Industry Committee on July 20th, 2010

[Martine Dagenais]

As I said before, the bureau has the power to review any mergers in Canada to make sure they don't result in a substantial lessening of competition. We look at different factors. Foreign competition is a factor we look at, but not whether it is a U.S. buyer or a Canadian asset being purchased. At the end of the day, that kind of decision is more a trigger when we look at if a transaction is subject to notification in Canada. If you have a U.S. buyer with no assets in Canada, maybe you won't be able to trigger the notifiable requirements under the act, where the commissioner is required to get some information from the parties. But in terms of the competition review, we don't—

[Mike Wallace, Conservative, Burlington, ON]

So the origin of the buyer or the seller in terms of its corporate nationality plays no role in the Competition Bureau's responsibility of looking at a transaction?

[Martine Dagenais]

We look at the impact for sure, but in terms of the threshold to trigger a requirement of a notification for the commissioner to review a transaction, it could have an impact. But we—

[Mike Wallace, Conservative, Burlington, ON]

Okay.

Those are my questions, Mr. Chair. Thank you very much.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Wallace.

Mr. Godin, do you have any questions?

[Yvon Godin, NDP, Acadie—Bathurst, NB]

Yes, I have one or two. I would like to go back to what Mr. Wallace was saying earlier. Does it make a difference whether this asset belongs to Shell or to Delek US Holdings? Both are U.S. companies. And yet there is a difference. One of the two companies wants to shut down the refinery, convert it to a terminal and bring in cheaper products from elsewhere, while the other wants to operate the refinery. In my opinion, there is a difference between the two companies. I would just like to clarify that.

Furthermore, the domestic industry operates in an international marketplace. Mr. Gauvin is responsible for the oil sands. The fact is that if you consider the overall picture these days, with free trade dating back to the 1980s, as Mr. Chong referred to, both past governments and the current government of Canada really couldn't care less. There is oil in Alberta that we want to sell to other countries. They will refine it and send it back to us. We have great arrangements with every country. The system is working very well. So, there is no desire to interfere. I think that's what the government is doing. It is simply washing its hands of the whole affair. Do you agree with me on that?

[Jeff Labonté]

I'm not sure I understand the nature of your question. Je m'excuse.

[Yvon Godin, NDP, Acadie—Bathurst, NB]

Did you not understand my question?

[Jeff Labonté]

I wasn't sure if I understood what you were asking me.

Could you repeat the question?

[Yvon Godin, NDP, Acadie—Bathurst, NB]

Sure I will.

I keep going to page 8 of your document, where it says: “The domestic industry operates in an international marketplace”. And it continues by mentioning “lower capital and labour costs; less regulation; production increase in non-OECD countries; economies of scale”, and all of the things we talked about. Right?

We have Mr. Claude Gauvin here from the ministry, representing, I think, through Natural Resources Canada, the oil sands and energy. We're dealing with all of that. Our country has the oil sands and I don't think they have all the refineries in Alberta. Then there's this big game getting played today about, well, I'll sell you the crude and you refine it and send it to us. They don't want to pick a fight with anybody; they're all polite to each other. Then the government on this one here is more like they're washing their hands of it, and it's a free-for-all.

Is that clearer?

[Jeff Labonté]

I do not agree with you. In Canada, there is a free market for trade in petroleum products. There are always regional characteristics in Canada. The market is highly complex. There are a lot of different factors in terms of transportation, distances, the population of Canada's cities and distribution.

It's highly variable and change is frequent. In fact, that is the way it is in Western Canada. We are talking essentially about Canadian resources being produced in Western Canada and Quebec. There is a need to have access to inputs imported from other countries. It's a trading process within a very free and open market. Every company makes its own decisions independently and that introduces new factors into the Canadian market.

[Yvon Godin, NDP, Acadie—Bathurst, NB]

Since the North American Free Trade Agreement was signed, the market has been very free and very open.

[Jeff Labonté]

That's correct.

[Yvon Godin, NDP, Acadie—Bathurst, NB]

In that respect, I agree with you.

[Jeff Labonté]

However, I do not agree with you when you say that we are simply washing our hands of the whole affair.

[Yvon Godin, NDP, Acadie—Bathurst, NB]

Well, I think you wash your hands not with water but with oil, and we're getting...I'm not going to use the other word that's coming to my mind.

Mr. Chairman, I would just like to close by saying that I hope the Prime Minister of Canada will involve himself in this matter and get in touch with the Shell officials to ask them to go back to the bargaining table.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Godin.

That's our last member for today.

Mr. McTeague, go ahead.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

I have two questions, actually.

[The Chair, Conservative, Michael Chong]

Yes, go ahead.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

One is to table a letter that I had already written to Mr. Paradis, back on March 29, 2010, concerning this, as well as a response by the minister. I will table this very short answer. It deals with Monsieur Labonté's answer to my colleague Monsieur Coderre in which he was not aware of what had happened:

Although this is a private-sector business decision, my staff continues to monitor the situation and the possible impacts on the energy supply and workers at the refinery.

Clearly there is something amiss here again.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. McTeague. I'll instruct the clerk to make sure that those documents are translated into both official languages and distributed to members of the committee.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Mr. Chair, I have one question, in addition to that.

It's more of an instruction and perhaps advice to some of our witnesses. I take it from Madame Dagenais and others that they've already made a decision with respect to whether this constitutes potentially an area that would allow the Competition Bureau to examine further.

I'm a little concerned, though, about the terms and conditions of conversion from the refinery to a terminal, which could have the effect of freezing out non-branded players, could have the impact of shutting down the entire energy supply to places such as Nunavut, could have an impact on price to consumers, could make us potentially more vulnerable without the concomitant power of investigation or oversight with respect to who owns the terminals and the pipelines.

I'm concerned about the lockstep pricing in a number of major cities across Canada, 2% to 4% above world price in most of those cities for the cost of fuel.

All of this is to suggest that I want the bureau to tell me here and now if market restriction, refusal to deal, or any one of those requests made will be taken seriously, or is it a foregone conclusion?

If it is a foregone conclusion—and bear in mind that I've been around this issue for some time—in 1986 the then Conservative government under Mr. Mulroney decided that they were going to invite McMillan Binch to rewrite the Competition Act. That would be McMillan Binch whose main client was Imperial Oil. If that is the case....

Sorry, Mr. Chair, I want to go to my question.

[The Chair, Conservative, Michael Chong]

With respect, the last questioner was Mr. Godin. The subsequent round, if we were to continue, was to go to Mr. Wallace.

We decided to end with Mr. Godin because we are nearing the 2:30 point.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Okay. Regarding market restriction, then, is there a chance to look at that, yes or no?

[The Chair, Conservative, Michael Chong]

Thank you very much.

I'm sure the witnesses will be able to respond to you after the meeting if they so wish. They've answered an hour and a half of questions. We do appreciate the witnesses appearing in front of our committee today.

As a final point of information for members of this committee, I've been informed by Shell's legal counsel that they will be sending a letter to the committee, likely tomorrow, in which they will clarify and respond to some of the testimony presented subsequent to their testimony today. When I receive that letter, I will instruct the clerk to translate it into both official languages and to have that distributed to members of the committee as part of the official record.

Mr. Coderre.