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Jim Prentice


Following is a condensed and edited version of "Nation Building Infrastructure in the Asian Century," a speech by CIBC senior executive vice-president and vice-chairman Jim Prentice to the Vancouver Board of Trade, Thursday, Feb. 23, 2012

One of the pivotal events in the history of this great city was its selection as the western terminus of the Canadian Pacific Railway – Canada's first great nation-building infrastructure project.

Indeed, when a Canadian thinks of nation-building, the first mental image is likely of an old, sepia photograph – of a man in a stovepipe hat, surrounded by onlookers in the Eagle Pass, west of Revelstoke, driving the last spike into 4,000 kilometres of railway track laid down across mountain, prairie and unforgiving wilderness.

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In 1875, Prime Minister Alexander Mackenzie had said of this ribbon of steel, and I quote, that "it could not likely be completed in 10 years with all the power of men and all the money of the Empire." History judges him something of a pessimist. The CPR was finished in less than five. And it changed our country forever.

Canada has benefited from many ambitious projects over the course of its history.

Projects like the St. Lawrence Seaway, the Trans Canada pipeline, James Bay, the Bennett Dam, Hibernia and the Trans Canada highway – these were all transformational in their own way. Each put its stamp on Canadian development, progress and prosperity.

These projects had several common elements. They took years to build and created massive employment and spin-off benefits. They were financed with private sector and public sector funds and stimulated the economies of entire regions. And each in its day was subject to intense scrutiny and stoked public debate and controversy, as is the nature of developments that hold the potential to change the fortunes of a nation.

It is worth reaching back in history to remind ourselves that Vancouver was selected as the western terminus from among a number of sites on Burrard Inlet. Even then the key criteria was sufficient deep water to accommodate ocean-going vessels.

From day one, Vancouver was meant to be not just a railway town, but a great and vibrant port city – not just the end of the line, but a Gateway to and from the Pacific. This city was chosen to be the place where Canada would start.

In the same summer that the first passenger train arrived from the east, the first ship arrived at the Port of Vancouver.

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It had come from China.

Businesses and investors in British Columbia have recognized the importance of the Asia Pacific ever since. And Vancouver and Canada have benefited from that awareness and that connection.

I believe that when historians look back to the early years of the 2000's, they will identify a pivotal event that shaped the course of the century to come – shaped it for the world at large, and for Canada as well.

It happened on September 17th, 2001. That's the day when China signed an agreement to become a member of the World Trade Organization.

That event triggered forces that have caused a tectonic shift in the balance of global economic power. It is a shift that has moved China from the periphery back to centre stage of the world economy. It is a shift that marked the beginning of what will come to be known as the "Asian Century."

Now, what does that mean exactly – the Asian Century? Strip away the rhetoric we so often hear and let's look at the numbers. Let's consider the forecast growth for seven of the continent's largest economies, including China, India and South Korea.

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Today, these seven countries have a combined population of more than 3 billion people and GDP of $15.1 trillion.

By 2050, it is estimated that these countries will account for 45% of global GDP and more than 90% of global growth.

The implications of this growth are sweeping – and, in many cases, staggering. Today, right now, China consumes 45% of the world's coal, 30% of its iron, 46% of its steel, nearly 50% of its cement, 38% of its copper and 33% of its aluminum. As Wenran Jiang of the University of Alberta has put it, China has become the "factory to the world." It is our planet's single largest consumer of raw materials.

And China has done all this while importing foreign oil to fuel its growth, becoming the world's second-largest user of oil and its largest consumer of energy.

By 2015, some estimate that China will be consuming 13 million barrels of oil a day. In terms of pure demand, that will be perhaps 12 per cent of what the world produces. But here's the key – China alone accounts for 60% of the growth in oil demand.

Think of the implications of that – for China, for the oil-producing nations of the Middle East. And yes, for Canada.

Simply put, the rise of the Asian Century and the demands of production in China and beyond will stretch the supply of the world's commodities to the breaking point.

To look at the Asian Century from a Canadian point of view, we have the ability to become a supplier of higher value commodities. And one of our competitive advantages will be our ability to be a strategic supplier of oil and natural gas to a rapidly expanding Asia.

The incremental demand of tomorrow is Asian, not American. China now depends on foreign oil for slightly more than half its supply. By 2015, that will increase to 70%.

It also consumes 45% of the coal that is burned in the world today.

Helping China meet its needs will create jobs and income for thousands of Canadians – propelling our country to greater prosperity through trade.

A 2011 report by the Pacific Economic Cooperation Council put a number to it. By having only one customer for our oil, Canada effectively leaves an astounding $28 billion on the table every year. That's $28 billion in lost Canadian corporate revenue and the associated federal and provincial taxes.

This is a British Columbian story. As a country, we benefit from one of the shortest supply routes to the Asian market. Shorter, in fact, than Australia's. Much of the gas that will be exported to China – and to markets in Japan, Taiwan, South Korea and beyond – will come from BC.

The various proposals to develop LNG facilities on British Columbia's coast will bring significant economic benefit to the natural gas producing regions of the province – and to the country as a whole.

But let's be clear and let's not sugar-coat it: As critically important as it is to our shared future, the development of Pacific corridors for oil and liquefied natural gas stands as perhaps the most challenging initiative that our country has encountered in decades.

I noted previously that nation-building infrastructure has often stoked public debate. It can be controversial and divisive. And this is certainly true for these Pacific Energy Corridors.

I tell you frankly that I support the development of the Northern Gateway pipeline. But this debate is much larger than simply a question of support or opposition to a pipeline. We are indeed speaking of the need for leadership to define and deliver what is in the national interest of Canadians.

This is a defining moment for Canada and the federal government has an important role to play. But they're not the only one. We also need the engagement of the British Columbia government, B.C.'s First Nations and of course the private sector.

So, what do we do from here? These are tough issues. Arguably the toughest. And we are all in uncharted territory, in a new post-Keystone reality.

The constitutional and legal issues surrounding west coast energy corridors, terminals and shipping are extraordinarily difficult. The way forward hinges upon negotiating through the complex overlay of unresolved First Nation land claims and unresolved environmental and infrastructure questions.

These may well be the most difficult public policy questions in Canada today and to expect that Enbridge, or any other corporation, can resolve them in the context of an NEB hearing is unrealistic.

Firstly, the constitutional obligation to consult with First Nations is not a corporate obligation. It is the federal government's responsibility.

Secondly, the obligation to define an ocean management regime for terminals and shipping on the west coast is not a corporate responsibility. It is the federal government's responsibility.

And thirdly, these issues cannot be resolved by regulatory fiat, they require negotiation. The real risk is not regulatory rejection. It is actually regulatory approval, undermined by subsequent legal challenge and the absence of 'social license'.

So how should we move forward?

It begins with leadership. Our reality has changed in recent months with the US decision on Keystone. West coast access for Canadian oil and natural gas was always important, but it is now critical to Canada's national interest.

To advance that national interest, the federal government needs to take the lead. They need to consult. They need to negotiate. They will ultimately need to exercise their legislative authority as a majority government.

First, Ottawa must step up and more actively consult with First Nations on the unresolved land claims that blanket British Columbia. Energy corridors will need to be secured on a non-derogation basis, allowing for development, without forcing First Nations to relinquish unresolved issues. While the NEB will aid in this effort, it alone can't get the job done. Senior negotiators need to be put in place to assist in those consultations.

Second, Ottawa has sole jurisdiction over our territorial waters. So it must take the lead in developing a management regime that will take into account the rewards as well as the environmental risks of increased west coast tanker traffic. Legislation will be required. So too will contingency plans for unforeseen eventualities.

It will be essential– given the importance of these waters to coastal First Nations – for the government to pursue a co-management regime for those waters, together with the Province of British Columbia and the coastal First Nations.

Finally, Ottawa must permit the NEB hearings to unfold and conclude as needed. This process will take time. It may indeed take several years. And it needs to be conducted at arm's length with all of the players receiving a proper hearing. It needs to be expeditious, but if it is forced, rushed, or arbitrarily constrained, it will not withstand either public or judicial scrutiny.

The bottom line is this: Developing pipeline corridors to the Pacific requires much more than money. Leadership, patience and time need to be invested. Only then will meaningful dividends truly be achieved.

The Asian century marks a Canadian opportunity. But we need to be willing to do the hard work required to take advantage of it.

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