Finance Committee on Oct. 29th, 2014

[The Chair, Conservative, James Rajotte]

I call this meeting to order. This is meeting number 53 of the Standing Committee on Finance. Our orders of the day are pursuant to Standing Order 83.1, continuing with pre-budget consultations 2014.

Colleagues, we again have two panels before us in this session.

In our first panel we have five individuals. One, I think, is en route.

We have, first of all, from the Canadian Association of Petroleum Producers, the vice-president, Janet Annesley. Welcome to the committee.

From the Canadian Gas Association we have the president and CEO, Mr. Timothy Egan. Welcome.

From the Canadian Intern Association we have the president, Claire Seaborn. Welcome back.

We have Éric Pineault from the Institut de recherche et d'informations socio-économiques.

Next, we have the Toronto Region Board of Trade and Mr. Patrick Gill. Welcome to the committee.

Thank you all for being with us here this afternoon. You have five minutes, maximum, for your opening statements, and then we'll have questions from members.

We'll begin with Ms. Annesley, please.

[Janet Annesley, Vice-President, Ottawa and Eastern/Atlantic Canada, Canadian Association of Petroleum Producers]

Thank you very much.

Good afternoon, Mr. Chair, and committee members. Thank you for the invitation to be here today.

As you know, CAPP represents companies, large and small, that explore for, develop, and produce crude oil and natural gas in Canada. Together CAPP's members and associates are part of an industry of about $120 billion a year in revenues.

Canada's oil and gas industry currently employs about 550,000 people nationally, and this number is expected to grow as production also continues to grow. Canada's energy sector is in an expansionary phase, and Canadian oil and gas developments are expected to create sustained demand for skilled labour over the next decade. In the oil sands alone, hiring requirements for construction, maintenance, and operations are expected to total 98,000 jobs over the next 10 years. Also, efforts to expand through the development of B.C.'s LNG industry are expected to put additional pressure on the labour market.

While the prospect of higher industry employment has the potential to create strong economic prosperity, access to skilled labour is becoming an increasingly important economic competitiveness issue. Ensuring companies have the right people with the right skills in the right place and at the right time is crucial to delivering oil and gas projects on time and on budget.

Barriers to interprovincial labour mobility and recent changes to the TFW program have hindered our members' ability to deliver resource projects on time and on budget. Higher costs and higher risk translate into reduced competitiveness and make our country less attractive for capital.

Given the high impact of skilled labour shortages on the oil and gas sector, my remarks today will focus on skills training via the federal labour market development agreements and, where skilled Canadians are not available, necessary reforms so industry can continue to access labour via the TFW program.

First, oil and gas companies want to employee Canadians, but Canadians with the right skills are not always available to our industry. At some $2 billion annually, the LMDAs are the single largest labour market transfer program to provinces and territories. Given the government's renewed focus on Canadians first, it is critically important that the LMDAs be as targeted and as effective as possible at connecting unemployed Canadians to the jobs and skills training needed to meet the labour market demands of the future. Skill development and work experience programs are the most effective for improving employment and income levels. The LMDA program, itself, has indicated that “skills development is the most effective intervention in increasing the earnings“ of active EI claimants. Skills programs improve productivity and lower EI, as well. Other LMDA programs, such as the targeted wage subsidy, self-employment program, or job creation partnerships, do not experience as consistent overall benefits.

We recommend that the government reform the LMDA program to prioritize skills development and work experience programs similar to that of the provincial labour market agreement approach and in a manner that is strongly connected to occupations in demand.

We believe in hiring Canadians first, of course, and attracting and recruiting within Canada. Oil and gas is a major reason why Alberta, with three million people, leads the country in apprentices. Despite this focus, however, we know we must move beyond our borders to get the skill sets that are not available for the jobs we have. As such, we rely on the TFW program. The hospitality and service sectors where we operate also depend on this program.

We are supportive of the many changes the government has made to the program, including stronger enforcement and compliance, and the 10-day turnaround for high-skilled, high-paid, and short duration applications. However, since the changes have been announced, the oil and gas producers have experienced significant challenges in accessing the program. A lack of access to skilled construction trades is a critical risk to major project economics. In fact, Statoil postponed its plans for a major oil sands project, citing these types of labour costs as the key reason.

All companies are watching their costs and comparing our project economics to those of other jurisdictions, such as the U.S., especially in an environment of volatile prices and given higher costs and the projected infrastructure constraints to get oil and gas to markets.

In the past, construction companies were covered under an Alberta annex for the TFW program as part of the Alberta occupation-specific pilot program. This enabled timely access to construction trades.

[The Chair, Conservative, James Rajotte]

You have one minute.

[Janet Annesley]

Thank you.

To ensure companies have the labour they need, we recommend the federal government reintroduce a program effecting the same outcomes as the Alberta occupation-specific pilot program, with the option to apply it to other programs as needed.

In closing, Canada's resource opportunity and the energy, security, employment, and prosperity it brings can only be realized if we have the skills to develop it. We do believe in hiring Canadians first, in training, attracting, and recruiting within Canada. As such, we recommend the government targets the LMDAs, your largest and most effective program, to skills training and work experience programs aligned with the needs of the economy. However, we must also look beyond our borders when Canadians are not available.

Reform to the TFW program is needed. We recommend the federal government reintroduce a program effecting the same outcomes as the Alberta occupation-specific pilot program in concert with your other changes.

Well-paid, skilled, safe jobs are a major benefit of a vital oil and natural gas industry, and a thriving skilled workforce can be the backbone of competitiveness for Canada's economy.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from Mr. Egan, please.

[Timothy Egan, President and Chief Executive Officer, Canadian Gas Association]

Thank you, Mr. Chair.

Thank you to the committee for the opportunity to speak today. I've a short statement on two of the specific items contained in our submission provided to the committee in July particularly of relevance to the topic that's been put to this panel—maximizing the number and types of jobs for Canadians.

CGA is the voice of Canada's natural gas delivery industry. The map on page 2 in the package distributed to you illustrates natural gas distribution and transmission companies that deliver energy solutions to more than 6.5 million Canadian customers.

Today, over half the Canadian population relies on the natural gas delivered to their homes, apartments, buildings, hospitals, schools, and businesses, using almost 500,000 kilometres of underground delivery infrastructure and storage facilities. Since 2005, the distribution sector has invested over $25 billion in this extensive national network, to ensure the safe, secure, and reliable operation and maintenance of our system.

As all of you know, we use energy in three principal ways: for heating, for power generation, and for transportation. Natural gas is used for all three, although to date its greatest use has been as a heat source. We often talk about how natural gas is an ideal energy choice for any of these applications because it is affordable, clean, safe, and reliable. But today, given the topic of this panel, I want to focus on the affordability attribute, and how this affordability has meant significant savings for consumers and growth for economies as investors have been attracted to our markets' low energy input costs.

I'll also highlight the opportunity for the natural gas distribution industry, working in partnership with all levels of government, the private sector, and homeowners, to continue to help drive economic growth, investment, and job creation.

If I could draw your attention to the chart on page 3, this graph illustrates how natural gas reduces energy costs for homes, businesses, and institutions. As you can see, in 2003 the average Canadian household spent between $1,300 and $4,300 for space and water heating. Natural gas is by far the most affordable choice.

At the end of the day, we know that for all energy users any reduction in energy costs, while enjoying the same level of comfort or maintaining the same or improved level of service or production output, is a significant benefit. It means money in the pockets of consumers, for families in their homes, or for businesses to become more competitive and to expand and grow.

Because of the abundant supply and ongoing affordability of natural gas, coupled with the rising cost of many other energy options, Canadian utilities are building out their delivery systems to reach more Canadian communities, industry, and the transportation sector. However, there can be challenges in connecting some communities and industrial customers.

As you may know, natural gas utility investment activities are regulated, and they must apply to their provincial regulators for approval of the investment costs associated with connecting a community. In most cases these costs are approved because the benefits to the community justify the cost, and utilities proceed with the investment. But when the communities are smaller and farther afield, the total benefit may not outweigh the cost to connect the customers, and regulatory rules restrict the amount of cross-subsidy that can flow between consumer groups and regions. This can rule out a community connection project, despite the significant savings per year for homeowners and industry in these regions.

Let me give the committee some examples of recent partnerships that made up that shortfall through cooperatively funded distribution system extension projects, and give you a sense of the economic benefits seen in each case. The map on page 4 illustrates some of these examples.

A $40-million project to build a 43-kilometre pipeline into Red Lake, Ontario was funded cooperatively by the federal and Ontario governments, by Goldcorp, the municipality of Red Lake, and Union Gas. The federal government's contribution of $2.7 million was made through FedNor to help support the engineering, design, and construction costs related to establishing the natural gas link to service businesses and residences in the community. Completed in 2012, natural gas became not only an affordable energy source for area mines owned by Goldcorp, but the project brought a lower-cost energy choice to homeowners and local businesses, and served as a catalyst for regional economic development, enhancing business competitiveness and attracting private sector investment to the region.

[The Chair, Conservative, James Rajotte]

You have one minute.

[Timothy Egan]

Red Lake mayor Phil Vinet said in 2012, “Thanks to FedNor's support, this project is a win-win situation. We're seeing cost savings for local businesses, new jobs being created, plus new opportunities for businesses throughout the region.”

The mayor also noted that natural gas could reduce the cost of living for residents and help reduce energy costs for about 180 businesses. At the time of completion, the expansion project had created over 100 jobs.

The map shows you other examples: in Quebec, in Thetford Mines; in British Columbia, from Squamish to Whistler, B.C.; and another one in the Northwest Territories, where we're trucking gas over 3,600 kilometres.

The role of the federal government, we believe, is to facilitate these projects, and we have specific asks in terms of reallocating the existing program or infrastructure money for northern communities and for local communities, and supporting an accelerated capital cost allowance for LNG facilities. Each of these offers direct benefits to Canadians and communities across the country, lowering energy costs and delivering more opportunity for Canadians.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

Ms. Seaborn, please.

[Claire Seaborn, President, Canadian Intern Association]

Good afternoon, everyone. My name is Claire Seaborn, and I'm the president of the Canadian Intern Association and an articling student at a law firm in Toronto.

Today we'd like to make three recommendations.

First, Parliament should amend the Canada Labour Code to extend workplace protection for interns working for federally regulated companies. Second, the Canada labour program and programs in other federal agencies should also adopt an enforcement strategy regarding employee mis-classification and internships. Third, Statistics Canada should begin tracking internships as part of the labour force survey.

I'm going to take the next few minutes to provide some context on intern-related issues and expand on these recommendations.

Internship generally refers to temporary work performed by individuals looking to gain experience or make connections in a new field. Interns aren't just young people and recent graduates. They're also injured workers re-entering the workforce or a mother after a leave or a recent immigrant seeking work in Canada. Internships can be paid or unpaid, and they can be independently organized or part of a school program, such as a co-op or work placement.

Although some internships are beneficial and legal, many internships contribute to unemployment; facilitate socio-economic, gender, and intergenerational inequality; and violate workplace laws. Under Canadian workplace law the default is that an intern is considered an employee, unless a statutory exemption applies. The Canada Labour Code does not refer to interns, trainees, or students. As a result, there's some legal ambiguity when determining whether an intern should be considered an employee. In 1989, the labour program released a guideline explaining that all training periods must be paid, unless the person is undergoing some pre-employment testing that's of short duration.

Next week a labour program adjudicator will begin hearing the case of former Bell Media intern Jainna Patel. He will decide whether Bell was required to pay her wages during her internship and hopefully clarify the interpretation of interns under federal law.

Unpaid wages are not the only problem with this legal ambiguity. Under the Canada Labour Code it's unclear whether interns and students are entitled to workplace health and safety protections as well. You may have heard of the deaths of Adam Keunen, Aaron Murray, Wayne Affleck, and Andy Ferguson. Each of these young men died while in a school internship or co-op placement. Although not all these positions were federally regulated, these tragic events emphasize the importance of health and safety laws and that young workers are greatly in need of workplace protection.

Our second recommendation is that federal agencies must adopt enforcement strategies regarding the mis-classification of interns. The Canada labour program, CRA, and Citizenship and Immigration Canada all have roles to play to prevent exploitation by employers.

Our third and final recommendation is that Statistics Canada begin tracking internships. I appeared as a witness before this committee, you'll remember, on March 27 as part of your youth employment study. We are glad to see that this committee's report cited our submission and adopted our recommendation for the federal government to begin collecting data. However, to date no provincial or federal government has collected any information regarding the prevalence or characteristics of internships. The committee's report also stated that the federal government should work with the provinces to ensure appropriate protections under relevant labour codes.

Many of the provincial governments have already taken action on internship-related issues. B.C. and Quebec have employment laws that require all internships to be paid, unless they're part of a school program. In May, Saskatchewan included the definition of “intern” and “student learner” in their workplace laws and determined that interns are entitled to many workplace protections. Alberta's ministries of labour and education recently announced a comprehensive review of Alberta's employment standards laws for the treatment of interns and all work integrated learning programs. In Ontario, the Ministry of Labour is also taking action.

[The Chair, Conservative, James Rajotte]

You have one minute.

[Claire Seaborn]

I want to thank Minister Naqvi and Minister Flynn for their work on Bill 18, which would bring interns and students under the protection of workplace health and safety laws. They've also done some recent crackdowns and inspection blitzes on employers who are hiring interns illegally.

The Canadian Intern Association would like to thank members of Parliament who have already spoken out about internship-related issues: Scott Brison; Laurin Liu, who is here today; Andrew Cash; Brent Rathgeber; and Justin Trudeau.

We're very pleased to have this opportunity to address the committee.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

Mr. Pineault, you have the floor for five minutes.

[Éric Pineault, Researcher, Institut de recherche et d'informations socio-économiques]

Thank you very much.

The Institut de recherche et d'informations socio-économiques is an economics research institute that has imposed itself over the years as an important actor in policy debates in Quebec. Its approach is characterized by fact-based policy discussions that assume a progressive stance.

As an associate researcher at IRIS, economist and professor at UQAM, I want to share some recent research on the limits of extractivism as the main driver of Canadian economic policy.

My presentation reflects the economic case for an alternative policy framework, which in most aspects does not break with any current orthodox ideas on how the Canadian economy should evolve or be managed. I simply here highlight the importance in this setting of investment in driving sustainable and strong economic growth and make the case for economic policy adapted to an era of ecological stress and transition.

Today one in five investment dollars in Canada—I'm talking private investment dollars—is directed toward the petroleum and hydrocarbon-related extractive industries. This is up from only 5% in the 1990s. It's not just that oil investments have grown in absolute size, they also have replaced other forms of private investment.

This sea change in investment is mirrored by other structural changes, such as the composition of our exports, the dynamics of our labour markets, and product markets, as our economy adjusts to the long oil sands boom.

I will not argue here why this could be problematic on environmental grounds, but will focus on the economic risks that these developments imply, and how they affect the number and types of jobs Canadians can expect to have in the near future.

If industrialism characterized Canadian economic policy up until the late nineties, I think we can define our current approach as one based on extractivism. Such a distinction has nothing to do with traditional differences between interventionist versus non-interventionist policies, or free trade and protectionism. It cuts across these differences.

Extractivism is an economic policy that sees the resource sector as the principal motor of an economy. Its objective is to induce an ever-increasing flow of extractive and untransformed raw commodities that are bound for export markets. The economic challenge is not only accessing the resource and extracting it but also transporting it across the continent to get it to world markets.

Extractivism furthermore aims to link other economic sectors such as the service sector, finance, commerce, and manufacturing to primary sector growth.

Extractivism aims also to change the way labour markets and settlement patterns function, so they can also link to the needs of the primary sector growth. It influences monetary policy, environmental policy, as we've seen in Canada, and policies in the field of science.

I wish to highlight three limits that I think have a direct impact on the number and types of jobs Canadians can expect to have in the future if we pursue the policy of oil extractivism.

The first is heightened dependence on international trade cycles and commodity booms. As we have witnessed in the past weeks, the oil sands industry is extremely sensitive to changes in conditions in international markets, especially growth perspectives in Asian economies, such as China and India. The impact of softer demand is complex, but directly ties into the way other sectors have been linked to oil sands, particularly labour and product markets, so that current levels of employment and production are tied to the growth dynamics of the oil sector.

But most importantly for the future, how a slowdown impacts investment patterns is even more important now that the oil represents 20% of all private investment. Extractivist policies do not seek to mitigate this fragility, they amplify it.

I'm not saying that the oil sector destroys jobs or stifles growth. On the contrary, the growing dependence of growth and investment in Canada on one sole economic sector, oil, implies heightened sensitivity to the specific fragilities of this sector. Diversity could counter this tendency, but extractivist policies do not support economic diversification.

The second limit is the so-called carbon bubble. It is the risk that productive and financial assets, that are tied to these oil sands booms, could actually have inflated values and that in the medium term these values could face sudden and violent devaluation.

[The Chair, Conservative, James Rajotte]

You have one minute, please.

[Éric Pineault]

The carbon bubble argument is tied to the environmental assessment of oil sands petroleum versus other forms of energy. This assessment does not depend on the current view the Canadian government has on global warming, whether it believes or not in climate science, or whether it believes that oil sands exploitation contributes to global warming more than another form of energy production.

Given the extroverted nature of the oil extractive sector, in terms of markets and predominance of foreign firms and foreign capital, the view and polices formulated in other countries and regions, movements in other societies, could have a profound impact on carbon assets.

This should be obvious after the failure of a quick start for the Keystone pipeline as well as the recent decision by a major Swedish pension fund to divest from part of the carbon sector tied to dirty coal and oil sands.

The third impact is on the promising area of economic growth, which represents a great potential in terms of job quality and quantity that extractivism has shut out, the wide field of investment in the ecological transition, and the decarbonification of our energy base.

Paradoxically, Canada is—

[The Chair, Conservative, James Rajotte]

Thank you.

[Éric Pineault]

—endowed with a vast potential to go in either direction. Moving—

[The Chair, Conservative, James Rajotte]

I'm sorry, I do have to be fair with the time. I'm sure you'll have some questions during the question period.

We'll go now to Mr. Gill, please, for your presentation.

[Patrick Gill, Manager, Policy, Toronto Region Board of Trade]

Good afternoon.

Founded in 1845, the board is the chamber of commerce of Canada's largest urban centre, connecting more than 12,000 members and 250,000 business professionals across the region. The board plays a vital role in elevating the quality of life and global competitiveness of the Toronto region.

To this end, the board is grateful for this opportunity to provide the committee with its evidence-based advice on maximizing the number and types of jobs for Canadians.

The Toronto region continues to be one of the world's most prosperous city regions. It annually generates nearly 20% of Canada's GDP, and welcomes 120,000 new residents and workers each year. However, Canada's most prosperous city region has a problem. It has stubbornly high rates of youth and newcomer unemployment and underemployment. Region-wide youth unemployment stands at above 18%. This is far above the national average and is the highest it has been in a decade.

It's highly regrettable that our well-educated local talent pool is not being fully leveraged. Of our residents between the ages 25 and 64 years, 55% have post-secondary qualifications, well ahead of other North American regions.

Let's talk about solutions. One way of achieving greater labour market opportunities for youth and newcomers is through access to superior local labour market information, which allows students, educators, businesses, and policy-makers to make smarter decisions. To address our pressing local needs, the board commissioned a region-specific analysis of labour market needs by occupation and industry. This analysis projects the jobs that will be in greatest demand over the next five years across the Toronto region.

Across the country, there is a lack of locally relevant data like this. The board's data is now being used by the region's five colleges, NGOs, such as CivicAction, and the City of Toronto to establish job pathways tailored for local business clusters.

At an industry level, our projections suggest that the largest number of new jobs will be in professional, scientific, and technical services, followed by health and social services. In contrast, manufacturing, information, and cultural sectors are expected to shed jobs over the same period. At an occupational level, the greatest demand will be seen for retail persons, followed by financial auditors and accountants.

Overall we project that there will be more than half a million job openings across the region over the next five years. Half of these positions will be as a result of retirements alone. The important question to consider is whether local residents who are struggling will benefit, or will businesses have to poach workers from other areas of the country or even move these jobs abroad?

How then do we ensure that local residents who are unemployed or underemployed will benefit from these vacancies? We must scale up what is already taking place. We should scale up industry and academic co-ops and partnerships, such as the Downsview aerospace hub. We have to scale up intelligent land planning like Regent Park's revitalization, and we have to scale up the use of community benefit agreements attached to major infrastructure projects like the Eglinton Crosstown project.

Beyond this, there are two other things that can be done.

First, government can be strategic with its infrastructure investments. Bar none, investing in transportation infrastructure generates the greatest economic impact. Transportation construction not only creates jobs, but boosts productivity, as well, by reducing traffic gridlock. In the Toronto region alone, inadequate transportation infrastructure is costing our region up to $11 billion a year in lost productivity.

Second, the government can support productivity growth within the existing business clusters through trade. Trade not only opens market opportunities for businesses, but forces them to grow and to compete.

[The Chair, Conservative, James Rajotte]

You have one minute.

[Patrick Gill]

In conclusion, please know that the region's business community understands that they must lead the effort in creating more employment opportunities. Businesses can do simple things, such as giving part-time and contract workers access to internal job boards or skills training. They can also look to hire locally, as RBC did with the Regent Park revitalization project.

Again, thank you for inviting the board here today, and for listening to the perspective of the Toronto region's business community.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We will now go to members' questions.

We are starting with Mr. Caron for seven minutes.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much, Mr. Chair.

I would like to thank all the witnesses for being here today.

I'll start with you, Ms. Annesley. Welcome.

Are you from eastern Canada?

[Janet Annesley]

No, sir, I am a recent transplant from Alberta to eastern Canada.