Natural Resources Committee on March 25th, 2014

[Joan Crockatt, Conservative, Calgary Centre, AB]

I find it astonishing and fascinating that this is an industry that is hewers of wood and drawers of water, and you're saying that is absolutely not the case. It has actually spawned a high-tech industry that's flourishing in Newfoundland.

[Anthony Patterson]

Absolutely. In fact, I think our competitors are the Norwegians, where they've done the same thing. I think when people come back to Newfoundland if they haven't been here for a while, they're amazed at the technology industry that we're building here.

I would also say that we're crossing over into defence because of our capabilities. This is one of the big benefits I see out of oil and gas. The oil and gas is driving innovation in our neck of the woods. It's not the defence spending.

[The Chair, Conservative, Leon Benoit]

Thank you.

We'll go next to Mr. Trost. I actually have no other names on the list after that, but I'm sure there will be.

Mr. Trost, go ahead, please, for up to five minutes.

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

Thank you, Mr. Chair.

At this committee, one of the things we often ask witnesses about has to do with labour and skills and training. It's rare to sometimes listen to discussions about high unemployment rates in anything we do around this committee. So it is a little bit different hearing from Atlantic Canada where the unemployment rate is higher than it is in other parts of the country.

Having said that, as new developments come—hopefully, the pipeline to the east, development of natural gas, etc.—there's going to be shifting demands in labour patterns. So without going too far away from the natural resources theme, I'll start with the gentleman from New Brunswick and then over to Newfoundland.

What needs to be done to prepare your province, your region for the job changes that are going to start to come as you get more natural gas drilling, as more construction jobs become available? I know you're hoping to recruit some of the children and grandchildren who have moved out west, but what else is going to be done other than to call the families home?

[William Teed]

One knows that if you're trying to entice business to come to your community, one of the first things they look for is skilled labour, and the opportunities that are being provided by both natural gas development and by the pipeline project have certainly caused government specifically at the provincial level, together with participation by the municipal level, to make sure that the proper skills and the availability to have access to proper skills training are brought into play.

A few years back, there was a potential, and it didn't proceed, for a second oil refinery in Saint John. At that time, there was a concerted effort to really put in place a program, because it was going to be needed, to train people for the proper skills of that industry. The same type of cooperation and planning is now taking place for the upcoming energy sector projects.

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

How is that planning taking place?

[William Teed]

It's planning by business, government—at both provincial and municipal levels—and economic development agencies, like ourselves, to really make sure that there are proper education programs offered at our community college level for the skills that are needed to make sure these projects are developed by New Brunswickers.

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

I'll ask a variant of that question to Mr. Patterson. You're a high-tech industry there. One of the things as you expand your business is that you're going to need to acquire more brain power. As you develop more products and so on, where are you looking to recruit your labour force in Newfoundland? The unemployment rate has been going down there, and it's not just in trades—I'm talking engineering and across the board. Where are you looking to fulfill your labour needs in the upcoming future?

[Anthony Patterson]

Our company spun out of the university in our early days. We've maintained a very strong linkage back with the university. They're part of our research supply cycle. Through that, we work with a number of grad students and work-term students. In essence, we grow our own. So 90% of the engineers who work in our company came from work terms or are grad students, and at any one time we might have another 10 or so in the wings.

If you look at—

Go ahead.

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

Can you expand that to describe—I'm sure you know of other businesses in similar situations—if that tends to be basically normative in your area. People draw from Memorial and they just grow organically, or is this going to be a problem? Are there enough engineers, or does something need to be done to supply more labour going forward?

[Anthony Patterson]

It is the norm that we draw from Memorial, and Memorial, as you know, has the cheapest tuition rates in our area. Memorial is attracting an awful lot of immigrant students into it; that's a source, as well.

As companies grow big here, the trend is that they start to expand their engineering offices into Nova Scotia and New Brunswick. That's more of the strategy that we have, that we start diversifying geographically within Atlantic Canada once we start to exhaust the available pool of labour in Newfoundland.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Trost.

We go now to Mr. Regan, for up to five minutes.

Go ahead, please, sir.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much, Mr. Chairman.

Ms. Bak, let me ask you a question. I think you mentioned that three-quarters of the research and development in the industry is done by small and medium-sized enterprises, but they have huge problems working with the majors—the large companies—who seem to expect to work with the global companies. Are there things that could be done to help with the situation? Is there any role for government, in your view?

[Céline Bak]

Mr. Patterson has made a number of allusions to the Atlantic accord, which is a formula that stipulates a certain investment in R and D by the participants in Newfoundland's offshore oil industry. I'm not aware of anything quite like that in Alberta. It is certainly something that could be considered.

It's an interesting conundrum. In Canada—across all industries, not just this industry—we have a long tradition of being late to adopt technology. I'm not bringing news to anybody, right? It's the same in this industry. I mentioned the example of a company that has extensive credentials in the Middle East and slowly but surely there will start to be adoption in Alberta, but it's certainly slower than one would hope.

I think it's an area that merits its own study because we've certainly been considering this question for a number of years. We now have really good information about what shareholders in smaller companies expect in terms of being able to sell directly, as Mr. Patterson has described, to very large players. Statoil is an international company that might provide some interesting opportunities for us to learn, and then there are other sectors. I think the Atlantic accord perhaps looks a little like the IRB system one has in the aerospace industry, so I would suggest that this is an area where more evidence gathering might be required, because so far, sale cycles in Canada are definitely longer than they are in other parts of the world.

[Geoff Regan, Liberal, Halifax West, NS]

Your Worship, municipalities across Atlantic Canada face tremendous challenges in relation to infrastructure, and as I'm sure you know, as of Tuesday next week, April 1, the federal funding for infrastructure drops from $1.7 billion a year to $210 million, which of course if you spread it across the country doesn't provide very much. It's pretty thin.

Of course, the promise is in a few years it will go back up again. We'll see, but as you look forward to the energy east pipeline potentially coming online and the impact that will have, what challenges do you see in relation to infrastructure for your city?

[Mel Norton]

Fortunately, we've had very good partnerships both with the provincial and the federal government on some of our major infrastructure needs so funding is now in place for a new drinking water treatment system, which Saint John hasn't had until now, and then the cleanup of all our waste water will be completed this year. Some major highway projects have been completed through the provincial government. A major corridor linking our highway directly into our major industrial park was completed at the end of 2013, so a lot of the infrastructure is already there.

The key driver for most of our infrastructure expenses going forward, especially if there is more major development, will be on those hard things like roads. Then in addition to that, we want to make sure quality of life is there, so the flexibility built into the gas tax fund now as a result of recent changes so we can use some of that gas tax funding for recreational investments is important. Our primary focus will be on the roads and then utilizing additional revenue to deal with improving our recreation situation.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you.

Mr. Patterson or Ms. Pike—Mr. Patterson, you said earlier that in the North Sea over 5,000 exploratory wells had been drilled and only a couple of hundred or so off Newfoundland and Labrador. I wonder if one of you could tell us about the number of exploratory wells drilled off Nova Scotia. Also, what can we draw from the fact that so few wells have been drilled and so little relative exploration has been done so far, even though one thinks of these areas as having had quite a bit of exploration?

[The Chair, Conservative, Leon Benoit]

There is time for a short answer.

Go ahead, please, Ms. Pike.

[Barbara Pike]

About 212 exploration wells have been drilled off Nova Scotia and approximately about the same off Newfoundland. More wells have been drilled off Newfoundland because they have more production wells at this particular time.

It's a drop in the bucket considering the size of the land that we have here, the size of the land off Nova Scotia, for exploration. Obviously it's extremely expensive to drill but if we're going to take a look at the importance of or add to our offshore industry in Nova Scotia and in Newfoundland, we have to do more exploration. We have to invest more in geoscience to see what is out there. That is exactly what has attracted $2 billion in exploration off Nova Scotia.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Calkins, you have about three minutes to close off today's meeting.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

I'll be quick. I just want to come back to a couple of things.

Your Worship, could you clarify something for me? I know that some comments have been made around the table, but the gas tax transfer is something that comes through with the building Canada fund. It would come directly to your community. I'm sure that's a fairly sizable amount of money when it comes to your community.

Could you talk about that and how that's important? It was important to FCM and so on, but could you also talk about the corporate social side of things? I don't know about it in Atlantic Canada. I know in my riding, Encana or Calnash Trucking, or all of these either primary or big companies—or even small service companies—can provide hundreds of thousands if not millions of dollars to social infrastructure in the form of buildings and so on.

How does that play out in Atlantic Canada?

[Mel Norton]

Well, certainly in the Saint John context, the flexibility in the gas tax and the ability to allocate that to recreation is vital because most of our recreation infrastructure dates from the mid-1960s and is in need of significant replacement or repair in the next number of years.

On the social side of things, what we've seen from our corporate citizens are incredible partnerships. I think particularly of our PALS program. It's a partnership between local industry and all of our community schools in Saint John, and literally hundreds of employees from those companies go in daily, whether it's for hot lunch programs or whether it's for volunteer mentoring in the classroom. That happens daily across a variety of sectors.

Then I've mentioned the hard investment by some of the major energy companies in recreation facilities and improving our municipal park. There have been really incredible investments there.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

That's a great opportunity, and I want to build on the line of questioning I had before.

You have opportunities to grow. You have a labour force there that is wanting to come back. There are even some sitting on the sidelines for certain parts of the year, whatever the case might be, and we talked about some of the pressures.

Mr. Teed, you talked about some of the pressures on the price of natural gas, more from a delivery standpoint, because there is more natural gas on the market. There is a glut of natural gas on the market in North America in certain areas, and the problem is delivery, getting it to certain places. Propane in particular was a great example this year—it's not a great example, it's a terrible example—of how the price has spiked, and it was more of a delivery issue.

But I want to talk a little bit more about how you guys are uniquely positioned in the Atlantic basin. You said it. We see pressures on our NATO allies in Europe right now when it comes to energy. We have international tension with the country that is the largest supplier of energy to our NATO allies. What are the opportunities? Is anybody in Atlantic Canada talking about this? You have LNG terminals. You have the ability to export not just in the North American context; you have the ability to ship it across the Atlantic.

What's happening through any of your organizations—anybody here at the table can talk about this—looking at the economics and making sure that it's economically viable. We are stable. I know we're not terribly politically stable in Alberta right now, but we are a stable supplier of energy to the rest of Canada, the rest of North America, and we're willing to be so for the rest of the world. I guess my question is this. What kinds of opportunities are there to get products from Canada—from Alberta, from Saskatchewan, from wherever, from Manitoba, wherever these things happen, even in Atlantic Canada—to supply our friends and allies with a reliable stable source of energy?

Are the economics in place, and who's looking at it?

[The Chair, Conservative, Leon Benoit]

Okay, we are almost out of time. A very brief answer from you, Mr. Mayor.

[Mel Norton]

Thank you, Mr. Benoit.

The simple answer is this. Our port is geographically positioned better than any other port in the country to supply our allies in Europe, to supply India, and we're exactly 100 nautical miles further away than New York City is from Brazil. So if we want to service the entire world from Canada, Saint John is the place to do it.