It moves people, goods and information and it drives our economy. We at Enbridge are proud of how we deliver on our commitments and we take our obligations and responsibilities to deliver energy in a reliable, sustainable and efficient manner very seriously. When I showed you our asset map a moment ago there s one thing that may have jumped out at you, particularly regarding our crude oil pipeline system; effectively the entire system points and flows east and south transporting Western Canadian supply to major land-locked markets in the United States and Eastern Canada. This map shows only our system, but all North American pipeline systems tend to move in the same general direction and to the same markets. One thing you may have noted is that there is very little crude oil pipeline capacity from the Western Canada Sedimentary Basin off our west coast. There is some, but not a lot. The effect of this is that Canada basically has a single customer, outside of Canada, for its crude oil and that s the United States. National Energy Board data from 2009 shows that less than 1 per cent of Canada s petroleum exports went anywhere other than the United States. Just a little more than 1,000 kilometres west of one of the world s largest energy resources, is a coastline that is perfectly positioned, strategically and geographically, to connect Canada s petroleum supplies to the growing demand of Asia s markets. And right now, there is little oil flowing west towards those markets. Northern Gateway will change that picture and have a huge strategic impact on Canada. There is no way our relationship with the US as our major customer will change. The US is and will remain Canada s most important trading partner. There are myriad factors economic, political and geographic that underpin the very stable nature and long-term interconnectedness of the North American energy market and those will remain. Don t

4 think of the U.S. as anything but Number 1 when it comes to being a consumer of Canadian crude oil. What Northern Gateway does is provide much-needed, large volume optionality for Canadian energy to the Pacific Rim, including the US west coast and East Asia. In today s global marketplace, improved access to more customers around the world is absolutely critical to Canada s continued prosperity. A significant market outlet to the Pacific Rim will allow Canada to move towards being a price maker on the global energy market rather than a price taker on a landlocked North American market. We all know that the primary global oil market has shifted to Southeast Asia; Canada must move with these shifts. Northern Gateway is an opportunity to bring Canada s energy resources to the world while at the same time delivering sustainable local and regional prosperity for communities in northern B.C. and Alberta and national economic advantage for Canada. I mentioned the strategic importance of Canada s west coast a few moments ago. Let s look at that a little more closely. On the map of pipelines from the WCSB, we saw that better than 99 per cent of our oil exports are to the US. Here s a map of the Pacific Rim. You can see the proximity of major energy markets that Canada simply can t service right now because of our country s west coast energy bottleneck. Japan, China, India, all expanding economies with a long-term projected uptrend for sustained growth, and ones that we absolutely need to take advantage of in Canada. There are the growing markets on the west side of the Pacific Ocean. Here is the second largest crude oil reserve in the world available to supply them, overland about 1,100 km and short shipping routes away. That 1,100 km is a lot closer than many of our U.S. markets in terms of pipelineable distance. Are there other countries that can provide energy to the growing Pacific Rim economies? Absolutely. But, in an era of global trade diversification, and at a time when the world demand for energy is rising very significantly, ignoring Canada s west coast energy bottleneck is the equivalent of announcing that we re not interested in playing on the world stage. I don t think that s in Canada s best interests at all. And it will take a long time, if it s even possible, to catch up if we come to the game too late.

5 I don t think it would be wise for us to abandon the most important global energy markets to our competitors, whether they be in the Middle East or elsewhere. I ll talk about the specific short-, mid- and longer-term economic impact of Northern Gateway in a few minutes. Right now let s just consider the project on its strategic merits for Canada. In the October, 2010 issue of Policy Options, a publication by the Institute for Research on Public Policy, David Emerson, former federal Minister of Industry, Minister of International Trade and Minister of Foreign Affairs, made an eloquent case for the strategic importance, for Canada, of projects like Northern Gateway. In his article, The Northern Gateway: Moving Canadian Energy to Pacific Markets, Emerson highlighted the risks of leaving our nation s energy industry tied to only one customer, that customer being the U.S. He noted that of all of the G-8 countries, Canada is the one most dependent on trade, and that hitching our wagon to the US market alone, currently struggling to emerge from what some have called the Great Recession, is not a prudent approach to maintaining the long-term prosperity of our country.. If we are trade dependent, then let s play to our strengths and foster diversified trade with global trade partners, not just North American markets, recognizing that those North American markets will continue to be the most important to us. This will help insulate our nation from economic challenges that any single market might experience. Here s what Emerson says: The strategic importance of the Asia-Pacific Gateway is underscored by the fact that China s economy has now taken Japan s place as the world s second-largest economy, and is on track to become the largest economy within the next three or four decades. He adds: The lack of pipeline and port terminal facilities to safely and efficiently transport western Canada s resources to energy-hungry customers around the Pacific Rim is critical to Canada s robust economic future. In his paper, Emerson talks about Canada s Pacific Advantage. He notes the strong cultural, economic, business, investment and family ties that extend from Asia to our west coast, and we have to take advantage of that as Canadians. And consider this key geographic fact: Canada s west coast ports are two days closer to the Far East than other ports in North and South America, an important consideration in a world where the competitiveness of your supply chain is a defining success factor. Our nation s Pacific Advantage is clear.

6 So, as a nation we enjoy a Pacific Advantage and a world-class energy resource advantage. What should we do with them? Northern Gateway is an opportunity to marry these two fundamental global competitive advantages for the long-term benefit of the nation, strategically and economically. In very broad strokes, that s the strategic case for Northern Gateway. Now let me take you through some of the details of the project. I ve done my best to frame up the why ; I ll now address the how. The project comprises two parallel pipelines extending 1,172 km from Edmonton, to a marine terminal at the port of Kitimat on the west coast of British Columbia. The projected cost for the project is $5.5 billion A 36-inch west-bound pipeline will have the capacity to carry 525,000 barrels of oil per day from the Edmonton area to Kitimat, while a 20-inch east-bound line will provide capacity to transport 193,000 barrels of condensate from Kitimat to Edmonton. Condensate is part of the hydrocarbon chain and, as you may know, is used to dilute bitumen to make it easily pipelineable. The proposed route for the pipelines runs effectively due west from Edmonton to Kitimat. We filed the regulatory application for the project with the National Energy Board in May. It was the largest filing in Enbridge s history and one of the largest applications that the NEB has ever received, totaling more than 17,500 pages of documentation. That application will be reviewed by the NEB as well as the Canadian Environmental Assessment Agency. Our filing in May triggered the beginning of the formal public discussion and consultation of the project through what is known as the Joint Review Panel, a quasi-judicial threemember body with representatives appointed by the National Energy Board and the federal Minister of the Environment. Over the course of the next 18 months to two years, The JRP will consult with stakeholders and study the application to address two fundamental questions about our proposal: In terms of the Canadian Environmental Assessment Act, will the project cause significant adverse effects on the environment? And in terms of the National Energy Board Act, is the project in the public interest?

7 The answers to those questions will take into account the feedback, input and interests of stakeholders to determine the future of the project. Now let me take you through some of the challenges. Some Northern Gateway stakeholders are making it clear that among their key concerns are tanker safety and the risk of a leak into waterways, marine safety and the protection of the environment. Those are very legitimate concerns and ones that need to be addressed. Our Northern Gateway operations will take every caution to protect the marine environment at the Kitimat Terminal, along the marine route and along our nation s west coast. Our project plan calls for extensive and stringent marine safety systems and protocols. We are putting in place a model of world-class marine safety protocols which include: Locally based pilots, familiar with the coastal waterways, who will board each ship and guide it through the channel to Kitimat, and back out to open waters. All vessels entering Kitimat will be modern and double-hulled. Operational safety limits will be established to cover visibility, wind and sea conditions. Powerful custom-built tugs, will escort both loaded and empty tankers to ensure safe passage through coastal routes. In addition, a second (tethered) tug will be provided for loaded vessels. The escort tugs will also have extensive first response capabilities to provide immediate assistance, if required. As well, Northern Gateway will support the installation of a new radar system to cover critical route sections and the installation of additional navigational aids such as navigation beacons, buoys and lights. The result will be improved emergency response capacity for BC s main northern shipping routes, for all marine traffic. A few more safety measures: Vessel speed will be reduced in the marine channels to between 8 and 12 knots. While docked at the Northern Gateway Kitimat Terminal, tankers loading export petroleum will be surrounded by an oil spill boom.

8 The response readiness for a marine spill, including staff and equipment, proposed by Enbridge will exceed Transport Canada Standards and will place the project within the top terminal and port operations for oil spill response preparedness worldwide. That s our commitment and we ll ensure that s the case. So, Enbridge is committed to ensuring that vessels transporting petroleum and condensate via the Kitimat marine terminal will employ the highest worldwide safety and navigational standards. To help ensure those standards are met, we are participating in a voluntary assessment known as the TERMPOL review process, administered by Transport Canada. This review process evaluates marine terminal operations, vessel routing and other marine safety issues. As part of this process, Enbridge, together with interested participants, also voluntarily conducted a Quantitative Risk Assessment to quantify the risks associated with the marine components of the project. In addition to the safety steps I outlined a moment ago, we have also assessed the routes to and from Kitimat to ensure that they meet TERMPOL requirements. At the narrowest point along the both routes the largest proposed vessels to be used in the Douglas and Principe (PRIN-si-pee) Channels have waterway-to-vessel width ratios significantly larger than the TERMPOL minimum. The narrowest point in both the Principe and Douglas channels is nearly 1.6 km wide, with 1.4 km of that span more than 36 metres deep. This is more than three times wider than TERMPOL requirements of a minimum 455 meters for the largest proposed vessels. So, pipeline safety and marine safety are top priorities for us. And over the past 25 years, more than 1,500 ships have safely travelled to Kitimat carrying petrochemical products. This is not a new concept. Just to put a little more perspective around this particular issue, North America currently safely imports about 8.4 million barrels of oil every day by oil tanker. Shipping associated with Northern Gateway is going to increase BC North Coast Shipping traffic by only 3 per cent. Not a dramatic increase. With 8.4 million barrels of oil being delivered by tanker each day, the one major North American incident associated with all of this activity is the Exxon Valdez, which occurred 21 years ago. This was a serious incident and industry has learned and has improved its performance dramatically. Over the past 3 decades, the world-wide number of large spills (over 700 tonnes that s about 5200 barrels) from oil tankers has been reduced by a factor of about 3, from an

9 annual average of 9.3 spills in the 1980s to 3.3 spills per year in the 2000s. Smaller spills have decreased by more than half. This despite a significant increase in the volumes being shipped. We have a clear obligation to operate safely and reliably and to protect the public, employees and the environment from oil leaks. It is our top priority. Frankly, if I didn t personally have every confidence that Enbridge could construct and operate the Northern Gateway Pipelines in a way that was safe, reliable and environmentally sound, then I would not be proposing that we move forward with the project. Am I suggesting that we can guarantee there will never be a release from the Northern Gateway Pipeline, from the terminal or from a tanker? No, I can t promise it. What I can promise, and what Enbridge is proposing, is a pipeline, terminal and marine safety system that sets the global standard for safety, environmental protection and incident response. I ve already talked about our approach to safe marine operations. Over the length of the current proposed route, the pipeline will cross many active watercourses in Alberta and BC, ranging from very small creeks to larger rivers. We use a variety of crossing techniques to ensure that our pipelines are safely placed and disturb the environment as little as possible during construction; many of those are directionally drilled under streams. Pipelines, over the many years that they have been in use, have been shown to be the safest way to transport oil and natural gas. Pipelines have been proven much safer than rail. Although Enbridge had a very notable oil leak from a pipeline in Michigan this summer, our record of leaks from 2002 to 2009 is about 40 per cent of the industry average, with about 4.2 barrels spilled per billion barrel miles by Enbridge compared with about 10.7 barrels leaked per billion barrel miles as the industry average. But that s not good enough. If anyone thinks we want to go through what we did in Michigan this summer, they re absolutely wrong. Since 2002 we have spent nearly $1 billion on our integrity programs for our Liquids Pipelines systems across North America. Our objective is to drive the number of leaks, spills and releases from our pipeline system down to zero.

10 Commencing in early 2002 during the feasibility phase, we started contacting all Aboriginal groups along the route. That consultation has continued throughout the process and will continue throughout the life of the project. Our model with respect to Aboriginal engagement along the route includes: Protocol Agreements that enable Aboriginal communities to complete their own analysis of Northern Gateway plans Long-term agreements that will cover opportunities such as employment, training, business procurement and environmental protection A coastal community strategy to build upon the local knowledge and skills of coastal First Nations In addition, we plan to provide an opportunity for First Nations and Métis communities to own an equity share in the pipeline, which would provide lasting benefits to all members. We will be extending to participating and neighbouring first nations and Métis groups an opportunity for 10% equity participation. While some First Nations have expressed opposition with respect to Northern Gateway, many have indicated project support as well. To date, we have entered into over 30 formal protocol agreements with Aboriginal groups along the proposed corridor. We are in the process of communicating economic participation opportunities to Chiefs and Council members. Meetings for this purpose began in mid-november and will continue until at least mid-december. In addition to our consultation with Aboriginal groups, Enbridge is undertaking an extensive community engagement program for the project. The community engagement program offers a wide variety of opportunities for individuals and organizations to learn about the project, to ask questions and provide input. I made the case earlier for the strategic importance of the Northern Gateway Pipelines project for Canada. That strategy will not only diversify markets a strong and for our nation in the decades and generations ahead, but will also, clearly, deliver significant local economic advantages as well. Put simply, Northern Gateway presents a win-win-win for B.C., for Alberta and for the country as a whole.

11 Here are some impressive numbers to consider. I draw your attention to the number at the top, which represents the $270 billion increase in Canada s GDP over 30 years as a result of the project. This isn t an Alberta project, or an oil sands project it s an oil industry project and one that is a Canada project. Once the pipeline is operational the positive impact continues with 1,150 long-term jobs created throughout Canada, $2 billion of labour-related income across Canada over 30 years and $2.6B in total tax revenue for local, Provincial and federal governments. So, Northern Gateway is, without a doubt, a complex and ambitious project. It represents the largest capital project we have ever undertaken and it will be a game changer for Canada s energy industry and, as a result, for the nation as a whole. In that, I think it will have much broader implications and set an example for industries outside of the energy industry. By opening the world s energy market to Canada, Northern Gateway will help enable the nation to achieve its true potential as a global energy superpower and to enjoy the benefits of its resource wealth for generations. It s going to be a huge challenge, but it s worth it and we think we re up to it at Enbridge. Thank you.