Finance Committee on Nov. 25th, 2013

Okay, great.

I had hoped to present a brief overview today of some of the history, but also some recommendations in terms of disbursement of the Dominion Coal Blocks. Very briefly, the coal blocks do lie in a critical wildlife corridor between the two world heritage sites of Waterton-Glacier International Peace Park and our Rocky Mountain system that includes Banff. Because this area is seen as so critical to wildlife, and as a global opportunity to maintain wildlife populations in the Rocky Mountain system in the face of climate change, we feel that any disbursement of these particular lands is critically important. It is important that there be particular covenants placed on these lands.

Those concerns grow out of three specific areas that we've been looking at. The first one was the fact that the UNESCO mission of 2009 was very clear about the importance of this area and the need to minimize barriers to wildlife connectivity in that zone.

As well, it called for a moratorium on mining developments in the corridor. That was followed up in 2011 by the Flathead Watershed Area Conservation Act, which was legislated in British Columbia to ban mines, oil, and gas within the Flathead River. I note the federal government's announcement supported that and suggested that, should there be lands in the Dominion Coal Blocks sold, the areas within the Flathead would maintain that ban on development.

Thirdly, on the Species at Risk Act, which presently applies to those lands, we are very concerned that this application to federal lands be carried over to any change in the status. I think the other piece of important background is the Ktunaxa Nation, of course, is engaged in treaty negotiations with the Government of Canada and the Government of British Columbia at the present time. There's a responsibility to consult and reach accommodation with the Ktunaxa Nation before moving forward with changes.

Our suggestions in regard to any disbursement of those lands are that these particular pieces of background information have to be taken into account and actually addressed when that sale takes place. Along those lines, we're suggesting there are several options, the first of which is perhaps a conservation covenant on any of the blocks that should be sold that would include the conditions of the no mining, oil, or gas development within the Flathead watershed. Also...to fully apply sections 32 and 33 of SARA, on no harming, killing, or harassing of listed species, as well as section 58, the protection of critical habitat.

The issue in the Elk Valley itself is a very, very significant one. That is around selenium loading in the river. The provincial government in the spring of this year mandated the Elk Valley water quality plan, which is presently just basically getting rolling. That plan has at the table the governments of Canada, British Columbia, the Ktunaxa Nation, the United States, and the State of Montana. At present, the mandate for that plan is to make sure that there is no further loading and, in fact, that we reduce and gradually bring the health of the Elk River back in place. It's our feeling that sale of these lands could definitely jeopardize that plan, should there not be very clear conditions around selenium and cadmium nitrate loading included in the plan.

With that, I'll leave that in the hope that through questions we can get maybe a little bit deeper into that. I'm very interested in the location of the lands in terms of their importance to wildlife, but also in terms of what they mean economically to the region.

Thank you.

Conservative

The Chair Conservative James Rajotte

Thank you very much.

We are going to go to members' questions with Mr. Rankin, please.

NDP

Murray Rankin NDP Victoria, BC

Thank you.

I'd like to welcome you, Mr. Bergenske, to our proceedings. I've long admired your work, formerly with the East Kootenay Environmental Society, and now as executive director of Wildsight. You're certainly a prominent environmental leader in British Columbia and I salute your work on this file as well.

There are the two coal blocks that are at issue. My first question is, are you referring to both of those—the northern and the southern one—in the same way? Would you apply the recommendations you've made to both?

Executive Director, Wildsight

I think they do have to apply to both, but I think there is very much an opportunity, not only for both blocks, but for possible a subdivision of those blocks to look specifically at the values that are on those blocks and then to be able to apply the wildlife management conditions specifically to areas. The area in terms of selenium loading I think that would very much apply to all of the area and I think it's important to note that block 73, the smaller of the two blocks, is in fact totally surrounded right now by lands on which Teck operates, which is the major player in the coal blocks.

The other block, which is independent and would probably have the higher value in terms of wildlife, only has a portion of that block in which the coal values are seen on assessment to be very high.

NDP

Murray Rankin NDP Victoria, BC

So therefore it might be possible.... I understand your recommendations apply to both, but the conservation covenant certainly on the southern, larger block, you're arguing for that and for the application of section 58 of the Species at Risk Act, critical habitat, certainly on the southern block.

The selenium loading issue, though, is probably more pertinent to the northern block since it's surrounded by coal land anyway and would likely be the more likely of the two to be developed. Am I right about that?

Executive Director, Wildsight

I think you're right. I think it has to be taken into account on both blocks should there be development, but certainly the likelihood of development is on the northern block. It also would likely not be until the distant future at which time we would hope the Elk Valley water quality plan would account for whatever was going to have to happen on that block.

NDP

Murray Rankin NDP Victoria, BC

You referenced the Flathead Watershed Area Conservation Act, the British Columbia statute. I was pleased that you also noted that the federal government seems to have supported that initiative. I'm wondering therefore if it's likely or conceivable...or if you're able to provide some current information about the status of the proposed Flathead national park and the relevance, if any, of this southern Dominion Coal Blocks land. Is the federal government talking about a Flathead national park and if so, would this be potentially included in such a park?

Executive Director, Wildsight

The coal blocks themselves are not within the area of the park proposal in the maps that you've seen. The national park within the Flathead is a very important piece of core area for wilderness and wildlife, but the connectivity corridor, which moves up through the Rockies, is as important and it's where the Dominion Coal Blocks lie.

So there are two parts to the work that we're doing with the coalition of groups here and one of those is the national park itself and the other is the connectivity, which means there would be other types of activity taking place, but what we want to see on that land are certain types of covenants or basically a management plan that ensures that wildlife connectivity is maintained into the future.

Conservative

The Chair Conservative James Rajotte

One minute.

NDP

Murray Rankin NDP Victoria, BC

All right.

I'd like to talk to you a little bit more about the problem of selenium loading. That's a general issue. The Globe and Mail had an article on it a couple of days ago and there is an Elk River plan being hatched. I'm not entirely clear, though, what you're saying the impact of the Dominion Coal Blocks disposition would be. What is your position on that?

Executive Director, Wildsight

We've taken the position that we wanted to see the outcome from the technical advisory committee that's presently sitting in regard to selenium loading in the Elk River. If people have seen the article—and obviously you have—in the Globe it points out very much what our position has been and that is we are not wanting to see coal mining shut down in the Elk Valley. We think it's very important that Teck operate and over time bring into place control of the selenium. Should there not be any coal mining taking place and no one engaged, we fear that the history of 40 years of coal mining and the leachate that is there would not be sufficiently dealt with. As far as the piece on the Dominion Coal Blocks is concerned, we feel that will have to be part and parcel of any discussions moving forward. Teck has been clearly mandated to come up with guidance that will happen in coordination with the governments so they will have to meet that. So we are hoping that if there were ever development, we would have the mitigation plan in place before that took place.

Conservative

The Chair Conservative James Rajotte

Thank you very much.

We'll go to Mr. Saxton, please.

Conservative

Andrew Saxton Conservative North Vancouver, BC

Thank you, Chair.

Thank you, Mr. Bergenske, for joining us via video conference, and also for providing your presentation to us. My first question is for you.

You are aware that any future potential development of either of these coal blocks would be subject to full environmental reviews; you are aware of that, correct?

Executive Director, Wildsight

Yes, I am.

Conservative

Andrew Saxton Conservative North Vancouver, BC

Okay. Thank you very much.

I'd now like to ask a question of Chris Arsenault, who's been sitting there so patiently this whole time. I think he deserves to have some questions asked of him as well.

First of all, I'll go back to the LSVCCs, which is the hot topic today.

I'd like to quote from Professor Jeffrey MacIntosh, who couldn't join us today, from the University of Toronto. He says:

LSVCCs have generated poor returns, displaced more effective private funds, and in net, have impoverished, rather than enhanced the Canadian venture capital industry.

I'd now like to quote from Professor Jack Mintz at the University of Calgary. He says:

These credits have not only been ineffective in generating more venture capital, but they have also helped finance poor projects that should have never been funded in the first place.

The C.D. Howe Institute says:

Providing tax relief to LSIFs has been, overall, a disappointing use of taxpayers’ money.

The LSVCC is an example of an LSIF.

Finally, the OECD recommends the phase-out of the tax credits to labour-sponsored capital corporations

So there seem to be a lot of people speaking against these funds. There are obviously some who are here today who are speaking for them as well.

Do you believe that taxpayers are receiving sufficient value for their investment in LSVCCs? That's really the crux of this matter—value for taxpayers.

President, iNovia Capital Inc.

Chris Arsenault

Obviously I can only speak from our perspective, from iNovia's perspective, and my own.

I could add a quote, which is that on average, North American venture capital funds are not returning capital. Yet the few that are have created Google, have created Apple, have created every single technology company that we're using even in this room today. Therefore, without venture capital, you do not have that type of innovation that can come to bear.

Canada is late. We have lost ground with Nortel and with RIM to a certain extent. We need to up our game and we need to be more active in supporting our companies. More than 300,000 Canadians are based in the valley. More than 40 VCs are Canadian but working for U.S-based valley funds.

So when I wake up in the morning and look for the next entrepreneur to back, I look at the available capital that I have to fund these companies. It happens that, yes, the Fonds de solidarité FTQ and the Fonds d’action have been my biggest and best partners over the last 13 years.

From my perspective with regard to why we're delivering today, they've played a big role in that, and it is up to us to come up with backing the next generation of entrepreneurs in order to build these big businesses in Canada. If today you list the top 10 technology companies in Canada, you will notice that the majority of the capital raised by these companies is not from Canadian VC funds.

Conservative

Andrew Saxton Conservative North Vancouver, BC

Our government agrees, and fully recognizes the importance of venture capital. That is why we've come forward with a new venture capital plan, which I think you're aware of. In 2014, $400 million was dedicated to that in budget 2012.

So we're on the same page when it comes to venture capital plans and funds. The issue here is the allocation of scarce resources and whether taxpayers, through tax credits, are getting the best bang for their buck by allowing these tax credits to continue when so many people are arguing against them. That's really the crux—that or whether the money could be better employed somewhere else.

President, iNovia Capital Inc.

Chris Arsenault

Well, on average I cannot comment. I only look at the specifics. For me, the specifics are those who are actually delivering results. For me, it happens that, for iNovia and many of our co-investors here in Canada, we have labour-sponsored fund funding and partnerships.

So for us, it is important.

Conservative

Andrew Saxton Conservative North Vancouver, BC

Okay.

Now, you mentioned some success stories in the U.S., such as Google and others, that are the result of venture capital.

Can you name one major success that has been as a result of our tax credit? Has there been a Google in Canada specifically as a result of the tax credit?

President, iNovia Capital Inc.

Chris Arsenault

Well, the Fonds FTQ has won, I think four times over the last 10 years, fund of the year, backing the company that generated the most return to investors. Over the last 10 years, the Fonds has been one of the investors backing the most successful company out of Canada.