Finance Committee on Dec. 4th, 2007

[Lee Richardson, Conservative, Calgary Centre, AB]

Yes, and that's the difference that I'd like to--

[Pierre Alvarez]

If you're looking at a fully upgraded barrel of synthetic crude, it's probably somewhere between $55 and $65 a barrel. The average on a conventional barrel is probably $40. The costs are going up, not down, because you're into enhanced recovery and those kinds of things, and remember that the dollar, in the midst of that, is a huge factor.

[Lee Richardson, Conservative, Calgary Centre, AB]

How much of the oil that's produced at a cost of $40 to $60 a barrel gets, less taxes, $90?

[Pierre Alvarez]

Half.

[Lee Richardson, Conservative, Calgary Centre, AB]

It's half of it.

Generally, on synthetic oil produced out of the oil sands at an average cost of around $60, what would the return be?

[Pierre Alvarez]

Well, that depends right now on where the royalty review settles out on a go-forward basis. I think that's the first big question. The second big question is what the climate change policies and the air quality changes in the land will be over the next little while. The third question is local steel prices and things like that. We've seen dramatic increases in costs over the last little while.

When you look at where we rank internationally in terms of attractiveness, we're in the bottom half of the world's destinations for investment.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

Thank you, Mr. Richardson.

Monsieur St-Cyr, vous avez cinq minutes.

When Monsieur St-Cyr takes the microphone, he's going to ask a question in French, so any of you who do not speak French may want to put on your translation headsets.

I am going to say a few words in French to see if you are receiving the interpretation.

Go ahead, Mr. St-Cyr.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Thank you, Mr. Chairman.

Thank you all for being here this morning.

I am going to continue with Mr. Alvarez from the Canadian Association of Petroleum Producers, because a number of statements and visions are different for the petroleum industry.

During your presentation—and I read this in your brief—you stated on several occasions that you wanted to be treated like any other industry. You explained to us that capital is mobile and that industries can obviously invest elsewhere. While it is true that capital is mobile, the oil, as such, is not, since it is concentrated in specific places. At present, major investments are being made in certain regions of Canada, primarily in Alberta, naturally, and these investments, among other things, are the reason why you are facing such high development costs.

The other thing that really surprised me when you talked about being like any other industry is that for years, petroleum companies, namely those developing the oil sands, received preferential treatment: the accelerated capital cost allowance was in place for years, and there was the tax treatment for royalties that was modified and that favoured oil companies over mining companies. During all of those years spent developing the oil sands to make them profitable, you asked for special treatment.

But now that the oil sands are profitable and making money—we see the huge corporate profits—you are asking to be treated like everyone else. To me there seems to be an imbalance there, and as a society, it would be normal to ask oil companies to bear a portion of the environmental costs resulting from both the development and extraction of the resource rather than only when it is ultimately used, because greenhouse gases are essentially produced through the combustion of oil or natural gas.

As an industry, are you prepared to bear the burden of the environmental damage caused by petroleum development? For example, if an industry causes a spill, accidentally or otherwise, should it be responsible for the consequences?

[Pierre Alvarez]

You have asked several questions; I will do my best to try and answer them. I am going to give you two or three examples. Why are we afraid? Why do we see a threat of discrimination?

There are two very recent examples. First of all, budget 2000 treated our sector very differently from other sectors of the economy. We paid much higher taxes than other sectors of the economy for six years. That was a very significant form of discrimination.

Moreover, in terms of climate change, we saw reduction targets that might have been twice as high for us as they were for other sectors of the economy. We have been ready to launch a program since 2002. When Mr. Chrétien was Prime Minister, there was a program slated to begin in 2008. We reworked a program with Mr. Dion, when he was Minister of the Environment. We were ready to begin. We are also ready to begin with the new government. We are prepared to pay our share for our emissions. However, we do not want to pay for others' emissions. We are prepared to begin.

What's more, this has started in Alberta. Since July 1, 2007, Alberta has had a carbon tax, like the one in Quebec.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

You say that you are ready to begin, but what is preventing you from doing so now? Is it because there are still no greenhouse gas emission reduction targets set in the act? Is it because the Kyoto Protocol has not yet really been implemented? Or is it because there is no carbon exchange? What is preventing you from starting immediately?

[Pierre Alvarez]

We have already started in Alberta. It is in the act: we will start this year. It will probably cost us up to $150 million, that we will pay to the Government of Alberta for a technology fund. That is how we will pay this carbon tax here in Alberta.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

If I understand correctly, you are waiting for government investments. Is it a government fund?

[Pierre Alvarez]

No, we are paying with our money. It is not a fund. We are paying directly.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Okay.

[Pierre Alvarez]

There is no program at the federal level. There will not be a tax before 2010. Quebec and Alberta have a program. There is no problem. We will not pay voluntarily if other sectors of the economy do not pay. We have been ready since 2002, we are starting.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

That is fine, thank you.

My next question is for...

[The Vice-Chair, Liberal, Massimo Pacetti]

I am sorry, Mr. St-Cyr, but your five minutes are up. I was listening; that is why I did not intervene.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

It was so interesting.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

Mr. Dykstra, you have the floor.

[Rick Dykstra, Conservative, St. Catharines, ON]

Thank you, Chair.

I did want to acknowledge that the member of Parliament for the riding here, Art Hanger, wanted me to pass on his goodwill and recommendations. He assured me that Mr. Richardson was going to be able to more than hold the fort this morning, and bring the good folks of Alberta and represent them well here.

I did want to continue along this line, Mr. Henwood.

One of the investments the government has made in the sports centre was the $1.86 million. I think you touched on it a little bit in terms of the use of those funds. I wondered if you could elaborate a bit more on how that's been helpful for your organization, and basically how things are going with it.

[Dale Henwood]

Absolutely.

The support we get right now from the federal government at our centre for high-performance sport is about a third of our total cost. But particularly with the recent investment the federal government has made, along with sponsors from the Vancouver organizing committee—again, that's specific to the winter side—I think we've seen tremendous improvements in our Canadian athletes.

As I tried to indicate, looking at it from a medals standpoint, we have consistently gone up. We were third in 2006; we were second last year. The intent is to be number one in 2010. As I said, that's a little fragile, but I'm confident we'll be there.

The bigger issue is on the summer side, where we haven't had any new investment, and I think it shows. Not that there's always a direct correlation between investment and results, but there is a pretty good correlation there. On the summer side, it's just going down.

That's why the focus today is not necessarily on the winter side; it's more on the summer side.

[Rick Dykstra, Conservative, St. Catharines, ON]

I'll be quick, because I know we need to move through these five minutes fairly quickly.

It's interesting, looking at our slogan for Vancouver—“Own the Podium”—I think as Canadians, five or six or ten years ago, probably our motto would have been “Share the Podium”. So it's good to see the focus and effort that we've made on this—the $11 million a year that the federal government invests, directly focused on athletes for the winter games--is certainly paying off, and that's certainly a compliment to your organization.

I noted that you mentioned St. Catharines, which is of course my riding. Believe it or not, there are lead athletes from all over the country, and St. Catharines certainly has produced its fair share. I appreciate the note on that. Please pass along my good wishes to those who are there.

[Dale Henwood]

Thank you.

[Rick Dykstra, Conservative, St. Catharines, ON]

Jeff, you noted in the budget—and I just happen to have it with me here—the manufacturing component that you worked on with a leading motor coach manufacturer to integrate a modified heavy-duty diesel engine into an existing vehicle in order to meet requirements for reduced emissions.

I find that fascinating, not only because it's in the budget, but because it covers so many bases with respect to what we've been trying to talk about when we're trying to lower our emissions and be environmentally conscious while at the same time trying to make sure we have a strong economy.

I wondered if you could just comment on that, because it's an extremely practical application.

[Jeff Zabudsky]

I'd like to acknowledge that program, which has now moved from a pilot phase to a more permanent program, and acknowledge the federal government for recognizing the research that can take place in colleges.

We're all familiar with research that happens in universities. It's very important and needs to continue and be supported.

In colleges our approach is much more applied. It's about solving a real-world problem in business and industry. That project itself was one where our students had a chance to work with a local company that needed to retrofit their engine to fit into their existing chassis to meet emission requirements for the U.S. that came into effect last January. The exciting part of that initiative was that our students had a chance to be front and centre in that project and worked directly on a leading-edge, new technology, and they were very proud of that. We are now graduating students who have had a chance not just to learn in a classroom but to learn directly with industry. Those people are going to be much more valuable in industry because of that innovation and that critical thinking they had to go through to solve that problem and to solve the problem for industry. It's a great example of the kinds of things that can happen in colleges and technical institutes.