Finance Committee on Oct. 24th, 2012

[W. Scott Thurlow]

I'd preface my remarks by saying that the decision made by Iogen and its partners was an independent decision, a business decision, and it was based on the global assets of the entire company. They had assets to be deployed in other parts of the world.

The recommendation I would give this committee is to start with the operating incentive of 15¢, which is something we are competing with in other jurisdictions. It doesn't exist for next generation. Secondly, I would want to make sure that the programs that exist under SDTC right now aren't changed midstream. Make sure that the fund is allowed to evolve the way it was designed to do when it was created in 2007.

[David McGuinty, Liberal, Ottawa South, ON]

How's my time, Mr. Chair?

[The Chair, Conservative, James Rajotte]

You have 10 seconds.

[David McGuinty, Liberal, Ottawa South, ON]

Can I just respond to Mr. Leach for a second?

Mr. Leach, I appreciated your remarks about trying to improve the regulatory system in Canada, but I did want to correct the record to a certain extent. One of the reasons that the Mackenzie Valley pipeline was so significantly delayed was because the project proponent, Imperial Oil—it is widely understood now and agreed—contributed to about four years of delay by not meeting the timelines to deal with the regulatory bodies that were in play at the time.

[The Chair, Conservative, James Rajotte]

Okay. We may come back to that later in the session.

We'll go now to Mr. Hoback, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you Chair.

Thank you, gentlemen, for being here this afternoon.

I understand Mr. McGuinty's frustration with Iogen being in his riding. Iogen was proposed to go to my riding in Prince Albert and set up this facility. In fact, they did a lot of groundwork and they brought in a partner by the name of Shell. Once Shell was brought into the picture, all of a sudden it seemed like everything was a stop sign. It's unfortunate, but that's what happened. It's unfortunate that they tried to relocate I think to Portage la Prairie, and even then they couldn't justify the numbers.

I think the reality in the region is this, and it goes back to what Mr. Jean and I have been saying. When you look at doing business in parts of Saskatchewan now, the labour shortage is so severe that it drops the cost of production, and the cost of construction goes up. I have a pulp mill going on in Prince Albert right now. I need 300 employees just to run it. I don't know where to get them. I need 400 employees just to do some construction inside this pulp mill, and this is actually the same pulp mill that Iogen was looking at to make into biofuels. So I can understand why they went to Brazil. There are probably some economies of scale, there are probably some feedstock prices that are cheaper in Brazil. There are other commercial activities going on in the background of their decision.

I think we can take pride in knowing that technology was developed here in Canada, and it's still going to be redeveloped and redefined. I can still see a day when Iogen is going to build a plant here, somewhere, either in Ontario or Saskatchewan. I look forward to that day.

It leads into one question I have, and that's on the $500 million. We have that $500 million fund sitting there that never really did get take-up. Is there anything we should be changing in that fund to actually get it utilized?

[W. Scott Thurlow]

Absolutely.

I share your sentiment as it relates to the Iogen technology. That technology will find its way back into Canada, there is no doubt about that. And Shell is also one of my member companies, so I'm in a somewhat precarious situation.

In all seriousness, absolutely, we would like to see the ecoEnergy fund reopened, the $500 million, to ensure that we get the most viable projects going forward. What I would like to see, first of all, is a performance bond of some kind so that when and if the program is reopened, would-be applicants have to put forward 25% of the production based on their first full year of capacity. That 25% would be repayable when the major equipment is ordered and put in place.

The second thing we'd like to see is a very transparent and very timely and prompt window for new application submissions and selection, and then the final contribution agreement approvals. From the cash side of the equation, we'd like to see the existing production incentives for all renewable diesel projects in the program right now extended to March 31, 2017, and to review all of the other unused funds in that ecoEnergy program. This is a program that was absolutely successful as it relates to ethanol, and we want to see that success emulated on the biodiesel side.

[Randy Hoback, Conservative, Prince Albert, SK]

Mr. McGuinty brought up a good point.

You mentioned the topic of canola and how canola is actually being shipped across the line, processed into biofuels, and then shipped back into Canada. Is that true? Can you maybe just elaborate on that?

[W. Scott Thurlow]

It is absolutely true.

We look forward to a time when that logistical chain is shortened significantly and we'll see that value-added upgrade happen right here in the country. The renewable fuel standard was introduced by this government, and industry just hasn't caught up to it yet in terms of developing the build-out required to meet that need.

We have three shovel-ready projects that are ready to go. If the ecoEnergy program is changed in the immediate short term, we can be producing the biofuels that will meet the Canadian mandate by the end of 2014.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay.

When it comes to canola, then, you feel we have the ability; we just need to have some time to let that ability evolve. Is that fair to say?

[W. Scott Thurlow]

Well, it's time and then reopening the program to ensure that the most viable projects can go forward. But absolutely, it could and should happen.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay.

Mr. Brunnen, Mr. Jean talked a little bit about unemployment insurance and some of the changes he'd like to see made in unemployment insurance. Can you just maybe highlight that again quickly? The labour shortage is a huge issue. As a good example, we've lost a huge opportunity in Prince Albert because of labour shortages and labour costs.

How do you think that would be handled with the suggested changes you have?

[The Chair, Conservative, James Rajotte]

Just a brief comment, Mr. Brunnen, please.

[Ben Brunnen]

Basically, we're calling for changes to the employment insurance program that, priced more effectively, would remove distortions for people to stay in areas of high unemployment and move to areas of low unemployment, essentially. We're calling for the employment insurance system to continue to ensure that it has that safety net in the event that people who have fallen on hard times or who have a hard time transitioning out of their job...but also encourage economic activity to its highest and best use.

We're calling on the federal government to change the way it does these programs. Take the non-employment related benefits out of the program itself and fund those in a different way. Then charge differential premiums for areas that have chronically high unemployment.

What you are effectively doing in a situation like that is you are encouraging both businesses and employees to find solutions to chronic labour shortages, whether it's migration to areas of lower unemployment—

[The Chair, Conservative, James Rajotte]

I'm sorry, I'm just trying to be fair to all members in terms of their time.

Welcome back to the committee, Mr. Giguère.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you very much, Mr. Chair.

I am pleased that the committee has heard from you all because I have some questions for you about this country's economic development in the future. I am really looking forward to asking you those questions.

Mr. Thurlow, the pulp and paper industry is in difficulty all over Canada. I know that research is being done into technology that will allow the industry to produce both pulp and paper and biofuel in the future. Can you tell us a little about that technological advance?

[W. Scott Thurlow]

Absolutely, and thank you very much for the question.

Some of my member companies are currently looking at that next generation of technology. For the most part, this next generation is going to be feedstock agnostic. So whether it's waste from agriculture or whether it's traditional pulp and paper products, or the waste from those products, these can go into what we would call a cellulosic ethanol. Through a traditional gasification process, enzymes will break down this wood waste or this biomass into a product that can be consumed.

That process is ongoing. The companies that are in Quebec are using the SDTC programs to develop that technology. My member companies are spending their research and development dollars right here in Quebec and Ontario to develop that technology.

It's certainly something that we have on our radar.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you very much. If you ever need encouragement for your research, if you want to get funding for it, you will find me a willing ear.

Mr. Sinclair, Mr. Leach and Mr. Brunnen, Canada has recently lost 500,000 jobs in the manufacturing sector. We have a balance of payments deficit of almost $50 billion. Our economic strategy at the moment is to produce raw materials as quickly as we can and export them completely unprocessed.

Paradoxically, Canadian businesses have never been so well capitalized. The Governor of the Bank of Canada has said that about $600 billion have not been invested.

What can we do together to stimulate investment into secondary and tertiary processing for our raw materials?

[The Chair, Conservative, James Rajotte]

We have two minutes. Could each of you do a 30-second comment?

Mr. Sinclair, please.

[Art Sinclair]

Again, the question was what can we do to encourage activity in processing, manufacturing, those industries. Certainly, I'd start going back to the productivity issue. One of our recommendations was the extension for the accelerated capital cost allowance as a productivity measure.

To follow up on Mr. Caron's question about productivity, from our perspective, in our chamber, what we see as being critical for the productivity issue is labour force development. We have to make investments in new technology, new equipments—the terminology is advanced manufacturing. We're shifting from people doing work to robotics, to machines doing work. We still need that human capital there. We need people to program computers and run the robotics. That's one of the key things, and that's where we have to make the investments in those particular areas.

[The Chair, Conservative, James Rajotte]

Okay. Let's go to Mr. Leach now, please.

[Gary Leach]

I just want to point out that Canada makes its living as a resource extraction country, and I think it's widely misunderstood, the view that the resource extraction industries are not full of high-tech jobs. Our industry is full of well-paid engineering, scientific research jobs. The oil sands dominates the agenda or the conversation around resources, but over the next couple of decades, $2 trillion will be invested in the oil sands and a million Canadian jobs will be tied to it. These will all be well-paid—and they can't go anywhere.

I want to point out that the resources are here. You can't move our oil and gas, for example, to China. Canadians are going to be employed in these industries because the resources are here.

My view is that this country needs to understand that we have a huge opportunity in well-paid jobs in the natural resource sector, and these are high-tech, research-oriented jobs in many cases.

[The Chair, Conservative, James Rajotte]

Mr. Brunnen, go ahead, very briefly, please.

[Ben Brunnen]

Essentially, looking at this one, we need to agree on the objective of strengthening our economic competitiveness. From a resource perspective, it begins with a Canadian energy strategy, with some level of agreement on how to develop our natural resources, understanding where the economics lie, whether we understand where that opportunity is to upgrade, generally speaking, looking at the capacity that already exists in our trading partners, and whether and to what extent we need to diversify our energy export markets.

One of the bigger things we need to focus on right now is removing interprovincial barriers to trade. That will facilitate labour mobility and economic competitiveness across provinces.

[The Chair, Conservative, James Rajotte]

Great. Thank you.

We'll go to Mr. Adler, please.