Finance Committee on Oct. 31st, 2011

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Welcome to everybody here this morning.

It's great to be out on a Monday morning in Toronto. It's always great to be here in my colleague Mr. Adler's riding and area. He does such a great job on the finance committee, and I just want to make sure that you guys understand that he's doing a really good job for us and for you.

There are so many questions I'd like to ask. I wouldn't mind going into corporate governance with Mr. Conway. There are things I'd like to go into with Mr. Goldring, but we have only five minutes, unfortunately. So that will be another day, hopefully. But I want to commend you both on the work you're doing.

I'm going to kind of tee off on Alain's question about the gas line. Where my farm is in Saskatchewan, there's actually a gas line that crosses our farm. It's a line that goes from Beacon Hill to Prince Albert. I think it was put in during the late sixties or early seventies. Just about four years ago we had them put a pig in the line. Is that the right terminology? On my farmland they actually dug up about four or five areas where they inspected and rewrapped the line and made sure that everything was proper. So I can attest that I've witnessed what you guys do. Again, nothing is ever 100%, but I commend you for that kind of work.

Nobody wants to see our environment ruined. Nobody wants to see those types of impacts or those leaks or anything like that. Again, we want to make sure that we have the proper regulatory framework for any new projects that go forward. In the same breath, we don't want to overdo it. We don't want to let the system become politicized, which I think is what's happened in the States. That's the danger in any project. Politicians get their fingers involved and make decisions based on politics, not necessarily on sound science or the facts placed before them.

Ms. Kenny and Mr. Kennedy, I'll let you both talk to this. From the National Energy Board and the process they go through to approve a new pipeline, up to the regulatory process you go through--you talked about the framework--what are all the different hoops you have to step through, whether it's the Department of Fisheries and Oceans or Environment Canada?

Can you tell us what impact the Supreme Court decision on the Red Chris Mine, in Terrace, B.C., has had? How is that going? I guess I'm looking for recommendations. Is there a way we could still have the same results and maybe make it a more efficient process?

[Brenda Kenny]

Well, as you said, we could have a full day on just this, but let me try to be very brief.

First of all, Canada lived through politicization of pipeline projects, and it led to the fall of a government in the House of Commons in the 1950s. That resulted in the creation of the National Energy Board Act. Since that time, we in Canada have used a very rigorous, fact-based, quasi-judicial process to engage public participation and to hear evidence from all parties. Last year this government enabled the National Energy Board to include public funding for intervenors for the first time, and our industry was supportive of that. They now can fully duplicate what is done by the Canadian Environmental Assessment Act in a fact-based way. Canada's best defence against slippage is to safeguard that evidence-based process and to make sure that it's open to the public.

That said, the permitting that follows can unintentionally trigger a whole other round of environmental assessment and crown consultation and can lead to expensive delays and even more uncertainty, in terms of investment.

It's those components put together. We need good environmental assessment in early planning. We need facts. We need transparency. We need timeliness. We need concrete decision-making, and, as you said, we need to keep it away from being a political decision and rely on good science and facts.

[Randy Hoback, Conservative, Prince Albert, SK]

Mr. Kennedy, you talked about liquefied natural gas and the importance to the Canadian economy of seeing that being shipped out. I assume that you're talking about the pipeline to Kitimat. Just give us an idea of what you see as far as the safeguards we're putting in place to make sure that a pipeline is absolutely safe.

[Tim Kennedy]

Sure.

I think all companies are aware of the public interest in any pipeline built now. There's clearly a lot of attention on the Keystone Pipeline and the Northern Gateway Pipelines project, which is Enbridge. Those are oil pipelines.

There's been less attention given to LNG, although I think attention will be given, because natural gas has a different nature if there are any issues with the pipelines.

Spectra itself has spent a lot of money in the last four years. Spectra actually became known as Spectra in 2007. Before that it was Duke Energy and Westcoast Energy, as I said.

Lots and lots of resources are put into safety. We've spent over $260 million a year over the last four years on the safety and integrity of our pipeline system. As Brenda has said, we really do focus on the best technology we can put into it to make sure that there's integrity in the system.

[The Vice-Chair, NDP, Hoang Mai]

Thank you very much.

Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you, Mr. Chair.

I appreciate the witnesses coming forward today. Many of you are speaking about investments in the next budget, and that puts you on the same wavelength as the official opposition. We've been saying that because of the economic slowdown that's anticipated over the next few months, this budget has to be a budget that looks to investment in a number of key sectors in order to push a jobs agenda.

I want to come back to Mr. Conway and Mr. Kennedy, because both of you have spoken about the scientific research and experimental development program that exists. As you know, according to the Jenkins report, we've seen a real failure in research and development. Canada is the last among industrialized countries in direct investment in R and D. We're last among industrialized countries in the development of PhDs, and we're among the last industrialized countries in patent development. So there's been a real failure in R and D, there is no doubt. And if we want to have an innovation economy, we need to make significant changes.

I'd like you to speak to the changes you are proposing for the SR and ED program. Number one, what would the fiscal impact be? And number two, I'd like you to speak to the government's failure around the development of PhDs and the development of higher education and access to higher education as well as the fact that we're last among industrialized countries for direct investment in R and D.

We've had a number of presentations that have obviously called for more direct investment in R and D by the federal government, but to what extent do you think the federal government should be investing directly in R and D so that we can stimulate that innovation economy?

That's directed to Mr. Kennedy and Mr. Conway.

[Michael Conway]

Thank you, Mr. Julian.

There are lots of ways the spend can go better, and can go smarter. The Jenkins report did mention--and it dovetails with our other recommendation about simplification--that it's a whole lot simpler for small businesses to base the SR and ED credit on labour-related costs than to do the plethora of record-tracking based on the proportionate use of their machinery and the like. So that just makes sense. If it's simpler, it costs them less to track it, it costs them less to have high-priced advisors to fill in the claims, and it gets the money to the people who need it to continue the innovation.

On the innovation front, the current spend stops too early. When you look at the term of scientific research and experimental development, it really is experimental. If there is a certainty of outcome, then the funding is denied. The vision is of smoking beakers and lab coats, but in actuality it's commercialization that drives jobs. It's taking that idea and making it into a product that gets sold to employ more people. That's what produces jobs.

The last point we made was that small private companies certainly have the most difficulty finding funding. We do an annual survey on credit availability, and it just confirms that there are no big surprises, that the smaller companies have more difficulty finding funding. And if they're looking for a longer-term type of funding, that's even more difficult to get.

So getting seed capital for a small company is really tough.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I'm sorry, I have only a few seconds left, so I'd like to refer the question to Mr. Kennedy as well.

Thank you, Mr. Conway.

[Tim Kennedy]

I hate to do this, but I'm going to ask Dennis Hebert, who is our tax guy, to come forward and give you a quick answer, because R and D....

Do we have time for that, Mr. Chairman?

[The Vice-Chair, NDP, Hoang Mai]

No.

[Tim Kennedy]

Okay.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

We don't?

[Tim Kennedy]

That's it. We can talk about it afterwards.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

What a tough chair.

[The Vice-Chair, NDP, Hoang Mai]

Mr. Van Kesteren, go ahead, please.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair.

Thank you all for coming.

Mr. Brison, who has left the room, was commenting about the fact that the internal combustion engine is on the way out. I don't know. It reminds me of Mark Twain and the report that he had died; he said that the rumours of his demise were greatly exaggerated. I think the same thing may be true of the internal combustion engine.

I get excited about some of the developments in electricity. I keep seeing things like the $7,500 incentive in the United States. I don't know if we're going to have time, because I'm going to redirect my question in a minute, but looking at the cost of that and the cost of that per job would make an excellent submission to this committee.

Mr. Kennedy, you've stated that natural gas has a very interesting history. We have managed to extract gas by fracking. As a result of that, at this point, how many years' supply would you say is in North America?

[Tim Kennedy]

On the estimates for shale gas--which many are saying is a game changer for the energy sector in North America--we're looking now at what we know after four years of increasing understanding. Even four years ago we were talking about importing LNG terminals to North America because we didn't have enough gas. Now we have a huge amount. We're looking at over a hundred years' supply, and for the next 10 to 15 years we're looking at very stable prices because of that huge supply. So it has really been changed.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Talk to me about price. We've seen it spike to about $9 a gigajoule. What is it today?

[Tim Kennedy]

It's certainly under $4 now, and we're looking at a stable price. All the outlooks are showing about $4 to $6 over the next 10 to 15 years.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

So you expect that to be somewhat constant.

[Tim Kennedy]

We do.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Mr. Adler, I don't want to pour water on your parade, because I think there are some exciting new developments in electricity, but in the natural gas trucking alliance there are some astounding results. We heard about a company in Vancouver that's a leader in natural gas engines. They made a submission last year for something along the same lines for natural gas filling stations. We were proposing something from Quebec City.... That was rejected, but an interesting thing has happened. The private sector has come forward and has started to install these things. As a matter of fact, Shell Canada has announced that they're going to invest $250 billion in natural gas. From that, I'm reading that there seem to be some real possibilities in natural gas.

Mark, what are you hearing from your industry? I know that the trucking industry.... I might add that there are no tax incentives to buy these. I think they're $60,000 more for a unit. What's happening in the auto industry? Are we seeing some movement toward natural gas?

[Mark Nantais]

We've certainly been there already. The technology is widely available. We know how to do it. One of the stumbling blocks so far has been a readily available refuelling infrastructure. That's what's needed for these types of fuels. Whether they're electricity recharging centres or natural gas refuelling centres, they must be coincidental in the market to be successful. When that hasn't happened, progress on fuel for transportation has slowed or actually gone away in some cases. So we've missed opportunities.

As you've pointed out, whether they're commercial vehicles, large transportation vehicles, or even personal transportation vehicles, they will be part of the slate of technologies going forward. We cannot get around it, and we have a readily available source of fuel. It's a very good fuel. It will undoubtedly be part of the mix as we go forward.

I agree with you that the internal combustion engine is not dead yet. There are still opportunities for much greater improvement in that type of technology.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Mr. Kennedy, you must be looking at some of these developments with interest. Obviously there are many more opportunities. Are you looking at other opportunities--locomotives and ships, for instance?

[Tim Kennedy]

Yes, we're looking at them.