First some breaking technology news – some of our loyal but beleaguered readers have noted that we have been posting less than a blog because of the lack of capacity for readers to comment. Beginning next week, this will be corrected and we invite your comments on this blog and all previous postings. I look forward to your views and critical comments. If you are receiving this on a list or from a friend, you can post your comments at www.cep.ca. Follow the Keystone link off the front page.

Monday and Tuesday of this week, CEP was before the National Energy Board challenging Enbridge Pipeline’s “Southern Lights” application to reverse an existing conventional oil pipeline in order to bring “diluents” back to Canada which in turn will be used to export bitumen.

Here are some highlights from the transcript of Monday’s hearing that brought some clarity to several key issues in the pipeline debates. Steven Shrybman, CEP counsel is cross examining Ralph Fischer, Director of Planning and Analysis for Enbridge Pipeline, and Don Thompson, Director of Light Product Development at Enbridge and President of the Southern Lights subsidiary.

To date, projections by industry consultants and CAPP have maintained that the relative proportion of Canadian upgrading will remain constant despite growing bitumen exports. CEP has challenged that forecast, which was confirmed in this exchange:

MR. SHRYBMAN: The other thing that I notice in addition to the growth and the sheer volume of material that isn’t going to be upgraded in Canada, is that the proportion of unblended material seems to be growing as well… Am I right that the relative proportion of material that’s unprocessed is growing substantially over the next seven years according to your estimates?
MR. FISCHER: Yeah, I think that’s correct. Another way to say that I think the rate of growth in bitumen production is exceeding that of synthetic light and heavy production from mining-type plants.
MR. SHRYBMAN: Okay. So for someone like -- for my clients who are concerned about upgrading in Canada, this is moving in the wrong direction… We are going to be processing relatively less seven years from now than we are today; is that true?
MR. THOMPSON: We absolutely do not agree with that. You will be processing more than twice what’s currently being processed. So no, I don’t agree it’s a reduction.
MR. SHRYBMAN: Okay. Well, my question -- I agree with you that the actual volumes will be going up but my question had to do with the relative proportion. In other words, instead of processing about 70 percent -- you have confirmed the relative proportion that we upgrade now, seven and a half years from now, we are going to be down to closer to 60 percent. I think you just confirmed that.
MR. THOMPSON: That’s correct, but the 60 percent is of a much larger number than the 70 percent is.
MR. SHRYBMAN: Right. Okay.

The Southern Lights project to loop diluent from Chicago to Edmonton has been described as a bitumen export machine – a characterization denied by Enbridge, until Monday.

MR. SHRYBMAN: So is it fair to say that the primary rationale then for the -- at least the Line 13 reversal is -- or at the core of it is a project to facilitate the export of DilBit to U.S. market?
--- (A short pause/Courte pause)
MR. FISCHER: I think primary is probably the right word. We have about 90 percent in 2015 of blended heavy going to U.S. markets. So it’s a major market for it.

Some of the most heated exchanges before the National Energy Board have been over the fundamental issue of whether value added jobs are relevant to determining the public interest. Until now, industry spokespersons have vigorously opposed any linking of jobs and the public interest. Enbridge took a more enlightened view.

MR. SHRYBMAN: Are you aware of -- I believe you are -- Mr. McCracken’s evidence in this proceeding about the employment and economic benefits of value-added production?
MR. THOMPSON: I have read his evidence, yes.
MR. SHRYBMAN: All right. Would you agree with me that job creation and economic development of -- well, let’s begin with job creation. Is that a public interest consideration this Board should have regard to in Enbridge’s view?
MR. THOMPSON: So, yes, it would be one of the factors that would be included in the determination of public interest. But I think the Board is certainly capable of determining what it needs to take into account when it determines and certainly the weight that it puts on each factor but, yes, I would think that that would be one.
MR. SHRYBMAN: Yes, thank you…I think you have answered the question. Job creation is a legitimate concern among others?
MR. THOMPSON: It is certainly a legitimate factor, yes.
MR. SHRYBMAN: And the development of a diversified oil and gas industry is something a regulator should take into account in considering a pipeline proposal, whether it facilitates or hinders that development?
MR. THOMPSON: I think it would be up to the Board to determine the merits of diversification first and then whether a project contributes to diversification would be a subsequent step.
MR. SHRYBMAN: Okay. Fair enough, thank you.