Finance Committee on Oct. 19th, 2009

[The Chair, Conservative, James Rajotte]

Good morning, ladies and gentlemen. Welcome to Regina.

This is the 51st meeting of the Standing Committee on Finance. This is the seventh of nine cities we are visiting as the committee is going right across Canada to hear from organizations and individuals.

We are here in Regina this morning and then we are going to Weyburn this afternoon to do a site visit to the EnCana facility there, so we're very excited about that as well.

We have here with us this morning seven organizations. I'll read out their names in order of presentation: the Saskatchewan Association of Rural Municipalities; Saskatchewan Telecommunications, better known as SaskTel; the Saskatchewan Urban Municipalities Association; the Canadian Medical Association; the Canadian Real Estate Association; the Saskatchewan Chamber of Commerce; and finally, EnCana Corporation.

Each organization will have five minutes for an opening statement and then we will go to questions from members.

We'll start with the Saskatchewan Association of Rural Municipalities.

[David Marit, President, Saskatchewan Association of Rural Municipalities, Federation of Canadian Municipalities]

Thank you, Mr. Chair.

First of all, on behalf of the Saskatchewan Association of Rural Municipalities, I wish to thank the members of the Standing Committee on Finance for allowing SARM the opportunity to appear before you this morning. We really appreciate it.

Perhaps the most pressing matter facing rural Saskatchewan today is its road infrastructure. Rural Saskatchewan has a population of 200,000 and has 162,000 kilometres of roads that service industries vital to the nation's economy, including agriculture, oil, natural gas, and potash.

As most of you are aware, rural line and elevator consolidation, which began in the early 1990s and continues today, has created a ripple effect that has resulted in our roads being used more and more frequently, thus resulting in more and more damage. Railway companies discontinued 517 miles of track in western Canada in 2007-08 and 403 of those miles were in Saskatchewan. According to the Quorum Corporation's annual report on the grain handling system, there are plans for the discontinuance of an additional 700 miles of track in western Canada over the next few years.

Any time a rail line is discontinued, roads in our province experience an increase in use, which is why it is imperative that the Government of Canada introduce a federal rural roads program to help with the maintenance and upkeep of our roads. The rural taxpayer simply cannot afford to shoulder the consequences of rail line consolidation on his or her own.

SARM has undertaken efforts to improve and upgrade our province's roads. We have done this by initiating a program called “Clearing the Path”, in which secondary roads are improved to primary weight standards capable of carrying and accommodating the heavier loads required by our province's industries in order to remain competitive in this global economy.

A report prepared by AECOM engineering for SARM and the provincial Ministry of Municipal Affairs this year indicated that road construction costs between 1998 and 2008 increased by 152%. This enormous spike in costs naturally reduces the distance over which road repair money can be stretched. SARM sees no real chance that construction costs will be reduced in the near future.

A separate 2008 Associated Engineering study determined that many bridges in Saskatchewan will reach the end of their expected life in a few short years. There are approximately 2,300 bridges on municipal roads in Saskatchewan, 400 of which predate 1955. These bridges were built with the idea that they would last 60 years. In many instances, that lifespan expires in or around 2015. As well, many of them were not built to handle today's heavy truck traffic.

The AE survey determined that $100 million is needed for immediate and near-future bridge repairs over the next five years. The majority of this money will address only the most serious maintenance backlogs that currently exist.

The province has recognized the seriousness of the problem and has raised contributions to rural municipal infrastructure from $20 million to $40 million, but again, there is a need for greater help. We believe the introduction of a new federal roads program would go a great distance toward assisting rural municipalities with the challenge of providing the necessary infrastructure to accommodate the province's growing economy.

In addition to our road infrastructure, SARM also feels that our livestock industry currently faces disadvantages that make it hard for the industry to compete. Specified risk material disposal and country-of-origin labelling are two of the principal problems that create competitive disadvantages for our livestock producers. These urgently need to be addressed.

In summary, we very much appreciate the Government of Canada's assistance with municipal infrastructure, including the gas tax program and the Building Canada fund. However, further assistance is needed in the form of a federal program that specifically targets rural roads. In addition, our prairie livestock industry needs assistance to overcome its current challenges.

I want to take this opportunity to once again thank the committee for allowing us to present here today.

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now go to Saskatchewan Telecommunications.

[Robert Watson, President and Chief Executive Officer, Saskatchewan Telecommunications]

Good morning, Mr. Chairman and committee members.

SaskTel appreciates the opportunity to provide our comments to your pre-budget consultations. I intend to speak on two issues--first, the importance of a national digital economy strategy, and second, the need for a focused federal program of broadband access for Canadians as part of that strategy.

First of all, with respect to the new digital economy, earlier this year Industry Canada held a summit on the digital economy. At the summit, the federal industry minister stated that Canada needs to regain its leadership in the digital economy. He indicated that one of the major challenges is to use the information and communications technology to increase innovation, improve productivity, enhance competitiveness, create jobs, and generate wealth in every firm of every size, in every economic sector, in every region of this country.

SaskTel strongly agrees with the position taken by the minister. Advanced communications networks are a key component of sustainable economic growth and social development. This is especially true in a province such as Saskatchewan.

The telecommunications industry in Canada has been one of the bright spots in Canada during this recession. Employment levels have been maintained and capital investments have continued. The strength has continued in spite of $4.2 billion from the industry in the most recent AWS auctions. These record auction proceeds were, in the opinion of many, the result of artificial rules that created a scarcity of spectrum. The end result was that $4.2 billion was not available for the industry to invest in this infrastructure and in jobs in the industry of the future. Rather, the $4.2 billion was spent to rescue, arguably, the auto sector.

SaskTel and others are calling upon the federal government to follow the lead of many other countries in the world and create a national strategy focusing on the new digital economy. The strategy should include the following elements: it must be comprehensive and look at long-term growth, it must ensure a strong telecommunications sector that is able to continue to make massive investments needed on new infrastructure, and it must include a national broadband strategy for rural Canada.

Broadband services are instrumental tools for accessing information and goods and services and for getting things done at a distance. They are at the core of today's social, cultural, and economic life. However, residents in these regions cannot pay the true cost of bringing these telecommunications services to their homes and places of businesses. SaskTel or other telecommunications providers cannot afford to make the necessary investments in infrastructure required to support rural and northern demands while remaining economically viable.

SaskTel suggests that one way of setting a national broadband policy would be for the federal government to follow the recommendations of the telecommunications policy review panel, which suggested that broadband should become part of a basic set of essential telecommunications services that Canadians are entitled to receive. If broadband is recognized as an essential service, then the federal government must become involved in a more consistent manner than continue with the random one-time facilities grants.

SaskTel believes that the federal participation in rural and northern broadband could become a key component of a national industry policy in a new digital economy. The base wealth of this country remains dependent upon commodities such as oil, potash, uranium, and agriculture. Canada must ensure that those rural and northern people and businesses can participate in the economic and social fabric of the country if Canada is to maintain its standard of living.

SaskTel is making two recommendations for a national broadband strategy for rural Canada.

Recommendation one is that the Government of Canada follow the lead being taken by governments around the globe in assisting in the construction of a single strong network in rural and northern areas for broadband, stimulating competition of services as opposed to facilities.

Recommendation two is that the national broadband strategy must recognize that investment in advanced communications and broadband is never done. This infrastructure is constantly in need of changing and upgrading. Any national strategy must therefore be more than a one-time capital program and create a true long-term partnership with the telecommunications industry that ensures fair returns for infrastructure providers in the maintenance, sustainability, and growth of leading-edge networks in the areas where market forces cannot achieve acceptable results.

Thank you, Mr. Chairman and committee members. We'd be happy to answer any questions.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now have the Saskatchewan Urban Municipalities Association.

[Allan Earle, President, Saskatchewan Urban Municipalities Association]

Thank you very much.

Good morning, everybody.

My name is Allan Earle. I'm president of the Saskatchewan Urban Municipalities Association. At this time, I'd also like to introduce another official from our organization, SUMA's vice-president for cities and my colleague, Fred Clipsham.

We are a federation of urban governments that works to improve legislation, programs, and services to enhance urban life in Saskatchewan. SUMA's members represent 75% of Saskatchewan's population.

I wish to thank all members of the committee for being here today and for providing us the opportunity to address you this morning.

Saskatchewan is experiencing a tremendous amount of economic growth, and urban municipalities are on the front lines of this growth. Saskatchewan needs strong, viable urban centres with the capacity to foster and encourage growth, and that means we need the continued support of our federal government.

On behalf of our members, we have five key recommendations for your consideration here today.

As Canada addresses the implications of the worldwide economic downturn, municipalities are making progress in tackling the massive municipal infrastructure deficit. To that end, we are pleased to have assurances from the Government of Canada that municipal programs, including the GST rebate and gas tax programs, will be protected from cutbacks. The importance of these programs cannot be overstated, and we wish to acknowledge the major role these programs have played in the success of infrastructure projects in our province.

Over the last decade, the federal government has invested almost $1.2 billion per year in application-based infrastructure programs like the Canada strategic infrastructure fund, the municipal-rural infrastructure fund, and the Building Canada fund. This funding has been a necessary, but not sufficient, element in helping municipalities address the growing infrastructure deficit.

However, the ad hoc and short-term nature of these programs has made it hard for municipalities to count on funding to build and maintain projects. We believe the federal government should extend these programs at least at current levels and consider adopting funding models similar to the GST rebate and gas tax programs.

I am going to turn this over to my colleague.

[Fred Clipsham, Vice-President, Cities, Saskatchewan Urban Municipalities Association]

Good morning, Ms. Block and gentlemen.

Our second recommendation relates to a long-term strategic approach to address the municipal infrastructure deficit. Rehabilitating and renewing municipal infrastructure is critical to the long-term health of our provincial and national economies.

Insufficient funding over the long term has resulted in unmet local infrastructure needs across Saskatchewan communities, estimated to be in the range of $4 billion. SUMA believes that an integral component of the solution to the infrastructure deficit is the development of a nationally coordinated long-term strategy for infrastructure investment. The City of Regina's mayor, Pat Fiacco, has made a proposal for a national infrastructure summit, of which some of you may be aware.

There will be an opportunity over the next two years, while the current funding commitments are being delivered, to develop a national strategy. It is vital that the 2010 federal budget allocate funding to lead the development of this strategy.

Our third recommendation is for the federal government to work with the provinces and municipalities to address the issue of affordable housing. I should tell you that this is a priority for SUMA and for the Saskatchewan City Mayors' Caucus this year in working with our provincial government.

The federal government has made considerable investment in affordable housing renovations this year. These renovation dollars are needed, but it is time for the federal government to lead discussions with provinces and municipalities to identify how best to tackle the issue of housing. In our growing province, this is a key issue.

Our fourth recommendation is that the federal government extend recently expired transit investments and develop a fully funded national transit plan. Working in collaboration with municipalities, a national transit plan could make a significant impact in our fight to combat climate change. Canada is the only G8 country without a long-term national transit plan.

I will turn this back to President Earle.

[Allan Earle]

Thank you, Fred.

Our final recommendation is for the federal government to avoid downloading responsibilities onto municipal governments without the required funds to cover the costs. Specifically, SUMA is referring to the new standards for treatment of waste water that have been endorsed by the federal environment minister and many of his provincial and territorial counterparts. Along with FCM, we are looking for the federal government to underwrite and coordinate with provinces, territories, and municipalities a strategy to fully fund these new standards.

The urban municipal sector is an important stakeholder in creating business opportunities and fostering economic development, and we thank you for the opportunity to submit our recommendations for the 2010 federal budget. I know that you will seriously consider the proposals presented and work to ensure that municipalities are fairly represented in the next federal budget.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We will now go to the Canadian Medical Association.

[Dr. Anne Doig, President, Canadian Medical Association]

Thank you, Mr. Chairman, and good morning, members of the committee.

As the president of the Canadian Medical Association and a family physician from Saskatoon, I am pleased to address the finance committee during your pre-budget consultations.

Canada's physicians believe that innovative action taken now will ensure that we sustain a strong publicly funded and universal health care system. Our pre-budget submissions include three recommendations, focusing on health care infrastructure, health workforce, and electronic medical records, or EMRs. These initiatives are about improving health care for all Canadians. They fall within the jurisdiction of the federal government and recognize the government's current fiscal capacity. These proposals will kick-start a transformation of the health care system while creating more than 17,000 jobs that will ensure a competitive economy for the future.

The first area is infrastructure. The federal government should expand the Building Canada plan to include shovel-ready health facility construction projects, including ambulatory, acute, and continuing care facilities. The federal government has chosen not to invest Building Canada funds in health facilities. This is inexplicable. We need to better prepare our health system to deal with an aging population.

In addition, we must ensure sufficient capacity in our acute care facilities to meet surge demands such as epidemic or pandemic illnesses. Scarce long-term care facilities and home care services dictate that patients remain in hospital, delaying hospitals from performing elective surgeries and restricting the movement of other patients from the emergency room to acute care wards. Hallway nursing has become the norm in many hospitals stretched above 100% in patient capacity. In a country as wealthy as Canada, this situation is shameful. Roughly 25% to 30% of acute hospital care beds are occupied by patients who do not require hospital or medical care but rather 24-hour supervised care.

The $33 billion Building Canada plan could better support a smart economic recovery and the health needs of Canadians if health facilities were eligible for funding. A $1.5 billion federal investment in hospital and health facility construction will create 16,500 jobs over a two-year period, and 11,000 jobs in 2010 alone. This is an area where a small change to an existing federal stimulus measure could pay much greater dividends.

In terms of health information technology, the federal government should expand the two-year time-limited accelerated capital cost allowance for hardware costs related to health IT. Canada lags behind nearly every major industrialized country when it comes to health information technology. This is inexcusable. For patients, the impact of this underinvestment is longer wait times and an overall reduction in the quality of care.

The 100% capital cost allowance rate for computer hardware and systems software proposed in Budget 2009 is the type of initiative that will help make a difference on the front lines. For this initiative to provide the greatest benefit, the 100% rate should be expanded to include electronic medical records software and peripherals, and the whole initiative should be extended to five years.

Budget 2009 also pledged $500 million to support front-line development of EHRs and EMRs, but this money has not yet been delivered. Let me be clear: this delay is hurting patient care. The federal government must transfer these funds as soon as possible. Information technology investments will enhance the safety, quality, and efficiency of the health care system. They will also result in a significant positive contribution to Canada's economy and create thousands of sustainable knowledge-based jobs throughout Canada.

Finally, our third recommendation deals with the investment in health human resources. Canada does not have enough physicians, nurses, technicians or other health care professionals to provide the care patients need. This shortage puts the system under pressure, and the impact is being felt by patients across the country.

In the 2008 federal election, all three national parties made explicit promises to address HHR shortages. The federal government committed to fund 50 new residency training positions per year over four years and launch a program to repatriate Canadian physicians practising abroad. The government must keep this commitment.

The emerging economic recovery offers an excellent opportunity for the federal government to create a more patient-focused and sustainable health care system. Bolstering the Building Canada infrastructure plan to include health facilities will help providers to help patients. Enhancing EMR tax incentives and addressing health workforce shortages are also critical first steps in transforming our health care system so that it is truly patient focused.

Looking ahead, it will be important to continue to honour the financial transfers of the 2004 health care accord, including the annual 6% escalator, through to 2014. Past cuts to health care funding at all levels have had significant negative effects on patient care that continue to be felt to this day. Now is the time to begin thinking ahead to the fiscal needs of the system in the post-2014 era.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We will now go to the Canadian Real Estate Association.

[Pierre Beauchamp, Chief Executive Officer, Canadian Real Estate Association]

Merci, monsieur le président.

I'm Pierre Beauchamp, CEO of the Canadian Real Estate Association. I am accompanied by Dale Ripplinger, who is president of our association, and Gregory Klump, who is our chief economist at the association. Like others, I wish to thank you for the opportunity to appear before you today with our thoughts on next year's budget.

Mr. Chairman, the Canadian Real Estate Association is forecasting annual residential resale activity in 2009 to be weaker than any other year since 2002. Interest rate increases promised by the Bank of Canada in 2010, combined with rising unemployment, threaten the sustainability of Canada's housing market recovery. The commercial real estate market has been particularly hit hard and has yet to improve.

A recent study found that year-over-year transaction volumes declined by 51% in 2009 and that the number of transactions dropped by 38% over the previous year.

Now is not the time to remove the training wheels provided by economic stimulus measures. That coincides with the opinion of Mark Carney, the Governor of the Bank of Canada, and that of the finance ministers of the G7 nations. Indeed, we should use this time to defer tax on real estate reinvestment.

The capital gains tax and recaptured capital cost allowance on income properties are holding back important stimulus. George Kirkland of St. John's, Newfoundland, is like many income property investors. He explains: “The tax system encourages us to hold on to our property. If we were to sell today, we would not have enough money left over to purchase a similarly valued property and therefore realize the same level of income.”

According to Dianne Watts, who is mayor of Surrey, British Columbia: “The City of Surrey has been working hard to rejuvenate particular areas of its downtown for many years.” She believes some local property owners are unwilling to sell their rental properties, even at prices above market value, because of the tax consequences. She says the tax deferral would greatly assist in accelerating plans for development and growth.

Mr. Chair, this is a main street proposal. Dr. Thomas Wilson of the University of Toronto found that those with net incomes of $50,000 or less accounted for approximately 48% of the total dollar value of rental property gains.

Deferring tax would create opportunities for businesses in the renovation and redevelopment sector, generate revenue for industries engaged in mining operations, promote harvesting and manufacturing activities associated with building materials, and generate professional fees as well as tax revenues for all levels of government.

Between 2006 and 2008, the typical multi-unit apartment building transaction in Toronto, Vancouver, and Calgary generated over $287,000 in spinoff spending. In addition, more than one job was created for every two transactions.

The Canadian Chamber of Commerce recently adopted a policy resolution in support of tax deferral on property reinvestment. In addition, the National Trade Contractors Coalition of Canada, the Canadian Construction Association, the Canadian Federation of Apartment Associations, and REALpac, the Real Property Association of Canada, have expressed their support.

So again, Mr. Chair, we strongly recommend that you allow the capital gains tax and the recaptured capital cost allowance to be deferred when an income property is sold and the proceeds are reinvested in another income property within one year.

In terms of the residential sector, the 2009 federal budget recognized the need to maintain the value of the Home Buyer's Plan. The plan serves as a repayable zero-interest loan and can therefore reduce or even eliminate the need for costly mortgage insurance, and so reduce the amount of interest paid to lenders.

By allowing homebuyers to withdraw money from their RRSPs to buy a home, this program allows Canadian families to save for a home and retirement at the same time without having to greatly dilute both goals by choosing one over the other.

Indexing the plan is essential if tomorrow's homebuyers are to realize the same level of benefit from the plan. Moreover, when it was first introduced back in 1992, the homebuyers' plan was open to all homebuyers, not just first-time buyers, and, if you recall, helped combat the 1992 recession.

Residential housing transactions spin off benefits to industries across the country. A typical MLS systems transaction between 2006 and 2008 generated $46,400 in spinoff spending, which adds up to $22.3 billion each year. An average 202,000 jobs were created annually by MLS systems transactions.

We believe that expanding the homebuyers' plan by opening it to all homebuyers would not only support a recovering housing market, but would also benefit industries in a fragile state across the economy.

Thank you for providing us the opportunity to appear here today.

I would like to make a brief comment. Unfortunately, our group thought this meeting was over at 11 o'clock. We are committed to being in Ottawa tonight and will have to leave then. We apologize in advance. I would urge you to ask questions to our group before 11 o'clock if that's at all possible. Thank you for your indulgence.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now go to the Saskatchewan Chamber of Commerce.

[Steve McLellan, Chief Executive Officer, Saskatchewan Chamber of Commerce]

Good morning.

My name is Steve McLellan. I'm the CEO of the Saskatchewan Chamber of Commerce. Thank you for the opportunity to present the perspectives of the Saskatchewan Chamber to this committee.

We fully appreciate the many presentations you'll receive and also the time limitations I have today. I'll be as brief and concise as possible. You have received our written document, so I'll only highlight the recommendations.

Canada has clearly experienced an economic body blow. Those provinces that for many years were our country's economic legs are now experiencing fatigue, most times not of their own making. I use this analogy to say that it's time for Canada to rely on new, fresh legs for a time and ensure that they get the full support of the rest of the body to carry us all forward.

I'm speaking of Saskatchewan as these new legs that can provide momentum and optimism for the rest of the country. While it's true that our province's GDP alone will not turn around the challenges facing Canada, it's also true that everyone loves a winner, and especially one that yesterday was an underdog.

With that introduction, I offer these few positions that, if you adopt and endorse them in committee and in Parliament, will carry the day for Canada. I'll briefly reference several key themes.

First, the delegation of regulatory authority in allowing the provincial governments to use harmonized standards and equivalency agreements makes good common sense. If there's one thing consistent across all governments in Canada, it's a desire for a smaller bureaucracy to assist in productivity of effort by government and industry in their dealings with government. It makes sense to cut government costs, and all modern-thinking agencies are looking to end duplication.

We're in a recess, not a recession, in Saskatchewan, and it's during those days that we should be increasing our skills training, not decreasing it. Therefore, we recommend an investment in all areas of post-secondary training funding, partnering with the province to make these spaces available and ensure that the programs are relevant for our people.

In Saskatchewan alone, we will be 120,000 workers short in the next few decades, and 70% of all jobs will need some type of post-secondary training. We urge the federal government to make this a key initiative and see the benefits of strategic investment in this area.

The real impact of any stimulus program will be on how much investment is made by the private sector. Therefore, to add great value to the already committed stimulus dollars from the federal government, we recommend that an investment tax credit for equipment that increases productivity or provides environmental enhancement be considered. Businesses are retooling, and with an incentive, the pace towards these two areas would significantly increase.

Paralleling this investment or this incentive would be an enhanced accelerated capital depreciation program. Allowing businesses to depreciate their capital over different periods would mean more investment now, and that too would stimulate the economy.

Again, I can't emphasize enough that the successful recovery of the Canadian economy, although being led by the federal and provincial governments, will be directly related to the success of the business investment in our economy.

Our final point is a request for your committee to support our effort in striking a positive arrangement with the Saskatchewan government on harmonizing our PST with the GST. Currently Saskatchewan's government is not moving in this direction, partly, we believe, because the last negotiations with the federal government left too much money off the table in terms of transition dollars. We ask that you help these new legs of economic power in Saskatchewan by insisting that your officials get to the table with Saskatchewan to make our province a player in this modern tax environment.

As B.C. and Ontario finalize their arrangements to integrate their taxes, and as their economies react to the benefits, we too need to fully understand our competitive position. At the Saskatchewan Chamber, we are encouraging our province to move forward with the HST with a model that works for Saskatchewan.

So that's it, in four minutes: eliminate duplication of regulation and cut the cost of federal budgets and also for the provinces by allowing businesses to focus on business, not on regulatory paperwork; invest in people through enhanced funding to Saskatchewan's post-secondary facilities and programs, with the provincial government as your partner; develop a more productive investment tax credit to spur new capital investment and enhance the stimulus recovery; allow for accelerated capital depreciation to more accurately parallel business cycles; and finally, work with our provincial government to modernize our tax system through harmonization. We will push if you will pull.

Thank you for your time.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

The last presentation will be from EnCana Corporation.

[Eric Marsh, Vice-President, Corporate Supply Management, Special Projects, USA Division, EnCana Corporation]

Thank you, Mr. Chairman and all committee members.

My name is Eric Marsh and I am vice-president of the EnCana Corporation. It is my pleasure to address this committee.

Today we are proposing that the Government of Canada take a bold and innovative leadership step towards addressing some of Canada's most pressing environmental, economic, and energy challenges by establishing a Canadian natural gas transportation policy. We believe that through strong government leadership in the expanded use of natural gas throughout Canada's transportation sector, our country would quickly become a world leader in marrying the environmental benefits of clean-burning natural gas with widespread economic growth that is capable of generating substantial benefits from coast to coast and through virtually every sector of Canadian society.

EnCana's 2010 budget request is that the federal government launch a natural gas transportation policy for Canada, with policy changes that would support the use of natural gas, rather than higher-polluting fuels such as gasoline and diesel, to promote emissions reduction and spawn economic growth, and with fiscal policy measures to establish an investment framework that would create the first natural gas transportation corridor for passenger vehicles and commercial trucks, starting from Windsor, Ontario, and going on to Quebec City.

This policy change would stimulate investment capital in large-scale infrastructure projects such as refuelling stations and liquefied natural gas plants. In addition, it would provide support for the auto sector and the trucking industry to encourage manufacturers to mass produce natural-gas-powered vehicles and provide more product choices for our consumers. With joint cooperation between government and industry stakeholders, we are proposing the creation of a road map that adopts a solid plan for multi-year implementation by the end of 2010.

North America has recently experienced an extraordinary increase in natural gas resource abundance that has been driven by new technology advancements in horizontal drilling. North American natural gas resources are widespread throughout the continent and currently stand at approximately 100 years of supply at current production rates. The new abundance of natural gas will provide price stability and ensure affordability for future use as a transportation and power generation fuel. Natural gas can accelerate the environmental benefits addressed by Canada's Turning the Corner plan through large and immediate emissions reductions for both stationary and mobile sources.

Compared to our traditional fuels, natural gas emits 30% less carbon dioxide when used in transportation vehicles and generates 50% lower emissions than coal for power generation. Technology for large-scale natural gas use as a transportation fuel for passenger and commercial vehicles exists today. Europe, Asia, and South America have experienced impressive growth in natural gas vehicles, to nearly 10 million worldwide.

Consumer fuel savings offered by natural gas are impressive. At current fuel prices and in equivalent profit margins to gasoline, fuel savings of 50% could be achieved by the use of natural gas as a transportation fuel.

Policy changes mentioned previously would aid in the design and development of an extensive natural gas fuel corridor between Quebec City and Windsor, Ontario. EnCana has met with many business and government stakeholders to solicit support for the construction of this natural gas transportation infrastructure. Ultimately, this plan will make natural gas a major transportation fuel, and it can be repeated in other regions of our country. EnCana believes that an accurate and aggressive road map to ensure success should be created in 2010 to drive positive change in job creation, economic value, and emissions reductions.

A full build-out of natural gas fuelling station infrastructure across the country and the establishment of the natural gas auto sector would place the scope of this project on a scale with Canada's greatest transportation accomplishments throughout history, such as building the transcontinental railroad, the Trans-Canada Highway, or the St. Lawrence Seaway. It is important to start with these few key steps and launch a road map for the future. EnCana looks forward to working with industry and governments to help our nation realize this opportunity.

Thank you, Mr. Chairman.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now start with questions from members.

Mr. McKay, please begin our seven-minute round.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair.

Thank you, witnesses; uniformly excellent presentations.

I'm going to accede to Mr. Beauchamp's desire to abandon early and often--

[Voices]

Oh, oh!

[John McKay, Liberal, Scarborough—Guildwood, ON]

--and ask him my first question.

Essentially, your key request is that there be a one-year deferral of the realization of capital gains or recapture. Your main resistance, as I would understand it, comes from the Department of Finance, who says they can't keep track of what happens to $100,000 worth of capital gains--to use an arbitrary figure--because that's just too difficult.

The second area of objection is that if you give it to the real estate industry, why not to a small entrepreneur, or why not to somebody in agriculture, or why not to somebody in some other field?

I'd be interested in hearing your argument with the Department of Finance--I think that's primarily where your argument is--as to why the real estate industry should be given special deferral rights, if you will, that no other Canadian would enjoy.

[Pierre Beauchamp]

Thank you for your question.

Just for the record, we don't wish to “abandon”; we just made a major commitment on the basis of what we had been told.

Basically, we are looking here at an issue of fairness. As you may know, the Income Tax Act already permits tax deferral for certain qualifying properties under subsections 13(4) and 44(1) to allow taxpayers to defer capital gains when a former property is involuntarily disposed of or a former business property is voluntarily disposed of. We're just trying to make sure here that where real property is specifically excluded from that definition of former business property, we get a fair shake in that particular area.

We've also given all kinds of arguments for the environment, for the revitalization of such properties, and so on. As well, the cost is negligible when you look at the studies we have put together. We have been at this, as you well know, for well over five years, and that was part and parcel of the direction the government was taking in the first place some years ago, when it was elected.

So it's on that basis, basically, that we feel we're dealing largely with fairness here.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Yes. Effectively it's become a buy-and-hold strategy to the max.

[Pierre Beauchamp]

That's correct.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Essentially, it just becomes too expensive to dispose of your assets, so you hold the property; depreciate, depreciate, depreciate, and you just run it into the ground.

[Pierre Beauchamp]

Forget the depreciation. We have given you some very specific examples here. For example, if your purchase price is $800,000 and the value 20 or 30 years later is $8 million, you end up having to pay capital gains on more than $7 million. Capital gains on more than $7 million means that you have to pay something in the order of $2 million capital gains.

Who's going to sell properties in that kind of situation?