Such differences are usually aired behind closed doors.
But Sophie Brochu of Gaz Métro has broken those unwritten rules. She’s waging a vocal campaign against TransCanada Corp. over its proposed Energy East pipeline to bring 1.1 million barrels a day of western Canadian oil eastward to Quebec and New Brunswick.
The TransCanada project — now before the National Energy Board — would convert part of an existing gas pipeline network to oil.
The way it’s structured in eastern Ontario, Brochu said, it will cut the capacity available to Gaz Métro during peak winter demand by as much as 50 per cent.
That will lead to supply shortages, higher prices and compromised economic development for Quebec, she warned in a recent interview.
Five of the six largest industrial projects in the province are threatened because of their dependence on natural gas supplies — at a potential cost of $10 billion in lost economic opportunities over the next 15 years, Brochu said.
Companies want to locate in Quebec because of the availability of relatively cheap gas, but that development model is now in doubt.
In an interview at the east-end headquarters of Gaz Métro, Brochu said her jaw dropped when she first saw details of the Energy East project. “It had to be a mistake,” she thought.
Five of the six largest industrial projects in the province are threatened because of their dependence on natural gas supplies.
The plan includes building a new gas pipeline to serve eastern Ontario and Quebec. But the capacity of the new line is based on what’s needed to meet firm contracts rather than peak demand, and it doesn’t allow for future growth.
“It’s like saying that one or two lanes of the new Champlain Bridge won’t be needed because they won’t be used at night,” she said.
After months of fruitless talks with TransCanada, she’s been forced to go public — a stand she says is crucial not only to protect Quebec customers but to allow for natural gas to take a much more prominent role in the province’s economic future.
“If I was running Gaz Métro the way TransCanada is promoting its project, I would be fired,” she said bluntly. “I would never be allowed to bully my main customers. My board wouldn’t accept that.”
TransCanada insists it’s looking after its customers in Central Canada by building a new $1.5-billion gas pipeline to serve them.
“Ontario and Quebec gas customers will continue to receive gas to heat their homes as we have done for the last 60 years,” said chief executive Russ Girling, after filing the application for Energy East at the National Energy Board.
TransCanada also argues the new line will produce millions of dollars in savings on operating costs that can be passed along to Quebec consumers.
But the real issue is about capacity. Gaz Métro and Ontario distributors Union Gas and Enbridge Gas serve 3.6 million customers in Central Canada and they have plans to grow.
Both Union Gas president Steve Baker and Enbridge Gas president Glenn Beaumont were in the audience when Brochu made her case against TransCanada in a recent speech to the Montreal Board of Trade.
“She’s shown strong leadership on the issue,” Baker said in an interview. “I’ve known and worked together with Sophie for many years and I have to give her credit for being the first one to call out this issue.”
At the Board of Trade lunch, she worked the room like a political pro and earned a prolonged standing ovation afterward. She restated her case a week later in Quebec City, when she met with Premier Philippe Couillard and opposition parties in the National Assembly.
Board of Trade president Michel Leblanc has become a staunch ally in the fight over Energy East. “We’ve been very impressed with Madame Brochu. She entered the debate with a lot of facts and statistics on her side.
“Leadership is all about rigour and when she came to the Board she was really prepared. The other part of her leadership is that she has spoken about this privately to a great number of people in the business community here.”
All this has increased speculation the articulate and sure-footed Brochu will one day make the jump into politics. She admits she’s “often” been approached by political parties, but has always said no because she doesn’t believe she has the necessary skills or patience.
“I spend quite a lot of time with MPs, ministers and deputies. I see all the compromises they have to make and everything that’s involved … it’s not for me.”
Yet the 51-year-old Brochu, educated as an economist, is showing political vision by proposing a new national energy strategy for Canada.
The fight with TransCanada is a sign the Canadian energy market has become dysfunctional, she said. Producers in the west and consumers in the east no longer talk to each other.
Any mention of a national energy policy is a touchy subject out west, where the free market is king. The Trudeau government imposed a policy on Alberta in 1980 to keep domestic oil prices below world levels, but it proved to be a political disaster and was withdrawn in 1984.
In 1997, when Brochu joined Gaz Métro as a financial analyst, there was talk of moving natural gas from offshore deposits at Sable Island in Nova Scotia to markets in Central Canada.
Gaz Métro supported those efforts. But without a national energy policy in place, there was no political foundation for a deal and it never came together. “I was shocked,” she said.
Ten years later, in 2007, she sat on a panel at a Calgary conference and argued Canada’s energy industry had become “a patchwork of provincial interests,” with a north-to-south rather than west-to-east orientation.
She warned her audience unless provinces talked co-operatively about their energy ambitions they would risk colliding with each other. “My remarks got an icy reception from a lot of people in that room who still carried the scars from the (failed) National Energy Policy.”
The absence of a policy framework for the energy industry has led to “decades of silence, a lack of political leadership and each province trying to act on its own.”
Fast forward to today. The U.S. is producing colossal amounts of oil and gas and has become the world’s leading energy power. Canada is having a much tougher time selling energy into the U.S. market, especially since the Keystone XL pipeline proposed by TransCanada hit political roadblocks south of the border.
As the market shifted to a west-to-east orientation, provinces developed competing visions.
Brochu’s predictions have turned out to be right. As the market shifted to a west-to-east orientation, provinces developed competing visions.
Canada needs a new strategy that allows provinces to “monetize” their energy resources while respecting consumer interests, she said. Without such a strategy, blunders like Energy East are bound to occur.
She’s encouraged that Couillard and Ontario Premier Kathleen Wynne have begun a dialogue on energy issues. At the very least, provinces need to agree on a set of basic principles and one of them would be not to hurt domestic users.
The dispute comes at a time when Gaz Métro is poised to grow, with new plans to serve the Quebec market.
The company is structured as a limited partnership, with the public owning 29 per cent through publicly traded Valener Inc. The balance is held indirectly by the Caisse de dépôt et placement — the provincial pension fund manager — and Enbridge Inc.
As a regulated business, Gaz Métro is not allowed to mark up the price of gas. “The price we pay for natural gas is passed right through to the consumer. The place we make our profit is in distribution.”
The Régie de l’Energie looks at the company’s expenses and capital costs each year and tries to set a fair rate of return.
Growth has been slow over the last couple of decades, with gas stuck at a 13 per cent share of Quebec’s total energy use. But Brochu has a grand vision for the future.
She is investing $118 million to upgrade a gas-liquefaction facility in the Montreal area, with the help of a $50-million contribution from the Quebec government.
The move will triple production and storage of LNG to about 9 million cubic feet. Under the LNG process, gas is liquefied at temperatures of 160 degrees below zero centigrade, increasing storage capacity by about 600 times.
That will allow much more LNG to be transported by truck to areas not currently served by gas pipelines. The provincial government sees this as a big part of its Plan Nord strategy to develop northern regions.
One enthusiastic customer is Stornoway Diamond Corp., operator of the Renard diamond mine 300 kilometres north of Chibougamou. It figures using gas instead of diesel fuel to power its equipment will save as much as $10 million a year.
“That’s why I am fighting so hard,” Brochu said. “I want to preserve the capacity of Quebec to attract those customers.”