Natural Resources Committee on May 6th, 2008

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Trost.

Now we go to Mr. Tonks. You know, I just can't tell the two of you apart.

Mr. Tonks, over to you, please.

[Alan Tonks, Liberal, York South—Weston, ON]

Thank you, Mr. Chairman.

Ms. Doyle, could you just lead the committee through the fiscal relationship we have under the offshore natural gas and oil agreement, which is the storyline for the billion dollars that is in the estimates with respect to payments under the program? As part of that, could you delineate what factors would change that estimate from year to year?

[Cassie Doyle]

Yes, certainly. Thank you for the question. I'd be happy to respond.

NRCan is responsible for making these statutory payments to Nova Scotia and to Newfoundland and Labrador in an amount equal to royalty and other payments received by the federal government from offshore oil and gas activities. The level of these payments is influenced by the production levels of each offshore board, as well as by the oil and natural gas prices. The variance you can observe year to year is really related to the production levels and to what the price of natural gas is, which is quite volatile, as you well know, and of oil, which continues to climb.

The offshore accords with Nova Scotia and with Newfoundland and Labrador provide that revenues from the offshore should flow to the respective provinces as if the resources were on land. It's essentially the same regime.

[Alan Tonks, Liberal, York South—Weston, ON]

Are there any other ministries in which there are budgeted amounts? Why is it through NRCan that this regime exists?

[Cassie Doyle]

I'm not sure I'm going to be able to answer that, but I know that our department is specified in the offshore accords. That legislation specifies Natural Resources Canada as the department that acts as the manager, if you will, of those revenues coming into government and then flowing out to the offshore boards. It's the Minister of Natural Resources who is the lead minister for both of the offshore boards.

[Alan Tonks, Liberal, York South—Weston, ON]

I see.

Just pursuant to that, I noticed, and I'm sure the committee has noted, that the 2008-09 estimates are 6% more than the 2007-08 estimates and actually 30% more than in 2006-07. What really constitutes the increase to that extent in the programs and expenditures? What would be the major changes and major shift in policy or programs, if that's what accounts for this?

[Cassie Doyle]

Thank you for that question.

I understand the primary inflationary impact is derived from the increase in the price of oil; that's what's causing those revenues to increase. There's some variance or change in production levels of the boards, but it primarily can be accounted for by the price of oil.

[Alan Tonks, Liberal, York South—Weston, ON]

I'm not totally happy with that answer, because I was hoping, Ms. Doyle, that given the nature and intent of the questions on program expansion in research and development and Mr. Boshcoff's or Mr. St. Amand's questions with respect to solar or wind, there would be more of a reflection that this is visionary as opposed to systemic.

[Cassie Doyle]

Pardon me. I may have misinterpreted your last question. Are you speaking about the overall estimates and the increase in our overall estimates?

[Alan Tonks, Liberal, York South—Weston, ON]

Yes, that's right.

[Cassie Doyle]

I'd be happy to give a much more textured response.

The main reason for the increases is the representation of new priorities on the part of the government in the area of natural resources. Some of the examples include the increase that accounts for the investments in the forest industry long-term competitiveness strategy and the investments in offshore development to which the minister made reference in terms of the investments we're making in research and development to substantiate our claims under the UN Convention on the Law of the Sea.

We have investments, of course, in the mountain pine beetle that are reflected in that increase. We have investments in nuclear waste legacy liabilities, which were announced in 2006, as well as increases in the low-level radioactive waste clean-up at Port Hope. We have additional investments that reflect the costs for the relocation of our CANMET laboratories, which will be relocated to a new innovation cluster at McMaster University. Also, there are overall investments in the clean air agenda, which are represented through the ecoENERGY investments.

[Alan Tonks, Liberal, York South—Weston, ON]

Good. Thank you.

Thank you, Mr. Chairman.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Tonks.

We go now to the government side and Mr. Allen for five minutes.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you, Mr. Chair.

There are three questions I'd like to ask.

We've talked a lot about the pine beetle. One of the things we heard about in our testimony in committee was the emergence of the brown spruce longhorn beetle in Atlantic Canada. Right now, there's a CFIA containment area or cordoned-off area around Halifax for the brown spruce longhorn beetle.

There are a couple of line items in the budget that talk about the development of a national forest pest strategy, but also an invasive alien species strategy, and this is an invasive alien species. What I'd like to understand is, considering the impact this could have in the future, is the brown spruce longhorn beetle part of that strategy and is it among these invasive alien species?

[Cassie Doyle]

Mr. Chair, if I may, I'll ask my assistant deputy minister for the Canadian Forest Service to respond.

[The Chair, Conservative, Leon Benoit]

Go ahead, please.

[Jim Farrell, Assistant Deputy Minister, Canadian Forest Service, Department of Natural Resources]

Thank you, Mr. Chair.

Actually, that is correct. There are funds from both of those envelopes that are dedicated specifically to a research and development agenda that's developed in partnership with the Food Inspection Agency as well as the Province of Nova Scotia, to better define some of the scientific issues in terms of the outbreak, to better forecast spread, as well as to give advice to CFIA around issues like the quarantine zone, the ministerial order. So in fact it's a three-year R and D agenda. We're into the second year now, and it's funded for the third year as well.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Can you tell me how much the funding is for that?

[Jim Farrell]

I could get back to the committee specifically on that number. It's around $3 million or so, but I will get back with a specific number. There are contributions from our own department, as well as the Food Inspection Agency, to bring that program together.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

That would be very helpful. Thank you.

My next question is on FPInnovations and the $127.5 million innovation fund. One of the things I'd like to understand is how much of the FPInnovations funding has flowed to recipients. And what are the mechanics to get that money out there? Because I keep hearing from people on the ground that they don't even know this thing exists and they don't know how to apply for it and they don't know what kinds of projects would even fall under the scope of the FPInnovations.

[Jim Farrell]

Mr. Chair, could I respond to that?

It's currently not designed as a fund that's out there for a request for proposals. It's a partnership fund designed around four or five key priorities with FPInnovations.

The board of FPInnovations comprises industry members from across Canada, the provinces, and some academic people as well. In most regions of the country they've gone out and negotiated collaborative arrangements with universities and with provinces more focused on the regional issues.

For example, there's a very active agenda being developed in Ontario, and one in Newfoundland and Labrador. I'm not sure about Nova Scotia, specifically, but certainly we've worked very closely with the firms in Nova Scotia, as well as with the Nova Scotia government. Some of the priorities around that agenda are around setting the agenda for future investments, things like nanotechnology, things like unique attributes of the Canadian fibre so as to get a competitive advantage in applications in, say, specialty pulps, as well as uniquely Canadian shelter systems using wood, the non-residential use of wood in terms of construction. So there are a number of priorities, designed around setting an agenda for the future.

If there are specific interests from some of your firms or organizations, I'd be quite happy to take them and forward them to FPInnovations for consideration. They've been very active out there, actually, in dealing with firms across the country.

We also have a value-added wood program that we partner with the provinces and the industry and FPInnovations in putting what we call industrial advisers out in the field. And they actually visit individuals--mainly small value-added firms--to give advice on process control, on marketing, and on investment in terms of making them more productive and more competitive.

[The Chair, Conservative, Leon Benoit]

You have one minute, Mr. Allen.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

I want to come back to solar water heating. The minister just touched on it. There are 200 contribution agreements that have been signed on the solar water heating systems. I was just at a trade show on the weekend where some of these solar water heating systems can be installed where the payback seems to be around eight to ten years right now.

Can you tell me, of these 200 contribution agreements, who are they with, and is there going to be a thought of extending those to having that as an application program for residences?

[Cassie Doyle]

The ecoENERGY for renewable heat program, which the minister was mentioning, did have, this year, 200 contribution agreements. Those were signed with clients in the commercial, industrial, and institutional sectors. So that is the focus of that program at the present time.

I think there is some interest in looking at the potential of domestic partners in the future, but right now we thought we would get the best understanding and deployment within the small-business and institutional sector. So that's the focus for the current program.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you, Mr. Chair.