Finance Committee on Oct. 21st, 2009

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you.

I have a second question for Mr. Ryan. In reply to a question from Mr. McCallum just now, you said that, with the possibility of the government not investing in the renovations at Chalk River, we clearly run the risk of losing our supply of isotopes. It has now been closed for several months.

Do we have a secure supply of isotopes in our reserves? Do we have reserves or are hospitals getting their supply in other ways?

[Prof. Dominic Ryan]

You can't stockpile molybdenum-99. Its half-life is six days. Half of it's gone after six days. So you cannot stockpile it, which is why you have to have a local domestic production facility.

The Australians are just coming online with their facility. Because they're so far from everywhere, they have no choice. And they're expanding to supply the Asia region.

Hospitals now are dependent on wherever they can get it. There's going to be another shutdown of the Petten reactor in the summer. If we don't get NRU back up by then, that's going to be another major problem. It's coming from South Africa and Europe primarily at the moment, but a small amount may become available from Australia.

This stuff is short-lived. You have to move it. You have to use it immediately. There's no possibility of stockpiling it.

We're not talking about refurbishing NRU; we have to replace it. It's 52 years old. You don't fix a 52-year-old car, you buy a new one.

We can build a better one. We can use modern technology. And we can support all the missions that are currently supported by NRU with a new facility and secure our isotope supply for the next 50 years.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

I am not sure that I fully understood what you said in your previous remarks. You talked about building a new, multipurpose reactor. Am I correct?

[Prof. Dominic Ryan]

That is correct.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Could you explain that a little more?

[Prof. Dominic Ryan]

NRU, as it stands, is a large-core reactor in which you can do in-core research to study how materials behave in reactors. If you want to develop new nuclear reactor technology, you have to be able to run materials and fuels and understand how they respond. That's one mission that's done. You can put materials in to irradiate them to make medical isotopes. We have holes in the side of the reactor that are designed in, not just leaks, where you can draw out neutron beams; you can scatter off materials to study their properties, both for engineering and materials purposes, and also for fundamental research.

Developing all these technologies within one reactor means that you are serving a very large number of communities—industrial, fundamental, medical, and research—and it's a much more cost-effective way of doing things than building one reactor for each job.

We've really done a great job at NRU for the last 50 years with this very flexible design that is supporting projects that weren't even thought of when it was built. There was no medical isotope business. There was no neutron beam research. Engineering studies with neutron beams had never even been thought of. These are all things that evolved after we built it. It's a real triumph, a Canadian triumph.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

You are the experts. As you know, the general public hears a lot about the problems at Chalk River. Were they foreseeable? Did you warn the government?

[The Chair, Conservative, James Rajotte]

Very briefly, Mr. Ryan. We're way over time.

[Prof. Dominic Ryan]

I spoke to this very committee two years ago, asking for exactly the same thing. So yes, it's 52 years old. These things always break down eventually. It's obvious.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Dechert, please.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you, Mr. Chair.

Ladies and gentlemen, thank you for your presentations and your suggestions. I very much appreciate your taking the time to share your views with us.

I'd like to direct my first question to Mr. Carayiannis from the Canadian Association of Income Funds. It's good to see you again, by the way. Having been a lawyer in private practice, I can personally attest to the fact that converting companies into income trusts and then converting income trusts back into corporations is good work for lawyers.

Some of my former colleagues may be unhappy with my question to you about the conversion deadline and how that might impact their particular business in the next year or two if we do push back or eliminate that conversion deadline. Can you give us some guidance on how many trusts you think will convert prior to that deadline if the deadline is continued versus how many will convert later if we extend or eliminate the deadline?

[Peter Carayiannis]

Thank you, Mr. Dechert, for that question.

To give a specific projection in terms of conversions would be impossible. Primarily, because that information is usually considered proprietary by the trusts, it's sensitive business information. For the most part, the income trusts try to make the decision to convert to a corporate status dependent on business realities at the time of conversion, taking into account the best interests of the stakeholders.

What I can tell you by way of background is that over the last two and a half years some 60 income trusts have converted. They've been acquired by private equity, by pensions funds, and by sovereign wealth funds in some cases, and that represents market capitalization of about $50 billion. What we expect will happen is that come 2011 income trusts will be subject to taxes, and those that do not convert will pay taxes to the federal government.

I would point out that unlike most of the other presentations that I'm sure this committee has heard across the country where the presenters are requesting additional money from the government, we're in a unique position where we are actually going to be paying more money to the government. By eliminating the deadline for conversion, those funds will continue to flow to the federal government and the arbitrary deadline of December 2012 will be removed. So the income trusts will make a decision based on business realities at the time and in the best interests of their stakeholders at the time.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you.

I have a second question. You had another recommendation in your written brief about a carve-out for oil and gas trusts and other royalty trusts. Can you provide us some guidance on what you think the benefit of that request would be to the Canadian oil and gas sector versus the cost to the government in terms of lost revenue?

[Peter Carayiannis]

The specifics of that would be to say that in fact there would likely be no costs in additional revenue to the federal government. Carving out the oil and gas trusts from the application of the SIFT tax would be a great boon and benefit, in the views of our membership, to the province of Alberta and frankly to the economy of the country. It would be consistent with the historical position of income trusts in the Canadian economy and would allow the Province of Alberta and the businesses that operate in Alberta and in the prairie provinces in the energy field to continue to exploit and develop these very important resources for the country.

In short, the answer would be that it wouldn't cost the government anything. It would in fact add to the federal coffers.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Great. Thank you very much.

I'd like to ask a question of Mr. Shapcott and Ms. Lalani of the Wellesley Institute. I was very interested in seeing in your written brief your discussion of immigrant settlement funding. The region I come from, Peel region, is actually the largest welcomer of new Canadians on an annual basis. As you know, our government has been increasing immigrant settlement funding over the last few years through CIC, but specifically, I'd like to know how much more you think is necessary and in what specific areas we should be targeting it.

I also want to ask you a second question about the new Canadian landing fee. One of the presenters to the committee yesterday suggested that it be eliminated entirely. As you know, it was somewhat bizarrely imposed on each new immigrant in the mid-1990s by the previous government, which I thought was quite troubling. Our government reduced it in half immediately when it came to power in 2006. This other organization says we should reduce it to zero, and I'd like to hear your views on that as well.

[Michael Shapcott]

Thank you very much.

As you know, on the issue of newcomers, from a demographic perspective it's not just your region but all across the country, in almost every part of the country. Any population growth that we have will be from newcomers as opposed to natural birth and so on. So it truly is a national issue.

One of our perspectives on this is a health perspective, and there's a very curious paradox—in fact a very troubling paradox—that newcomers come to Canada and typically are healthier than resident Canadians. This is partly because we just don't admit sick people to the country; we screen them out. Fair enough. But after five years, typically the health status of newcomers is lower than resident Canadians' health status. So something is happening in that initial settlement period that's driving health downward.

We're in year three of a project. We're looking intensively at a very dense neighbourhood that receives a lot of immigrants in downtown Toronto called St. James Town, looking at the whole combination of factors, whether they are employment and income-related factors, whether they are factors involving the physical environment, housing, and so on. We're looking at the kinds of connections, and it's a bit too early for us to offer some specifics on that.

Generally what we hear from community-based organizations that are involved in the very critical work of immigrant settlement issues is that they don't have the resources they need to meet the needs of the communities, and the resources should in fact be increased. I think this ties in, if I may say so, with our general proposition to this committee around community innovation, that many of these organizations are looking for new ways to effectively meet the needs of newcomers.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

So more for programs generally. Some percentage increase.

[Michael Shapcott]

Yes, an increase. And on the landing fee, we don't understand the rationale for that either.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

It seems rather bizarre to welcome people, invite people to your country, and then immediately impose a tax when they have all these other costs to deal with.

Thanks very much.

I have a question, if I can--

[The Chair, Conservative, James Rajotte]

You're pretty much out of time, Mr. Dechert. Thank you.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Hopefully I'll get back to it in another round. Thank you.

[The Chair, Conservative, James Rajotte]

We'll go to Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I was initially going to ask a question of Mr. Ryan, but both Mr. McCallum and Mr. Laforest have, with your responses to their questions, kind of amplified the actual loss that shutting down Chalk River will perpetrate upon not only the medical community but the academic community as well, so I'm not going to go there. Anyway, thank you for that response.

Mr. Carayiannis, there's nothing on the order paper with respect to income trusts. Am I correct in reading your brief to say that it died when Parliament was prorogued and there's nothing proceeding at this point?

[Peter Carayiannis]

That's correct.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So if there's nothing proceeding, where does that leave you? Does that leave you in a forced conversion by 2012?