So in the end, does the Gulf spill improve the oil sands' outlook?
At first, it actually puts the whole energy production sector in the spotlight. In fact, the difficulties offshore in the Gulf Coast might have a negative impact on oil sands development and on things such as gas out of the Mackenzie Delta. You could see people saying, 'We've just got to cut back. We don't care if the price of hydrocarbons doubles, but we've got to do a lot less drilling and a lot less development.' But looking longer-term, as it becomes more difficult and expensive to do offshore activity, the oil sands might look relatively better. I can't predict [with certainty] but additional layers of regulation and more scrutiny for the offshore industry are not going to make it cheaper and easier.
What's your biggest achievement at TransCanada?
The biggest was to diversify beyond the Canadian regulated gas pipeline business. We were very much a one-trick pony. In the 1990s, attempts were made to diversify to South America, into the mid-stream energy business, and to build a bigger gas marketing and trading business. A number of those efforts proved inconsequential or inappropriate. Starting in 2000, we refocused again on what kind of a company we wanted to be. Digging a little deeper, it meant building this big power business.
The second achievement was extending our gas pipeline business into the U.S. so we are now one of the largest gas pipeline companies there. Third, and maybe ultimately the most successful, is the oil pipeline business. Keystone [which extends to the U.S. Midwest and ultimately to the Gulf]is an extraordinary project.
Is Alberta undermining you by advocating more upgrading here, instead of having TransCanada ship raw bitumen to the U.S.?
I don't think the government would ever want to say, 'We don't want you to upgrade' … but they need to consider the consequences. Let's say producing diluted bitumen has a cost structure of $45 a barrel, but producing upgraded synthetic crude costs $85 a barrel. Then if the oil price goes to a lower level, at least you still have an economic bitumen operation.
Remember that for the first 20 years of their lives, Great Canadian Oil Sands [now Suncor]and Syncrude were uneconomic operations. They never made a dime on a cumulative basis. So you have to consider the economic questions - not only what is the higher apparent value in the near term, but the most stable over the long term?
And what are the employment consequences? If you upgrade everything, and you're going to add two million barrels a day of oil sands production, that will take a huge work force. Is that in Alberta's best interests - to have 10,000 people come here to build the stuff and then have no jobs for them?
And the environmental cost?
The CO2 emissions from an upgrading activity are twice as high as if you just produced the bitumen and ran it through an existing refinery.
Still, I don't feel let down by Alberta. Our pipeline from Alberta to Houston would be even happier [in outcome]if it were shipping all synthetic crude. Synthetic crude is less viscous and we can move more barrels per day and make more money than just shipping bitumen. Even if it is synthetic crude, you have to find a market and the biggest market in North America for synthetic crude is the Gulf Coast. So we're not worried.
Was there a dark moment?
It was very dark when I took the job [in 2001]when it was clear the Canadian [gas]main line all of a sudden had a lot of competition. The industry ramped up pipeline capacity just as production growth levelled off. For the first time in my career, people were talking about a death spiral on the Canadian main line. But we did manage to sustain it and get through that 10-year period.