Finance Committee on Nov. 5th, 2009

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

What could Mr. Carney actually do about speculation? He has $50 billion to play with and that's about it, which is chicken feed in the greater scheme of things. He's a brilliant talker and he can talk it down a bit, but he--

[Avrim Lazar]

Well, so far he's done a really good job of that--

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

I agree.

[Avrim Lazar]

--by showing determination, and that's his job.

What we are trying to do is provide clear public support for his stepping in and doing his job in a more muscular way than we've ever seen before. He has talked about quantitative easing. I'm not going to try to second guess the bank as to when to act and how to act. As a client, as an industry that's affected by the bank's actions, as an industry where there are a quarter of a million jobs at stake, and when the dollar goes up by one penny and $500 million goes out of the pockets of Canadians in terms of earning and people lose their jobs, I'm saying, “Go, Mark Carney, go. Use every instrument you have to keep the dollar at the low end of the responsible range, because we are an exporting nation.”

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

Okay. Thank you for that.

In the second point within your presentation you mention a variety of accelerated ACCAs, and things like that, keeping the SR and ED things going.

For every year I've been here, the forest industry has come in and said, “We need this, we need that”, etc., and every year the forest industry, as a percentage of the GDP but also as an industry itself, continues to shrink. The question I have for you is this. If in fact the forest industry is almost inevitably going to shrink, aren't we playing at the edges with these kinds of proposals?

[Avrim Lazar]

First of all, to talk about your premise, parts of the forestry industry will not only shrink, but disappear. The world changes.

Parts of the forestry industry will be with us for a very long time if we play our cards right. Demand for lumber is going to come back in North America, and we are well positioned to respond to it. Demand for pulp globally is growing. Our competitiveness is increasing. So the market is out there. Many of our competitors are in bigger trouble than we are. Russia, Brazil, and Europe are having more trouble than we are with this recession.

The real question is, how much of it can we keep and what do we have to do? What we have to do is create world-class business conditions so that our companies and the workers in those companies will have a maximum chance. So rather than coming and saying, “You have to save us”, what we're saying is, “You have to tax us less and bring investment in”, and then we'll save ourselves.

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

Okay. Thank you very much. I apologize for running out of time.

My next question is to the Canadian Petroleum Products folks. It is good to see Mr. Macerollo back on the Hill.

I am looking at your point on renewables, and you're saying cancel all their subsidies, level the playing field, and we'll be in really great shape. Am I misinterpreting what you're saying?

[Peter Boag]

Mr. McKay, I don't think we were saying cancel the subsidies; I think we indicated there's a proper role for subsidies. Our concern is that a subsidy program now may become a permanent program. Our recommendation to the committee is to continue to exercise the due diligence to ensure that subsidy programs pass an ongoing and continuing test of effectiveness and efficiency.

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

The corollary of the point, though, particularly for the petroleum industry, is that your subsidies, such as the accelerated capital cost allowances for the oil sands, would presumably also be reviewed. Would you adhere to that view?

[Peter Boag]

I think that all subsidies need to bear that kind of scrutiny. I'm not an expert on that.

I'm not here representing the upstream oil and the oil sands. Our interests reflect directly on the interests of the refineries and the downstream component of the sector.

Tony, I think you had a further comment.

[Tony Macerollo, Vice-President, Policy and Communications, Canadian Petroleum Products Institute]

Mr. McKay, I would like to make two points. First, the refining sector is the manufacturing sector; it's not the natural resource extraction sector. I'm not sure I could identify a subsidy program for you other than what would otherwise be available to the manufacturing sector writ large.

The second point I would make, though, is that support for renewable fuels in many parts of the world is not a support for a climate change program. It's an agricultural support program. We have to be clear about what our policy intent is here. Is this to provide subsidies to the agricultural sector, or is it to provide alternative fuels that will ultimately contribute to Canada's climate change contribution?

[The Chair, Liberal, John McCallum]

Thank you, Mr. McKay.

Monsieur Laforest, s'il vous plaît.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you, Mr. Chair.

I want to welcome you to the committee and thank you for being here.

My question is for Mr. Lazar. You provided recommendations for the forest industry, in general, for the future. You talked about one of the worst crises that we have just gone through. We can talk about the current financial crisis, which we have been going through for a year now and which is very serious, but the forest industry has been going through a crisis for several years, three or four, at least. Guy Chevrette, the president and chief executive officer of the Québec Forest Industry Council has been making requests for two years now, and the Bloc Québécois has called upon the federal government to give the same level of support to the forest industry as it did the auto industry, namely through loan guarantees.

Do you think that if the federal government had done what was being asked, if it had paid as much attention to the forest industry, we would not be having as hard of a time today?

[Avrim Lazar]

That is a very good question. We cannot lay all the blame for the crisis at the feet of the Quebec government or the federal government. It is a market crisis, a productivity crisis, but we have to acknowledge that governments have a role in this, and we need to ask whether the government is doing enough for the forest industry.

We were very clear in the past: access to credit is crucial, because without it, we cannot survive. We are fairly satisfied with what the government has done, even though the guaranteed loans are a bit challenging given the lumber dispute with the U.S. The threat is real. If we take it a step further, we need to ask ourselves what we can do to ensure the industry's survival. We can look at the past

what could have happened, and the bottom line is if we want to think not about what happened but about what's going to happen, then we have to think about transformation

to make us more effective, profitable and productive, and to improve our environmental performance. That is why we are pushing the government right now; we are putting pressure on the government to help us transition to bioenergy, green products, forest products. We have just completed a study that shows that bioenergy in the forest sector holds great potential for our industry.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Earlier, in response to Mr. MacKay's question, you also said that the global demand for pulp and paper was on the rise—and that is, of course, good news—and I fully agree with you about increasing funding for research and development. The way I see it, that would achieve the best results for the future.

Thank you, Mr. Lazar.

I have a question for Mr. Zarins.

You talked about a national education program on the safety, use and even certification of sport helmets. You mentioned a ski hill in British Columbia, near Whistler, where they do not keep track of the number of brain injuries. I would imagine that the reason is there are too many. They are not able to keep track of them all.

What I am getting at here is that it is all well and good to regulate protective gear when people are playing sports. But, it is more a matter of regulating the rules of the particular sport. For example, it is, of course, very impressive when you watch Olympic athletes do ski runs and slalom courses, but not every young person or adult who plays a sport has the physiological, physical or neuromotor skills to do what highly competitive athletes can.

To my mind, that is often one of the causes of accidents. A lot of young people think they can do what these athletes can, and, very often, there is no supervision at ski resorts. What's worse, they are allowed to go down runs that should be totally off limits to many young people and even many athletes, in general.

The same applies to hockey, in terms of supervision. Last week, in Ontario, a young boy in the junior league was hit. We can be in favour of better protection for individuals, but I think we also need to work hard on changing the regulations surrounding sports.

Is that part of your planned strategy?

[Harry Zarins]

Thank you for the question.

Oui, it is part of our strategy.

Having regulations is very important. An education program is equally important. The instructor is the leader of the sport team, and good leadership is essential.

It's important for a leadership role to show and to be the stewards of the sport. And I think it's important that we talk about regulations but that we also talk about leadership and showing the right way to do things.

It is essential that the instructor show good leadership.

It is important for all instructors to show the way and to reduce the number of injuries and to recognize what those injuries are.

[The Chair, Liberal, John McCallum]

Thank you, Mr. Laforest. Your time is up, unfortunately.

Mr. Menzies, please.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair, and thank you to our witnesses again today. As usual, all of us have far too many questions for the amount of time we're allocated. We do appreciate your presentations and do go over them at length.

I'll try to be very focused. Mr. Lazar, something that I've heard you refer to before and I think a lot of people overlook is the fact that many of the corporations you represent are in effect captive shippers. That's the term we use. You spoke just very briefly about railway monopolies. This is the finance committee, but can you just elaborate very quickly on that--and a solution, by the way.

[Avrim Lazar]

And a solution? Yes.

You guys, like the rest of the country, don't like deficits, so there have to be ways of helping stimulate the economy that don't require taxpayers' money. One of them is to look at costs that are imposed by outdated or inefficient regulations.

Eighty per cent of Canada's forest industry mills, and we are the largest user of the railways, are captive to a single line. This, because of monopoly behaviour, imposes costs that we can no longer afford. If we could re-regulate the railways in a way that would create competition, we think there are solutions, and we've been quietly talking with the transport department about those solutions. There are some very elegant solutions for that. We actually could save an enormous amount of money, save Canadian jobs, save the rural economy, without asking the taxpayer to pay for it simply by putting simple competition into our transportation system.

This is not a complaint against the railways. It's a complaint against our regulatory structure that gives them a monopoly position. Everyone serves the client better when the client has a choice. It's the nature of humanity.

[Ted Menzies, Conservative, Macleod, AB]

Well spoken. Thank you.

I have a question for Mr. Boag of the Petroleum Products Institute. I believe we're still facing concerns. Correct me if I'm wrong. There hasn't been a new refinery built in this country in some time, or is there one in the works that I'm not familiar with?

Is that not a potential...? We've seen it repeated: there was a fire at Petro Canada and all of a sudden service stations in my riding, for example, had no fuel. We can talk about doing things right, but if people don't have fuel to operate.... We had people stranded because of fuel--and this wasn't a perceived shortage; these were literal shortages.

How are your people addressing that?

[Peter Boag]

To respond to your first comment, you're quite right, there's been no new greenfield refinery investment in Canada for some time. In fact, over the last 15 or 20 years, we've seen a significant consolidation in the number of refineries in Canada.

You're no doubt aware that there have been a number of proposals on the table over the last couple of years for potential new refineries. Unfortunately, the current economy, as one major factor, has caused some reconsideration of that, and those investment decisions have either been made not to invest or at least to defer any decision on that kind of investment.

That's not to say that refiners have not been making investments in increasing capacity and addressing in particular environmental issues. In fact, the investment over the past 10 years by refineries has been in excess of $10 billion.

Yes, there have been some short-term local situations with respect to unforecast outages at refiners, but I can tell you that refiners don't like that any more than customers do, so they're continuing to work at continuing to strengthen refinery reliability.

That said, if you look on a North American basis--and this is a North American market for refined petroleum products--the investment climate for expansion is not particularly pleasant. Demand is certainly well down from its peak in 2008, more so in the U.S. than in Canada, but still it is a North American market, and there's a lot of talk now about, on a North American basis, the significant overcapacity on a long-term basis, not on a short-term basis, and the need for further consolidation on a North American basis.

The investment environment clearly will determine where investments will be made and what investments will be made, but certainly refineries have been doing that.

[Ted Menzies, Conservative, Macleod, AB]

Thank you. We're glad that you're aware of the concerns that we're hearing in our constituency offices.

[Peter Boag]

Absolutely.

[Ted Menzies, Conservative, Macleod, AB]

To Mr. Walker, I have a quick question.

You suggested that extending the carry-forward provision of ecological gifts to 10 years comes without a cost. I'd like an explanation of how that works. It's dollars not coming into the government, and you've got to realize the situation we're facing now. We're facing a large deficit and we need to explain to our constituents that we have a plan to pay it off. I'm having trouble getting this to balance.

[Dave Walker]

The dollar value you referred to that's not coming in to the government is actually tax credits that the donors would be entitled to if they could use them, so it's a little bit unfair to give them the tax credit but because they can't use it to say that it's not income coming into the government.

What's happening is the donors are dividing their donations into two or three, and it's costing money for charities to administer, plus for governments and the ecological gift program to administer--two or three donations--when if we had the carry-forward for 10 years it could all be done under one donation.

Quite honestly, all we're asking is that donors get an opportunity to use the total tax credit that they're entitled to under the legislation as it's set up.