Finance Committee on Oct. 19th, 2010

[Paul Szabo, Liberal, Mississauga South, ON]

It's just that they look....

[Rick Hersack]

Familiar?

[Paul Szabo, Liberal, Mississauga South, ON]

We've been through this before.

I want to go back to the spending. I'm not sure if people are going to bet that we're going to grow out of this, or whether we're going to reduce spending, or whether it's a combination or permutation of that.

I want to ask the question again about social spending versus economic spending in terms of where the chamber of commerce comes in. Is this generally in the chambers and the discussions that the best way to deal with it is to ask people to hang on while we try to fix the economy, in its pure sense? Is that the philosophy of the approach?

[Rick Hersack]

Yes. Certainly the approach of our volunteer committees dealing with this is that we would prefer, of course, to grow our way out of the situation with investments that promote economic growth, increase GDP, thereby increasing revenue, and not having to cut. Certainly we've also cautioned that growth in program spending at all government levels, for that matter, should be maintained within limits of population growth and inflation.

[Paul Szabo, Liberal, Mississauga South, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Szabo.

I do need consent of the committee because Mr. Storseth is not a permanent member. Ça va? D'accord?

[Some hon. members]

Agreed.

[The Chair, Conservative, James Rajotte]

Merci.

Mr. Storseth, you have five minutes, please.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Thank you, Mr. Chair. And thank you to my honourable colleagues for giving me permission to speak.

I will just quickly comment. Thankfully the chairman seems to be right on top of things in the Edmonton region. Maybe he's bringing too much money into his community, though.

I'd like to address the Edmonton Chamber of Commerce--I believe Mr. Bobocel--on a couple of different topics. I'd like to follow up on the chairman's topic on accelerating the capital cost allowance.

You have two recommendations here on the accelerated capital cost allowance. I guess first of all I have more of an overarching statement. Do you agree that the former program of accelerating the capital cost allowance didn't include projects like upgraders?

[Robin Bobocel]

That's my understanding, yes.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Now the chamber's coming forward and including it as recommendation two. Which would be the chamber's priority in these two recommendations?

[Robin Bobocel]

We believe it's one and the same, in that ACCA does need to be reinstated and able to be utilized by project proponents. The reason we are looking to extend the program or expand it to include upgrading and other high-capacity investments is due to the fact that originally when the ACCA was instituted it was to incent the actual mining operations of the oil sands, which was very capital-intensive and technologically risky at the time. Technology has improved to the point where the risk of the actual extraction of the resource itself is less risky. Now the risk has been moved on down the value chain to the upgrading industry.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

It's always risky to use numbers when you talk about how much of our bitumen production we're actually upgrading, but I believe as of last week it was about 63%. Now, the argument is that with the increase in production, if we don't move forward, it's going to decrease the amount we are upgrading in our country, which makes sense.

I think everybody really agrees with that, but the question is what is the cost to the Government of Canada?

[Robin Bobocel]

I don't have an answer for that right now. We're still looking to flesh out this policy some more.

I'm not sure if Mr. Hersack has any supplemental information, but I don't have an actual figure for you.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Do you have an estimate of the benefit to the country?

[Robin Bobocel]

I don't have in real fiscal terms; it's on more of a conceptual basis.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Go ahead, Mr. Hersack.

[Rick Hersack]

I would just add that one of the concerns is that with the export of raw bitumen, according to our NAFTA agreement, the amount of export that we build up to cannot be retreated from. So if the percentages we end up exporting get increased, that means we're not going to be able to draw back and do more upgrading at a later stage. So it's important that the accelerated capital cost allowance be available now to encourage those upgraders, so that in fact the value added and therefore the benefits remain in Canada.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

I would agree, but what you're talking about is under NAFTA. That has no relevance to any export that we would make to Asia or India or China, though, right?

[Rick Hersack]

That's true.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Now, my concern is the fact that the province of Alberta, with its new BRIC policy, will be the largest holder of bitumen in the world in about ten years' time, and the cost differential between a brownfield refinery in the gulf coast and an upgrader in Canada, or Alberta more specifically, is about $1 billion. But we need to know how much of that ACCA would make up or else we can't really move forward with that.

Mr. Bobocel, can you quickly just explain some of the benefits to the petrochemical industry in our province that would occur with...?

[The Chair, Conservative, James Rajotte]

Please do so very quickly, Mr. Bobocel.

[Robin Bobocel]

Thank you, Mr. Chairman.

Mr. Storseth, thank you for the question.

Alberta is constantly looking at ways in which to diversify its economy. Based on the fact that we are primarily a resource-based economy, we need to expand the value chain and to encourage the development of a petrochemical industry. Having the ACCA in place, and upgraders as a result, provides the foundation for the enhancement of the petrochemical industry in Alberta.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Storseth.

Monsieur Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chair.

I would like to come back to something that Mr. Hersack just said.

and I'm going to do it in English, because I've graciously been given a couple of minutes as we head towards the end of this meeting.

You made a statement before, Mr. Hersack, that the level of export of bitumen cannot be retreated from under the NAFTA. I would allow myself to refine that answer and to tell you that it can be retreated from proportionally. That's the proportionality rule of the NAFTA. So you can retreat. But to go to the question that was asked by the colleague with regard to other markets, you couldn't retreat from the U.S. market and start directing towards Asia if doing so were economically more interesting for you. That's where the NAFTA proportionality rule would block you.

Sustainable development compels you to look at a problem socially, environmentally, and economically. When you look at the fact that we're still behaving like a third-world nation in many regards, exporting something that's very raw, allowing the value to be added and the jobs to be created elsewhere, just on Trailbreaker--that's one of the numerous ones to go in, along with Alberta Clipper and Southern Lights--it's been calculated by an independent outside study that 18,000 jobs will be created in the States with the upgrading and refining, and that's not being done here. So it's an interesting debate.

What would be helpful—you seem to be singularly well equipped, from your description of it—is to get your idea of how many jobs would be created if that sort of work were being done here, with the ACCA as a possibility, as opposed to what would be created somewhere else. I know I'm very much on the same wavelength as the chairman on this issue, so if you could provide us more information on that, it would be helpful.