This article was originally published in Maclean’s magazine on September 20, 2010. Partner content is not updated.Few Canadian CEOs have as many headaches as TransCanada Corp.'s Russ Girling these days. His company's U.S. pipeline expansion plans are under fire from anti-oil sands activists, the Environmental Protection Agency and some prominent Democrats.
Transcanada CEO Russ Girling Interview
Few Canadian CEOs have as many headaches as TransCanada Corp.'s Russ Girling these days. His company's U.S. pipeline expansion plans are under fire from anti-oil sands activists, the Environmental Protection Agency and some prominent Democrats. Presidential approval of the $7-billion project has already been pushed back into 2011, and the dispute will be a hot topic when Nancy Pelosi, the Speaker of the U.S. House of Representatives, visits Ottawa this week.
Q: Your company's proposed Keystone XL pipeline to the Gulf Coast of Texas has become a sort of lightning rod for discontent about Alberta's "dirty" oil sands. Are you worried about the future of the project?
A: I worry about all of our projects and the opposition that comes to them. But in this particular case, I fundamentally believe that the United States needs this crude oil - they produce about five to six million barrels of oil a day, yet they consume 15 to 16 million barrels every day. And right now, they're importing that shortfall from sources like Venezuela, Nigeria, Saudi Arabia and Russia. My view is that Canada is by far the most secure and reliable source of ENERGY. So this is fundamentally the right thing to do from an energy security perspective. And from an economic perspective, our construction alone will create 12,000 to 13,000 jobs in the United States. It's a $7-billion project, but with the multiplier effect, our studies show there is probably in excess of $20 billion of economic stimulus associated with it.
Q: The EPA has complained that the initial environmental assessment of the project was too narrow. And now 50 members of Congress are calling on the Obama administration to deny approval to the pipeline. What are you doing to try and overcome those concerns?
A: Specifically what we're trying to do is make sure that the agencies responsible for reviewing our project have the facts. This has become a political issue as well, and my view is that some of the issues being raised by opponents aren't factually correct. We just want to ensure a fair process. The first point I would make is that there is no causal link between the pipeline and greenhouse gas emissions. The second is that denial of the pipeline won't change the development of the Canadian oil sands. And thirdly, if those resources aren't going to the United States, they'll go elsewhere, probably offshore to China. And that would mean the U.S. would have to import more crude, which means more barge traffic and greater greenhouse gas emissions.
Q: Are the delays in the approval process going to hurt TransCanada's bottom line?
A: Not likely. We think we can manage in the short run. We continue to spend money in anticipation of a positive outcome. That's the way we do business on all our projects. If we waited for all the permits before we start to order equipment our construction schedule would be far behind our customers' needs. We're still spending for a 2012, mid-2013 start-up of Keystone XL.
Q: The premiers of Alberta and Saskatchewan will be meeting with Nancy Pelosi this week to express their concerns about how Canadian oil is being perceived south of border. Are you going to get the chance to talk with her?
A: TransCanada will likely be part of those discussions, but they are still working on the agenda.
Q: You've mentioned the facts you want to get across to critics. Is that the same message you hope to deliver to Pelosi and her colleagues?
A: They are coming to seek information, which I see as a very positive thing. And hopefully, those that are invited will be able to send factual messages. There's another issue about the push to extend the scope of the pipeline review beyond the U.S. border, "upstream" into Canadian jurisdiction. That's obviously an issue of Canadian sovereignty. In my view, Canada has been a very, very responsible environmental steward. We have committed to Copenhagen, to aligning our greenhouse gas policies with the United States. There is a carbon tax in Alberta. And unlike those other nations I mentioned where they could import the oil from, Canada is a leader.
Q: You mentioned the Copenhagen accord, but there has been a lot of criticism levelled at Canada for its position on greenhouse gas reduction over the last few years. Our refusal to embrace Kyoto, for example, made us a pretty big punching bag. Would you like to see the federal government take more action? Would that be helpful to you in trying to deal with these environmental concerns?
A: What we hope for with our pipeline project is that the facts are put on the table. I believe that Canada took a disproportionate amount of heat in Copenhagen around the oil sands, when the facts are that the oil sands produce just five per cent of Canada's greenhouse gas emissions, which are two per cent of global greenhouse gas emissions. So it seems odd to me that an operation that produces one-tenth of one per cent of global emissions became the lightning rod. Over the past couple of decades, Canadian oil sands producers have reduced the emission intensity per barrel by about 40 per cent, and they continue to develop technology in that direction. Those are the kind of facts that I think need to be put on the table.
Q: Another part of the attention focused on Canada is the growing boycott movement south of the border. A couple of weeks ago, the Gap, Walgreens, Levi-Strauss and Timberland pledged to stop using oil sands oil in their business. How big a threat do you think that is?
A: Our position is that we believe that we should all strive to reduce our energy footprint, and that we should all strive for energy conservation. But the facts are that the U.S. is going to continue to need to import nine to 10 million barrels a day, and oil coming from Canada is secure, friendly and creates economic development and jobs.
Q: The Alberta Enterprise Group has been calling for a counter-boycott of those companies. Are you still shopping at their stores?
A: I don't think boycotts are the right way to go. That's not my personal approach.
Q: It's been a bad few months for the oil industry. But in the wake of the BP spill, wasn't it the perfect time for these arguments you are making about the security and safety of Canada's supply to be heard? Why do you think it's so hard to get that message across?
A: The world needs all forms of energy and all forms of oil. Globally, we consume about 80 million barrels a day, and unfortunately it can't all be indigenous sweet, light crude. We need offshore, oil sands, Saudi production - all of these different sources to keep the global economy going. Each product has its own risks. But in the case of pipelining oil, that is by far the safest and most reliable way of transporting this commodity around the globe. There's about 170,000 miles of crude oil pipeline in the United States - enough to circle the globe seven times. And statistically, the incident rate per mile of pipe is extremely low. We have this emerging, large reserve sitting on North American soil, and it can be transported very safely. That message should be received positively.
Q: Of course, one of your competitors, Enbridge, had a 20,000 barrel spill from its pipeline in Michigan in July. What sort of effect has that had on your business?
A: Obviously it raises public awareness about the potential for incidents. Our pipeline is monitored for any pressure change, 24 hours a day, seven days a week. Keystone will have the newest technology and we'll receive updates every five seconds, so if there's an anomaly, we have the ability to shut down that pipeline in a matter of minutes. Spills of the Enbridge size are very, very rare. But it highlights that it can happen and that we have to be very diligent about having all the policies and procedures in place. And believe me when I tell you - the regulators on both sides of the border are very interested in understanding what our emergency response plans are.
Q: According to your own company website, TransCanada's "reportable incidents" jumped from nine in both 2007 and 2008, to 25 in 2009. What changed?
A: I don't have an answer to that, but I suspect they are probably related to construction. We need to report even the most minor of spills, and when you are building and testing there's a greater opportunity for that to occur. But no large incidents have been brought to my attention. [A company representative later attributed the increase to "ongoing expansion of our business, including the acquisition of a major power asset." Approximately half the spills were less than 38 litres, she said.]
Q: You just took over as CEO on July 1. It's an interesting time. Are the challenges different that you might have envisioned when you started your career?
A: Things have changed. The public is more aware, landowners are more aware. It's more challenging, but it forces us to be the best we can possibly be, and to use the best technology that's available. That's positive.
Q: Recently we've seen oil executives like BP's Tony Hayward vilified. Is your email inbox filling up with angry letters?
A: Those kind of things come with my job. Nobody loves that kind of thing.
Q: Have you been personally targeted?
A: I wouldn't say I've been targeted, but we get letters from landowners and environmentalists that have concerns about our projects - we have $22 billion worth under construction. My job is to be as responsive to those concerns as we can.
Maclean's September 20, 2010