Finance Committee on Oct. 1st, 2014

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Keddy.

Mr. Caron, you have five minutes.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much, Mr. Chair.

Welcome to all of our witnesses.

Ms. Cobden, you are well aware that, in a past life, I worked for a union in the forestry sector.There's been a real change in attitude as far as the industry goes, since I was involved four, five or six years ago, when things were much worse.

I found your presentation very informative, but I'd like to spend a bit of time discussing your third recommendation, which was to ask the federal government to redirect all undeployed capital from Sustainable Development Technology Canada's NextGen Biofuels Fund to a biorefinery fund. I'm interested in that recommendation because, in my riding, the industry seems to be moving towards pellets, and biomass.

Could you please elaborate on where things stand in that regard right now? Why couldn't the fund be used for torrefied pellets or biomass in general, and how might that eventually work?

[Catherine Cobden]

Thank you for your question. I am going to answer in English.

In fact the biorefinery reference is a very interesting opportunity that's applicable not just to the forest industry but also to the agricultural sector and others that choose to use a bio-based feedstock.

In the forest industry we have over 80 pulp mills across our country that generate pulp, which is a high value-added product. They are very chemical oriented and we have a tremendous opportunity, for example, to convert those to biorefineries.

I think across the space our point is that it's the bio-based feedstock for the bioproducts—all of them, not just bioenergy or biochemicals—upon which tomorrow's bioeconomy is going to be based. It is from that vantage point that we have chosen our wording.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Douglas, if I understand well angel investors are basically a bunch of Dragons' Den panellists but anonymous, not in front of cameras, right?

[Robert Douglas]

They're not in front of cameras. I would say there is no theatre and there is no drama. These are serious people who have been successful in business, generally speaking, and who are much more interested in giving back to their economy and seeing the next generation of entrepreneurs succeed as they have previously.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you.

The government has made a lot of changes to venture capital. To begin with, it set up a Canadian venture capital fund and gradually eliminated tax credits for labour-sponsored venture capital funds. So the government has made some big changes.

Given that you represent a very specific group of investors who operate in a highly specialized arena of venture capital, why do you believe the government should give them a special advantage? Would it not be better to take a more general approach or to make a more general investment in venture capital, one that your investors could benefit from as well?

[Robert Douglas]

If I may answer in English, you're saying “a more general policy” for angel investors. I don't quite understand what you might mean by that.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

What I mean is that basically you are representing a very specific section of capital venture.

[Robert Douglas]

That's correct.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

The government actually has a policy for a general capital venture fund. A Canadian fund has been created. Why should we pay specific attention to this cross-section of capital venture industry rather than look at capital venture as a whole?

[The Chair, Conservative, James Rajotte]

A very brief response, please, Mr. Douglas.

[Robert Douglas]

Briefly, angel investors typically invest small amounts at the early stage, prior to more senior venture capital wanting to become involved in deals. Therefore, we are filling a capital availability gap at a different timeframe than senior venture capital does. We take people through what is often termed the “valley of death”. We play a different role than senior venture capital does.

[The Chair, Conservative, James Rajotte]

Colleagues, we have five minutes, so we're going to vote. When we come back, we'll start with Mr. Allen.

Thank you. We'll suspend.

[The Chair, Conservative, James Rajotte]

I call this meeting back to order.

Mr. Allen, I would like to move immediately to your five-minute round, please.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you very much, Mr. Chair, and I appreciate getting started. I'm going to start with Ms. Cobden of the FPAC.

I'm sure you're surprised given the large forestry area in my riding as well as one of the large mills that actually take advantage of the biotextile market as well.

In your submission, you talk about the $60 million over five years to expand and accelerate university research. As you know, in our last budget we created the $1.5 billion Canada first research excellence fund to help post-secondary research institutions leverage those key strengths. I'm wondering if there is potentially an overlap of these funds here or whether that is something that could be complementary to the ask that you have.

[Catherine Cobden]

Thank you, Mike, for the question.

First I do want to clarify that the ask is also to engage colleges. You all have colleges in your communities that are very important to us not just for the R and D that they do, but also to provide future employees in addition to the university graduates.

The terms of reference for the $1.5 billion are not out yet, but absolutely every discussion we've had with the granting councils confirms that this is not duplication. They're facilitating very different needs. In our case what we have before us is a great capacity of these—I've already talked about them—120 university professors who have been dedicating their life research to the forest industry and have been getting funding through programs like the one that's expiring. What we're talking about is how we can keep their interest and keep them generating these ideas that are filling up the pipeline of innovation for the forest industry. Maybe we'll be surprised with the terms of reference for the excellence fund. I would encourage—and Pierre Lapointe, who is with me here, of course is going to look for the big megaprojects that might fit that, but this is more about maintaining and growing the capacity of colleges and universities in support of this path we're on.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

I've read your “Vision2020” report and the report card you're putting out, which is very helpful. In there you're talking about 60,000 new recruits by 2020. You are at 8,000 on the way there, so if you take that over...that means you might get to 40,000, if everything goes well.

As you pointed out, new trade agreements are going to be helpful, as are the U.S. housing starts and that type of thing.

What types of things can the government do? I have concerns, as you do, about your being able to get these people into your industry by 2020. What types of things would you suggest we do to try to encourage our young graduates and our young people to get into the forest industry?

[Catherine Cobden]

Thank you for the opportunity to address that question. It's a critical question, and we're all seized with it.

I would actually underline, Mike, that we think part of our second ask to the government and our provincial counterparts to promote the industry is actually a key element of that. It's not just to combat those campaigns that are happening—the environmentalists are taking a direct run now at the biotextile industry—but it's also important for us along the lines of attracting youth by showing off our renewability, showing off our sustainability, and demonstrating that we have the best practices in the world. I'm the mother of a teenager and that seems to be what drives them like a magnet to things. That's what we need to do. That's a very specific answer. Ask number two is what we had in mind there.

There are lots of other great things going on actually at ESDC, Employment and Social Development Canada. We're heavily engaged in trying our best to leverage all of that, but in particular, promoting our sector broadly is a huge opportunity.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

I would like to switch to Mr. Beaudry for a minute.

I want to take you back to a conversation that was held on May 8, 2014, at our committee meeting when they were talking about the mineral exploration tax credit, METC. The chair had quite an interesting dialogue with Lindsay Tedds at that time, and she disputed the efficacy of the METC and in fact said that many studies had been done to say that it doesn't contribute anything and that when you look at the activity since the METC has come in, there does not appear to be any evidence that it causes any additional investing behaviour as opposed to simply subsidizing investing behaviour.

Can you counter that please, and if you don't have a lot of time, if your association could write us on that, it would be helpful.

[Charles Beaudry]

We can certainly provide a written response, but I would say that from my own experience, I can tell you that during boom years—we are a cyclical industry as you know—the METC maybe doesn't have as much of an impact in terms of the behaviour. I can tell you that right now we're in a big deep trough that's almost as bad as the one in 1999. I would say, without solid numbers behind me, that right now if we didn't have METC, we would be running at about one-third of what we're running at in terms of activity. Even in my own experience, I've been struggling financially because of that.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

That's helpful. Thank you.

[The Chair, Conservative, James Rajotte]

Mr. Beaudry, if you do have anything further, please submit it to the clerk, who will ensure that all members get it.

We'll go now to Mr. Rankin, please.

[Murray Rankin, NDP, Victoria, BC]

Thank you to all of our patient witnesses. Sorry for the delays.

I want to start my questioning with my friend Merran Smith of Clean Energy Canada. Welcome.

Why should Ottawa play a role in supporting clean energy when the provinces are responsible for electricity?

[Merran Smith]

That's a really good question.

Canada could be a real winner in the clean energy sector, but there is very strong competition out there. As I said, there's $207 billion being invested, but those dollars go to where there's a policy that supports the industry. Where there's consistent, stable policy, the money goes and the companies get built. Those companies not only build out capacity but they create innovations, and now we have a new product to sell. Canada is really walking in this clean energy sector while other countries are sprinting. We think we need to catch up.

The other reason is we do have climate targets which the Prime Minister committed to for 2020, and this is going to be part of the path to get us there.

I did find the numbers, Mr. Keddy, the 77%.... Those come from Environment Canada. The difference, the 65% is renewable energy. If you add in nuclear, that's what gets it to the 77%, and that's called low-carbon energy. We still have a gap to get to 90%.

I would also say Ottawa has done this before with the wind power production incentive program and then the eco-energy program for renewable energy. Ottawa does know how to do this. Ottawa also did this for other energy sectors, like the oil sands. If you'll remember, in the 1990s it was not a viable industry and Ottawa provided tax breaks, infrastructure breaks, R and D. That has been very successful and it helped that industry get off the ground. We're just saying the clean energy sector needs that if we're really, truly going to be a clean energy superpower.

[Murray Rankin, NDP, Victoria, BC]

Leadership, then, in the face of provincial responsibility, but national leadership is urgently required.