Thank you very much, Mr. Rajotte.
Thank you to the members of the committee for inviting our association to speak with you.
My name is Gary Leach. I am executive director of the Small Explorers and Producers Association of Canada. On January 1, by the way, we'll simplify our name to simply the Explorers and Producers Association of Canada.
We brand ourselves as the home of Canada's oil and gas entrepreneurs. Our membership is 300 companies. These are oil and gas companies that started here in Canada, they're headquartered in Canada, and they invest here in Canada.
These member companies of our association contribute to the Canadian economy each year in new investment some $6 billion to $8 billion invested in new oil and gas and oil sands production facilities. This sum, by the way, is equivalent to the entire value of all the building permits issued each year in the greater Toronto area. So while you can see all the condos and office towers and industrial buildings going up in the Toronto area, you don't see the same visual image from our investment in the country because ours goes underground rather than up. I hope it gives you some idea of how much our association members are investing in this country each year, contributing to the economy and sustaining tens of thousands of well-paying jobs, primarily in rural areas of Canada.
In fact, a strong Canadian natural gas resource sector has been one of the main pillars of our nation's relatively strong performance compared to other G-7 economies. The oil and gas industry alone is the largest, by far, private sector investor in the nation and has become Canada's largest export industry by value.
As you may know, the upstream sector generates annual top-line sales of $100 billion per year and reinvests each year more than half that amount. There is no other industry in the country that remotely approaches the level of investment in Canada of the oil and gas industry.
We think it's time to let the private sector drive the nation's economic growth while Ottawa focuses on reducing its deficit spending and withdrawing stimulus that it has introduced to the economy in the last few years.
We think the federal government has done the right thing to reduce corporate tax rates because we think this will draw more investment by the private sector—helped along by those provinces that choose to align their tax regime with the federal one—and this investment will lead to more jobs and higher wages for Canadians. However, the wealth that can be generated for Canadians from coast to coast by our oil and gas industry, whether you measure that in well-paid jobs or taxes or royalties paid to government, is seriously impaired by our lack of access to markets outside North America. This reduces the value of Canada's energy exports by tens of billions of dollars per year. We only get to sell a barrel of oil one time, and if we don't get the best price for that barrel when it's sold, the opportunity is lost forever.
We therefore support the goal of streamlining the project review process in Canada, particularly for major pipeline infrastructure projects. Canadians are quite capable of conducting project reviews with thorough consideration of environmental, social, and economic impacts in a reasonable timeframe. We don't need 10 years to conduct a review of a project like the Mackenzie Valley gas pipeline—which didn't survive the review process. Ten years doesn't add anything to the knowledge base that couldn't have been learned in two or three years in a properly managed process. Businesses investing in Canada are entitled to a government review process that's efficient, effective, and has a decision point within a reasonable period of time.
We also endorse continuing steps by Ottawa to reduce the burden of too much regulation and red tape imposed by government on small business. I'm sure many of you know that trying to understand and comply with overly complex regulation is far more costly per employee for a small business than large ones. A recent survey suggested thousands of small business owners in Canada said they would not have started their business if they had realized how much time was spent dealing with governments instead of keeping their customers happy.
For small and mid-sized oil and gas companies, a serious additional challenge is raising enough capital to fund their growth plans. This has particularly been the case since the financial market crisis of 2009, and it has been made worse by weak natural gas prices and the heavy discount that I referred to a few minutes ago that Canadian oil sells for in the North American market.
The amount of equity financing raised for Canada's oil and gas industry is down 44% this year to the mid-point of the year, compared to the first half of 2011, dropping to just over $4 billion from a $7 billion record raised in the first half of last year.
The amount of money borrowed for oil and gas investment has increased 25% over that same time period. However, of the $4.1 billion in equity financing raised in Canada so far this year, about $104 million—so a little over 2%—was from the issuance of flow-through shares.