Natural Resources Committee on March 6th, 2014

[The Chair, Conservative, Leon Benoit]

I think you're the best MP from the Yukon, Mr. Leef, because you're the only one, but you would be the best anyway.

Mr. Calkins, you have up to five minutes, please.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Thank you, Chair.

Thank you to our witnesses who have come in today.

Mr. Smillie, you said that there were some 82,000 workers in Alberta from other parts. That comprises 45% of the camp workers, I believe you said. The workers are there transiently. Most of the workers you represent, of course, are construction workers. By their nature, construction jobs are temporary jobs. They move on to different jobs. Could you give us a breakdown of where those 82,000 workers are actually from? Do you have that kind of information? Does your organization have that kind of information on what provinces they would be from?

[Christopher Smillie]

They're from every province. We have the travel-card system, so when there's no work available in their home province, or if they choose to go and work out west, they can travel to another location to work.

We could endeavour to get a breakdown for you. Mainly, the workers would be from Ontario, British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick, P.E.I., and Nova Scotia. They're from everywhere.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

And primarily from Canada?

[Christopher Smillie]

For those living in the camps, I would say that 95% of the workers there would be Canadian, and 5% would be from either the United States or somewhere in the United Kingdom, if they're construction workers.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Okay. Great.

Now, you've said that these are jobs that create jobs—I agree with that—and that a decrease in projects affects construction jobs. It has been argued by some at this table that maybe a different pace needs to be looked at. I'm not saying that's right or wrong; I'm just saying that it's what's being argued by some.

Could you talk a little about that and maybe explain to the members of this committee and the witnesses who are here today how long the project approvals are for some of these projects? Also, how do you anticipate having the workforce ready for them?

[Christopher Smillie]

I'll talk a bit about Kitimat. We'll do that one because it's the prime example right now. It's an LNG terminal in B.C. We're currently going through the planning stage for a workforce for that project with a major construction company and a major oil company. A couple of them are partners on that project. We're currently planning a workforce to start construction soon.

As for generally what happens, an energy company will decide that they're going to do an expansion, and there is an RFP process wherein construction companies bid on that project. That's generally two years before any worker ever hits the ground. It's about a two-year window between when Suncor, say, or Exxon, or Imperial decides they're going to build something and when the worker actually gets to the job. In that time, there's the bidding process, there's the engineering, and there's all kinds of other stuff that's going on. We're still waiting for the Mackenzie pipeline, so....

[Voices]

Oh, oh!

[Christopher Smillie]

I'm trying to be a bit funny.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Yes. That's a bit different.

[Christopher Smillie]

Yes.

At the end of the day, these projects aren't decided overnight. Generally in the past there have been regulatory dances for five, six, seven, or eight years before people actually get on the ground and get to work.

We know that has changed. We know that there are new rules inside the NEB for maximum review periods, and we support that kind of thing. We want to make sure the review is rigorous and we want to make sure the review is strong. We don't think a project needs to be reviewed by two different jurisdictions. Let's take the most rigorous application of it, take a look at it, and have a maximum review period.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Thank you very much. I appreciate that.

Mr. Boag, I'll go quickly to you. You said that it has been argued by some at this table—I think it was Mr. LeFort who said it—that we are dependent on imports for oil. I would suggest that any country that is a net exporter of something is not dependent on anything. It's simply a matter of economics that makes the determination as to where our oil is sourced.

Line 9 is going through reversal, and hopefully we'll hear from the NEB today. Hopefully, it will be something positive. I maintain the position that frankly I think it's ridiculous that the NEB would even be involved in a public hearing process or be involved in a reversal of the direction. I mean, CN doesn't ask for permission to turn its train around and—

[Peter Boag]

Yes, but it's a re-reversal.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

I know.

But anyway, when did the economics change to make it more viable to take oil from the western basin to eastern Canada? If line 9 goes ahead and is fully implemented, how would that ratio change? It's 60:40 right now.

[Peter Boag]

First of all, the economics have probably changed, certainly within the last decade. But I think it's also important to note the context, that this isn't the first time the economics have changed.

That pipeline was originally built in the 1970s for the specific purpose of taking western oil to eastern Canada at the time of the original OPEC oil embargo and disruption in the Middle East. Economics changed, and by the 1990s that pipeline was reversed to be able to take imported crude as far as Sarnia.

Economics have changed again, and now there is an opportunity to move up to 300,000 barrels of oil per day. That's what Enbridge has requested from the NEB. That amount is enough to supply more than the total needs of the Suncor refinery in Montreal and half of the needs of the Valero refinery in Montreal.

You could potentially reduce what is about 600,000 to 700,000 barrels of oil imported into eastern Canada today by about 300,000 barrels.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you very much, Mr. Calkins.

We go next to Ms. Duncan for up to five minutes followed by Ms. Crockatt and Monsieur Giguère.

Go ahead, please, Ms. Duncan.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thanks, Mr. Chair.

Thanks to all of the participants, especially those in Alberta who had to get up in the wee hours to testify. I hope they're providing you with lots of coffee.

Dr. Harrison, you may well have participated and you're probably well aware that about 10 years ago the Province of Alberta and, I think, the federal government participated in a big review of the oil sands, the cost benefits and so forth, which a lot of people were involved in. A number of reports were initiated from that. The Alberta government hired Mr. Radke, who was a former deputy minister in the Alberta government, to do a review of the costs and benefits and how things were proceeding. In his report Mr. Radke made the same recommendation that former Premier Lougheed did, which was that the industry should be paced.

One of the strong arguments for that had to do with the escalation of costs. We've heard some testimony. We've heard from The Conference Board of Canada about $100 billion being invested, but that's by and large only in taking the bitumen out of the ground. If all the money is going into that, obviously there is not a lot of money left over for refineries, Mr. Boag's sector.

I wonder, Dr. Harrison, if you could speak to the implications for other sectors, in particular the municipal construction sector, with regard to competition for workers and the rising costs in this highly escalating, fast-paced industry in northern Alberta.

[Trevor Harrison]

In many ways, actually, everybody who has been to Fort McMurray knows it's quite unique. It's like a unique little economy within the province of Alberta.

One of the problems for other municipalities—and for the provincial government and Albertans as a whole—is that it tends to skew the economics of the entire province. For example, when you're trying to hire people to go to Fort McMurray, you know what the wage rates are up there, so it's very difficult sometimes to get people working in other parts of Alberta. You end up with a kind of very individual inflation rate that is set by Fort McMurray but that infiltrates into the rest of the province. So it does create all kinds of other difficulties for the province.

You've pointed out the huge amount of capital investment there that is sunk into a particular project. That tends to skew the economy in all kinds of ways—wage rates and everything else—and skew the tendency towards raw production as opposed to value added.

The late Premier Lougheed did in fact, right up until the time he, sadly, passed away, continue to encourage the Alberta government to set a better pace for the development. He said that it really was too rapid.

When you have this amount of investment in a single resource, I can't help but reflect, if I can have a moment, on something Mr. LeFort talked about, which is basically that throughout the history of Canada we've had resource towns that have suddenly boomed one moment and then suddenly just disappeared. What do you do with all that money and resources and human activity that went in there?

If I can just take a personal moment here, I actually worked in Fort McMurray for a number of years in the 1980s. In fact, my daughter was born there. I can actually remember very clearly the morning when Uranium City shut down. Uranium City is not peculiar in the history of Canada. What we have is a whole history of resource towns into which huge amounts of investment were put and then for whatever reason—sometimes technological innovations or changes in fads and fashions elsewhere—the economics simply didn't work any longer and the town suddenly shut down.

One of the things in terms of pacing and getting it right is to think not just about the short term, as in right now, but about how we build an economy, communities, and this country in the long term as opposed to putting huge investments in a single resource. That seems to me to really be the problem.

I'm not sure anybody would disagree with that, but how do we get it right?

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thank you.

I have a few more seconds, and I have a quick question for Mr. Smillie.

Would it be fair to say that the majority of construction workers are agnostic in what they work in, but that they would like a well-paid construction job? In other words, whether they're doing it in a municipal infrastructure or building a pipeline, do construction workers simply want well-paid construction work?

[Christopher Smillie]

It's fair to say.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Duncan.

We will now go to Ms. Crockatt followed by Mr. Giguère, and then Mr. Trost.

Go ahead, please, Ms. Crockatt.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Thank you very much.

Welcome to all of our witnesses here today.

Mr. Smillie, I want to start by noting that when you appeared before this committee last time, you represented 550,000 workers, and now you're representing 600,000.

[Christopher Smillie]

Yes.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Have you seen that kind of an increase in jobs? Is that increase since April mostly related to the oil and gas sector?

[Christopher Smillie]

It's a mixture of two things. It's municipal infrastructure work, which Ms. Duncan mentioned, in Ontario, and also various shutdowns that are occurring in Alberta for maintenance cycles.

When we take a snapshot, it really depends on what's going on and what's happening. However, a 5% to 8% fluctuation in membership isn't a strange thing. Sometimes in certain marketplaces we can't dispatch people to work sites, so they seek their own employment somewhere else.

There definitely has been an increase in new construction activity. In 2012, for instance, there was roughly only 5 million new construction hours in the oil sands; in 2013, it was close to 21 million. We definitely have seen an increase in activity, year over year, in new construction in Alberta.