Natural Resources Committee on March 7th, 2013

[Martin Lavoie]

You're right. I would say there is a similar point to be made about productivity as well.

We focus a lot on the machines. We don't focus much on the people who will actually maintain and operate the machines. I would say it's the same thing as having a very fuel-efficient car but you drive it in a way that is not very fuel efficient.

In the examples I was giving, the whole idea of training an employee is more popular for companies that have a plan that goes beyond just buying new machinery or refurbishing their building. More and more of our member companies are aware and they do adopt these plans, with consultants or internally.

We've had lean manufacturing, where you were training people to see if you could become more productive by changing the way you put the people on the line and the way you operate the machine. It's the same thing for energy efficiency. Operating the new machinery the right way, having your people in the plant giving you some intelligence with regard to the buildings in general, and having good maintenance of the building internally, are all things that companies will want to do. A lot of them will go with consultants that will put together a sustainable plan that will focus on training the employees to make sure they achieve their targets.

As I said, Canfor is a good example. They reduced their energy consumption by 25%. I don't know what share of that was due to training their employees, but it had to be quite a significant share of it.

You're right, and it's something we keep emphasizing. I hope in this year's budget and the federal budget next year, there will be more focus on labour training. It's definitely an area where we need to do something more.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

I look forward to that.

If you have wording for a specific recommendation for our committee to put in our report on this, I would encourage you to do that. I'm not looking for you to wordsmith that right here in front of me, but I would be curious to see a recommendation that we could at least examine in part of our study here.

Mr. Dick, I want to talk to you about your technology.

Is it a thermal hydrolysis technology?

[Dennis Dick]

It's a thermophilic and mesophilic technology. We use heat to aid fermentation, and then the biogas is created, burned in a reciprocal engine, and from there we have some heat recovery that we use in the adjacent greenhouse and facility.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

You can use virtually any biomass as feedstock, except I'm guessing you're not going to do well with lignans or anything from woody fibre. Is that right?

[Dennis Dick]

Correct. We focus mostly on organic waste that's MSW, municipal solid waste, or source separated organics or food-processing waste.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

You talked a lot about how your technology could be helpful for the agriculture sector, and I believe you. I'm very familiar with thermal hydrolysis technology.

Is there anything in your technology that's been certified by the OIE, with the removal of specified risk material, prion degradation, or anything like that?

Mr. Haughton talked about vectors and so on in the medical waste stream, but in the agricultural waste stream from slaughterhouses, we do have some real issues. We could use that waste stream to create the nutrient-rich fertilizers that you talked about, but if we're not getting rid of prions or specific risk material or any other types of disease control that we need at the front end.... I'm wondering if your technology addresses some of those concerns.

[Dennis Dick]

To a point. As I said, we have a thermophilic pre-treatment, so we are able to reduce 99.9% of the pathogens.

With regard to things like brains and spines, this technology would not take care of that, but virtually everything else.... There is a treatment where things can be pasteurized again. That's more so in manure treatment, the nutrient management as to the agricultural component of this technology. This is where most of the ADs are situated.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Calkins.

We now go to Ms. Liu for up to five minutes.

Go ahead, please.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chair. I also want to thank our witnesses for their suggestions and testimony.

I will begin with Mr. Lavoie.

I would like to have more information about the survey of your members regarding the scientific research and experimental development tax credit. I know that report was published a few months ago in the Research Money newsletter. Could you tell us about the findings of that survey?

[Martin Lavoie]

Yes. That is the Management Issues Survey. It focuses on management issues in the manufacturing industry. After the changes to the R&D tax credit were announced, we wanted to see how the companies would react.

It was still very early. The changes had not yet been implemented, but respondents could choose from a range of answers, and about 20% of companies said that they would look into what was being done elsewhere in terms of tax credit because the loss of 5% would seriously affect their ability to reinvest in R&D in Canada. Nevertheless, 69% of companies—or the vast majority—said that they could not necessarily afford to do R&D elsewhere, and that they may cut their budget once the changes were implemented over the next three or four years.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

You also asked your members whether they thought that the elimination of capital expenditures eligible for that tax credit would lead to the offshoring of their research activities.

Do you have any figures with regard to that?

[Martin Lavoie]

That measure will have the biggest impact, after the rate reduction. More than half of our members have capital expenditures in R&D for things like machinery. Some of our members who represent large companies—for instance, in the resource processing sector that often involves pilot plants, especially in the mining industry—have significant capital expenditures. As I mentioned, more than half of those people said that this measure would affect them.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Could you submit that survey to the committee? It could help us with our final report.

[Martin Lavoie]

Very well.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Ms. Bak, you suggest that a strategy on green technologies be adopted. You also conducted a survey in January 2011 on SMEs' needs in terms of federal support for research and development.

Could you tell us about the results of that survey?

[Céline Bak]

The survey concluded that the most popular programs were SHRED and SDTC's program. Another conclusion was that companies wanted various financing programs to be coordinated, so that they don't have to learn a new procedure for each program. Obviously, I should have mentioned that IRAP was among the top three programs.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

I would like to quote an excerpt from your report. I only have the English version. It says the following:

In 2009, total BERD by Canadian clean energy SMEs was $512 million. For the same period, total BERD by Canadian clean energy large companies was $1.02 billion.

We see that investment in companies' research and development has been declining since 2008. That sector contributes a lot to research and development. It helps increase our budget and expenditures in that sector. I think that's a success.

You also talk about the importance of establishing a national procurement policy.

Could you elaborate on that?

[Céline Bak]

Thank you. That is a very interesting question.

We should obviously be very careful when it comes to our obligations under agreements on free trade and international trade. However, I think that we, as a society, could decide to invest in infrastructure for our communities that are far from the network or outside the network—self-sufficient communities. We could keep in mind that Canada is advanced when it comes to energy, water treatment facilities and waste management systems. That was discussed today. We should at least be aware of the fact that Canadian companies could serve as a showcase for trade in our remote communities in need of infrastructure.

[The Chair, Conservative, Leon Benoit]

Merci, Ms. Liu.

Mr. Trost, you have up to five minutes.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair.

I was listening to Ms. Bak when she was talking earlier, and I got the impression that a lot of the companies involved in the sector there tend to be on the smaller side. They're not always the biggest. They tend to be the people with the ideas, but maybe they haven't fully implemented them.

From your perspective as their representative, what tend to be some of the particular issues the smaller firms have? I know you talked here about international business development, but what are some of the other issues they face as they try to take their better mousetrap to the next level?

[Céline Bak]

Thank you for that very interesting question.

There is perhaps an opportunity just to raise the familiarity with this sector among our established industries. We do find ourselves in situations where we'll fly in a large U.S. corporation to solve a problem where there are some Canadian companies that should be invited to the table. The ability to build confidence in what is actually a fairly accomplished industry internationally would be useful. That would open some doors, which may not always be open today.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

You're basically saying that there should be a bit more education or advertisement. How do we do that?

[Céline Bak]

Obviously the government has put in place the Canadian innovation procurement initiative. Highlighting the accomplishments of Canadian SMEs and exports would be one way of doing that. There is new data to suggest that over the period from 1997 to 2007, the value of SME exports that were not resource, mine, automotive, or aerospace grew from $40 billion to $80 billion. That's a very significant number, and it's probably much more than we expect. There's not an annual figure on this, but SME R and D investment in Canada represents 45% of our private sector R and D, $7 billion over $15 billion.

These are figures that give credibility to the industry and make people more open to returning a phone call.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Why then are the smaller and medium players the dominant—maybe I don't mean dominant. They're not quite a majority, but when you look at the overall players, why are they such a high percentage? What are they doing right, and what can they do better to get that R and D into more application and get more products out the door?

[Céline Bak]

It's important to note that this industry is only 15 years old. The average age of the company is actually 16. The aerospace industry, as a comparative, is over 40.