Finance Committee on Nov. 1st, 2010

[Robert Blakely]

What we've really proposed is a pilot project to see how it works and to find the bugs in it. A small program like the home renovation tax credit provided $10,000; people got 13% of the money back, and it put a whole bunch of people to work. We think a small program like this, with $3,500 or $4,000 worth of expenses getting you a small tax credit, will get a lot of people to work.

[Mike Wallace, Conservative, Burlington, ON]

Thank you very much. I will look at that.

My next question is for my petroleum friends and my natural gas friends, who I think are basically from the same place.

First, name the other government programs with time limits that have actually had time limits honoured.

Second, I want to know if the federal government in the U.S. is actually spending money from their treasury. There was some concern that the U.S. would get ahead of us in the natural gas business in terms of the more commercial use of it.

Third, there's one thing I don't know the history of, but maybe you can explain it to me. It's a little bit out there, but which comes first, the car and then the gasoline, or the gasoline and then the car was produced? Why should government be involved in the conversion of natural gas to a commercial automotive use when I don't think the government was that involved in the early stages of the automobile?

The price is at $27 a barrel. It's cheap. Why can't you compete and make it happen as a business? Why do you always have to come to the government to ask for help for this?

I'd appreciate an answer from either one of you.

[The Chair, Conservative, James Rajotte]

You have three minutes.

[Mike Wallace, Conservative, Burlington, ON]

They have one minute, and then we'll go to him.

[David Collyer]

I'll take the first two and I'll let Eric take the third one.

First of all, with respect to the U.S. tax treatment, what we're suggesting is not a direct stimulus or cash payment from government. What we're saying is that the Canadian tax treatment for natural gas development expenditure should be comparable to that of the U.S., so we're trying to create a level playing field and make Canadian gas more competitive in the Canadian and North American market.

In answer to your first question, that is really a determination for government to make. We're suggesting 30 months for very deliberate reasons. It's a time-limited period. We expect the economy to recover. We expect there to be development of broader markets for natural gas over that period.

That's our proposal. Whether the government sticks to that 30 months or not is for you to decide.

[Mike Wallace, Conservative, Burlington, ON]

Thank you.

[Eric Marsh]

To come back to the vehicles, in the past, natural gas has historically always traded at a 6:1 ratio to oil. Today it's over 20:1, and with that, natural gas is becoming more of a competitive fuel. What hasn't progressed, because there has been virtually no research done on it, is the advancement of natural gas engines for the transportation sector. In North America you really only have one primary company doing that, so what really needs to happen in the trucking industry is some additional technology. Some additional funding is needed on the manufacturing side of it to advance that technology.

We believe that at some point it becomes more and more economical as time goes on. We need to break that kind of chicken-and-egg cycle that we're in right now.

[The Chair, Conservative, James Rajotte]

Mr. Hiebert.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

This is concerning the universities and colleges. There was a presentation about an hour ago from the ACCC suggesting that there's a lack of spaces for domestic students, and yet there's an ask that the government fund marketing for international students to come to Canada.

In private conversation, it turned out that there is a disparity. Many universities and colleges are maxed out, and they'd have no place for either domestic or international students, but there are a number of institutions that are not maxed out, that still have space for enrollment.

How could the government proceed with a marketing strategy that would encourage international students to go to the universities and colleges that still have enrollment spaces available and do so without taking these from domestic students?

[Paul Davidson]

Thank you for the question. I think one of the great things about our post-secondary education system is its diversity across the country. If you look at the capacity issues across the country, you get very different pictures.

In Atlantic Canada, international students are a critical component of the demographic plan going forward. In some institutions there, there is considerable capacity. In the GTA there is less capacity, but there's also a need to bring international students to enrich the learning experience for all Canadian students.

So in terms of promoting a national strategy, I think the Government of Canada has done a good job in creating a brand. It needs some resources to actually enliven that brand, and each institution in itself can subscribe to that strategy or not. So, for example, some of the very largest institutions, the University of British Columbia, the University of Alberta, have very aggressive marketing plans to bring more students to Canada.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Cullen for a seven-minute round, please.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you, Chair, and thank you to our witnesses.

I'll start with our friends from the AFL-CIO. It's a dark day when union guys are showing up in cufflinks, but we'll let that pass for now.

[Robert Blakely]

But they are borrowed.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

They're borrowed cufflinks. Okay. Thank you for clarifying the record on that. That's important.

I may have misheard you, and pardon me for not knowing the union's history on this, but did you say you have no official policy concerning the temporary foreign workers program? The government has increased it dramatically over the last number of years. They actually include it in the so-called immigration numbers, which I find is a bit of a mixing of ideas.

[Robert Blakely]

In some cases it's appropriate. If people are on the provincial nominee program—

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I see.

[Robert Blakely]

—and they have more than two years, plus Canadian qualifications, they can apply from within Canada.

The suggestion I was trying to make is this. We spend about $60 million-odd a year administering the temporary foreign workers program. We could save some of that dough if we were moving Canadians who don't have a job at home to where there is a job.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

That's very interesting. I'll be looking at that proposal as well.

Mr. Collyer, I wonder if I could address you for a second here. You talk about very challenging times for the industry right now. I asked the library people to pull up the profit lines over the last number of years for your industry. I'll just go back to 2004 and then on. These are net profits after taxes: near $14 billion in 2004; near $20 billion in 2005; up to $25 billion in 2006. You took a big hit, down to a meagre $16 billion, but then recovered nicely back up to $19 billion. And then it goes on.

The industry, from a profitability standpoint, seems to be doing okay. I guess something I don't understand in your submissions, in asking for relief of taxation, is that if we go to 2008 and add up the subsidies that are on the books right now, for which you're already receiving benefit for enhancing your industry's opportunities—flow-through shares, $532 million; Canadian development expenses, $1.2 billion; capital cost allowance and accelerated CCA, $788 million.... If you add those up, you get to just north of $2.5 billion in tax relief already that you're receiving, particular to your industry.

I want to be totally polite about this. It seems a bit much, coming and asking for more, when in the current state the industry receives so much already for its own work, and its good lobbying makes quite a bit of money as it is today, whereas other industries that come before this committee are truly suffering, losing workers and losing competitive advantage in manufacturing, value-added wood, and all the rest of it. Square this circle for me.

[David Collyer]

Well, there are a couple of comments I'd make, Mr. Cullen. First of all, on the profits, the money that gets made in this country gets reinvested in this country—

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Does it?

[David Collyer]

—in most cases with respect to the oil and gas sector. It is reinvested to create the kinds of jobs that the building trades talked about. So I think it's very important to look at this in the context of its being, yes, a request for incremental tax relief, but it is driven by competitiveness considerations.

I think it's very important that the Canadian industry be competitive in the North American market relative to U.S. gas producers, because we want gas produced in Canada to create jobs in Canada and facilitate the kind of development on the transportation network that Encana talked about. I think that's all good for Canadians.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

You talked about the U.S. I'll just read you a quote: “I will work with my colleagues at the G-20 to phase out fossil fuel subsidies so that we can better address our climate change challenge.” That was the President of the United States speaking at the G-20 in Pittsburgh, which cost $18 million to put on somehow. I guess you get good deals in Pittsburgh.

When we look at a per capita basis, the Americans actually subsidize their oil and gas industry less. I'm trying to find out where CAPP comes to the conclusion that the unfair playing field is actually a disadvantage to Canada right now when we look at the subsidy rates, whichever way you want to cut it—per capita, size of industry, and all the rest. We're not in fact less competitive than the U.S. in terms of this subsidy question, this preferential taxation, or just direct subsidies to the industry.

[David Collyer]

I can tell you very specifically that if you take a natural gas well drilled in the United States and compare it with a natural gas well drilled in Canada, the same type of well, it is less competitive in Canada to drill it. Unless we get our cost structure and our tax system into a position such that we can be competitive with our neighbours to the south, Canada is going to lose market share and we're going to lose jobs and economic benefit—

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I'm assuming you're going to make that conclusion for oil and for gas as well? I know you focused a lot on natural gas, but I'm talking about oil, tar sands production, and all the rest of that.

[David Collyer]

Well, my comment was specifically to natural gas. That is the comparison we've made.